What is the max mortgage I could get?

Question

Basic situation:

Want to buy a house for 550k

Can put 300k down, make 70k yearly, excellent credit, no debts

a) is it wise to take up such a huge mortgage (with only 70k in income)

b) what is the maximum mortgage I could even get?

Answer 1

Probably not wise. - $16K in savings for emergencies is well below the recommended amount for your income, so putting the whole $300K down wouldn't be a real good idea.  

Ask your bank how much of a mortgage you can get.

Answer 2

The following site from the American Bankers Association will tell you how much mortgage you can afford.

http://www.aba.com/aba/cgi-bin/howbigNT....

Answer 3

In this case you'd only be financing $250K, if you are the sole income earner, this might be biting off a little more than you can chew; as nobody knows what lays around the corner (illness, loss of job, pregnancy etc.).

Typically, lenders have gone away from financing anything over 90% Loan to Value (LTV), and in many cases, they won't exceed 80%. Either way, in your case, you'd be looking at securing a loan at 45% LTV which is considered to be low risk. If you default on your loan, there's plenty of equity in the home for your creditor to reimburse themselves (foreclosure, not good).

So, based upon the fact that you have good credit, I would assume you'd have no problem securing a 45% LTV mortgage. Your debt to income ratio will also be a major determining factor in how much you'll qualify for.

Answer 4

This answer applies to Canada only.

A $250k mortgage is no longer huge. At 5.54% (current discount rate - some special rates as low 5.25% are available) over 35 yrs, the payments would be $1339 pm. Add 1/12 of annual property taxes and strata fees (if applicable) to calculate the gross debt ratio. The maximum GDR with a credit score of 620 - 679 is 35% ($2041 pm for 70k). If your credit score is 680+ and you have no other debts your maximum would be $2566 pm. Here's a payment calculator "www.tdcanadatrust.com/mortgages/index

Virtually every lender out there would be willing to provide you with such a mortgage. You may want to consider obtaining a slightly larger mortgage and holding back some of your cash (put it in some form of investment account that you could access in case of need) . Alternatively, you could obtain a 250k mortgage and arrange a $20/30k home equity line of credit from the same lender at the same time, which could then be used only if needed.  

Is it "wise"? The Canadian real estate market is now "flat". If you are buying a home for your long term personal use and can afford the payments then it is not "unwise" to buy. Don't expect the value to increase substantially in the new few years and don't buy if you are not sure you will keep the home for at least several years.        

          

Answer 5

A better question is what is the maximum you SHOULD borrow.  Most banks will lend you much more than you can comfortably pay back.  As a general rule of thumb, your monthly payment should be about 25% of your take home pay on a 15 year loan.  It sounds like the loan you are seeking is a little bit much for your income.  However, you have done an incredible job of saving.  You could easily buy a nice house just with the amount you have saved.  This would free up your income to save aggressively towards a bigger/nicer home.  With those savings and the money you could get for selling the 300k house you could buy, you can buy your dream house.  Good luck.