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Old 01-23-2019, 07:33 AM
 
58 posts, read 111,682 times
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Thinking about moving back to Toronto after several years
in the US. I’ve been told that generally a person with good credit can be
approved for a mortgage up to 4x gross salary. Any truth to this?

Looking at housing prices around the GTA (list prices on REALTOR.ca) a couple
earning 200k would only be approved for a max of 800k(based on 4x rule)
mortgage which gets you a lifetime mortgage
with a 250k downpayment for less than 2800 sq ft in most places certainly less than
2500 sq ft in the city. If you find something larger it’s in need of major renovation.

I thought with 250k down payment and 200k combined salary, one would be able to live fairly well off

How are people buying all these larger houses or multiple properties ? Are most of them
earning more than 200k in household income or do they save up for a down payment over 500k?

Last edited by rx81; 01-23-2019 at 07:35 AM.. Reason: Details
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Old 01-24-2019, 10:02 AM
 
2,837 posts, read 2,559,544 times
Reputation: 2217
Quote:
Originally Posted by rx81 View Post
Thinking about moving back to Toronto after several years
in the US. I’ve been told that generally a person with good credit can be
approved for a mortgage up to 4x gross salary. Any truth to this?

Looking at housing prices around the GTA (list prices on REALTOR.ca) a couple
earning 200k would only be approved for a max of 800k(based on 4x rule)
mortgage which gets you a lifetime mortgage
with a 250k downpayment for less than 2800 sq ft in most places certainly less than
2500 sq ft in the city. If you find something larger it’s in need of major renovation.

I thought with 250k down payment and 200k combined salary, one would be able to live fairly well off

How are people buying all these larger houses or multiple properties ? Are most of them
earning more than 200k in household income or do they save up for a down payment over 500k?
I think that's a fair calculation. If you are earning 200k you should be approved for max property price of $800k to $1 million.

However, keep in mind that the Bank of Canada has introduced new rules around mortgage financing starting this Jan, which requires banks to conduct stress tests on all new mortgage applications. Which means, every bank will evaluate your ability to pay based on the following scenarios:

- If interest rates rise by 1%
- If rates rise by 2%
- If rates rise by 3%

This will mean that you will most likely be approved a mortgage, but most likely a much smaller one than previous years. Bank of Canada is trying to cool the housing market in key cities, and pre-empting a potential mortgage bubble in the near future by requiring higher down payments, and more stringent stress tests.
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