![]() Your gross debt service ratio determines whether you can afford the monthly carrying costs associated with your home. Let’s look at the first of the two formulas: The gross debt service ratio. Your maximum mortgage is then added to your down payment to determine your maximum purchase price. Your debt service ratios are two formulas set by the CMHC that lenders use to find the maximum mortgage you can afford. Your debt service ratios determine whether you can afford the payments on a million-dollar mortgage (or a mortgage of any size, for that matter). We’ll determine this by calculating your debt service ratios. If you’re one of the few Canadians with a large enough down payment – congratulations! Now let’s look at whether you can afford the monthly mortgage payments on a million-dollar home. That’s why this factor is the one that disqualifies most homebuyers: Not many homebuyers have a cool quarter-million sitting around! To be on the safe side, you should have your down payment of $200,000 plus an additional $40,000 for closing costs to buy a $1-million home. Depending on your location, you should expect to pay between $15,000 and $40,000 in closing costs. Use the land transfer tax calculator to determine how much you’ll owe at closing. The LTT is by far the most expensive closing cost, and in Toronto, you have to pay LTT twice: once to the province and once to the municipality. Closing costs usually amount to 1.5% to 4% of a home’s value and include expenses like a home inspection fee, legal fees, title insurance, and the land transfer tax (LTT). But that’s not all – you’ll also need to pay closing costs. Since a high-ratio mortgage is out of the question for a million-dollar home, you’ll need a 20% down payment of at least $200,000, resulting in a typical mortgage on a million-dollar home of $800,000. However, the CMHC doesn’t provide insurance for homes valued over $1 million. Mortgage default insurance is usually purchased by your lender from the Canada Mortgage and Housing Corporation (CMHC). Mortgage default insurance protects your lender, in the event that you default on your loan. If you’re buying a home with less than a 20% down payment, your mortgage is what’s called a high-ratio mortgage, and you’re required to pay for mortgage default insurance. Saving for a mortgage down payment is hard enough, but Canadian law states that homes with a purchase price of over $1 million require a down payment of 20% or more. Not having a large enough down payment is what disqualifies most buyers from buying a $1-million home. So, can you afford to get a mortgage for a $1-million home? Let’s look into the factors that affect your mortgage affordability, including the two most important: your down payment and your gross debt service ratios. So, can you afford to get a mortgage for a $1-million home? There are two key factors that affect your mortgage affordability – your down payment and your gross debt service ratios. Most of them would need to save a down payment and take on a mortgage on a $1-million home. ![]() Most Canadians buying a $1-million home don’t have $1 million in cash just lying around.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |