Most people know their weight. Their height. Their age. Their birth date. Their address. Their SIN. Even their income. Could you imagine if you always had to say to someone, “Can I get you that information when I get home? It’s written down in my planner… ”
Knowing your everyday numbers is important. It allows you to make quick and informed decisions.
Therefore I, as a Mortgage Broker, have made it my goal to know my numbers — to memorize certain things so that when called upon I can provide concise and detailed information in the simplest format. I am going to arm you with some quick mortgage number facts and mortgage industry calculations that I use daily.
1: Payments are $400/month/every $100,000 mortgage amount with 20% down or more. Example: $400,000 mortgage = $1,600 monthly mortgage payment.
2: Payments are $450/month/every $100,000 mortgage amount, 19.99% down or less. Example: $400,000 mortgage = $1,800 monthly mortgage payment.
3: For every $10,000 mortgage amount increase, payment increases by $40/month with 20% down or more. Example: $420,000 mortgage = $1,680 monthly mortgage payment.
4: For every $10,000 mortgage amount increase, payment increase $45 per month, 19.9% down or <. Example: $420,000 mortgage = $1,890 monthly mortgage payment.
5: If rate increases by 0.25%, monthly payment increases by $13 per month per $100,000.
6: If rate increases by 100% the monthly payment only increases by 33%.
7: A $13,000 credit-card debt cancels out $100,000 mortgage money.
8: A $400 per month vehicle payment cancels out $100,000 mortgage money.
9: A $20,000 gross income services a mortgage of $100,000. Example: Household income of $120,000, qualifies for a $600,000 mortgage.
10: A $400,000 mortgage balance (FIXED rate term) holds a penalty of approx $3,200 with a monoline lender. With a traditional bank, it’s closer to $16,000. This term paid out with 24 months remaining.
Knowing your numbers is likely going to change this fall. There are changes coming and they are not small ones. The federal government is going to make yet another amendment to the lending policy. Nothing specific or concrete yet. Coming this fall (2017) you are likely going to see your borrowing power reduced by as much as 25%. If today you qualify for a $500,000, that amount could drop to approximately $400,000 is as little as 3 – 4 months.
The bottom line is simple. Borrowers need to focus on what they can control:
- Coming up with larger down payments, saved and gifted.
- Earning more income. If you are self-employed, then you may want to re-structure your reported income to CRA. Verified income will be essential. This is LINE 150 of our tax documents.
- Good, strong, clean credit, both credit score and credit history.
Be sure that you know the power of your own numbers. Don’t be concerned with the past. Every day we move forward. Changes happen all the time; we need to adapt or be left behind. Asking WHY is sometimes not the best reaction but rather HOW. How do I adapt? How do I become current?
Overall, Canada has a very strong, dependable and stable financing and real estate market. The changes that are handed down by the federal government are mandatory, right or wrong… they need to be followed. And if you have any questions, please contact your local Dominion Lending Centres mortgage specialist.
Written by Michael Hallett