The
Bank of Canada decreased their Qualifying Rate to 4.99% which is great news for
anyone looking for a term other than a 5-10 year fixed.
You
may wonder what the Qualifying Rate is or how it could affect your potential
mortgage. As of April 19, 2010 all insured mortgages (less than 20% down) with
a term of less than 5 years or a variable rate must be qualified at the current
Qualifying Rate as opposed to the actual interest rate. Here is an example*:
Purchase
price $300,000
Down
payment $ 15,000
CMHC
Premium $ 7,837.50
Total
Mortgage $292,837.50
For
this mortgage with a 5 year fixed rate term, you would need to earn just over
$60,000 a year in income to qualify**.
For
this same mortgage at a variable rate or term less than 5 years, you would need
to earn at least $70,000**.
The
Qualifying Rate was at 5.34% as a few weeks ago so this recent drop will
definitely help those who will be subject to it. With the same mortgage
at that rate, you would need closer to $73,000.
*Using
a 5 year fixed rate of 3.19% over 25 years
**This
does not factor in other debts and could potentially be lowered if you have a
high credit score.
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