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Bank of Canada Qualifying Rate is now 4.99%

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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.
 
http://www.christinebuemann.com

*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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