New Debt Servicing Rates - Allow Buyers More Purchasing Power
Financial institutions have always been bound by something called debt servicing. The easy definition of this is "how much money do I have to make in order to service or pay the debt I've incurred" i.e. My mortgage. The guidelines for this until recently have been 32% of my gross annual income can go to my mortgage OR 40% of my gross annual income can go to all my debt.
The lid has just been blown off of that guideline.
Now on OAC with 5% down you can go to 44% of the gross annual income all encompassing. So that old adage of you can afford 4 times your annual income doesnt work.
Here's an example:
If you have $50k (that's 2 full time jobs @ $12.02hr) of verifyable income and no debt you can now purchase at $350k. Thats more than $100k of extra purchase power. Perfect for those who would love a home with a basement suite but can only afford a condo.
They also get the best rates available.
This is just the tip of the iceberg, much, much, more to come in the next couple of weeks.
Talk to your bank or lending institution for more information regarding this new announcment.
***Source - Mark Nelson, The Mortgage Group Canada Inc.***