We all want to be experts when it comes to striking out into that dusty area of our office and renegotiating the mortgage contract. The truth is there is so much to know! Even as a full time professional in the industry 24/7 – I am always working hard in keeping up with the pace of changes in rates, rules, and market sentiment. It’s non stop. Now add to this the online tools that pseudo-experts have made available in the mortgage calculator and things get really hairy. Let’s navigate this jungle together.
What Are The Parameters Of Your Calculator?
There is a standard to the basics of how the financial calculation of interest rate, compounding frequency, and the amortization of your mortgage all come together in an expressed payment. But we need to go deeper. What percentage of your gross income can be utilized toward qualification? What is your gross income based on how you derive your income? Can we even use this number based on the changes in the government’s mortgage rules now and what about next week? You are starting to get the picture. Although an online calculator can give you a general idea of your mortgage amount – it definitely does not incorporate the whole picture.
Ontario Mortgage Affordability Calculator Limitations
As search engines are blind to your intended input and only provide you the results of what is typed in – so to are mortgage calculators blind to all the factors that determine the actual numbers that will eventually be punched into the fields of said calculators. The calculator can’t advise you on how your credit, employment situation, property location, or available mortgage product will have an effect on those numbers. Does that throw a wrench in the marketing scheme of most of the banks? Yep. Here is how the numbers can change for each situation:
1) Credit – By having a higher or lower credit score, banks can use a higher percentage of your gross income towards mortgage qualification making the static parameter of a set percentage not applicable to any but the best of applicants. This also affects the interest rate you input into the calculator.
2) Employment Situation – There are major changes to how and what type of income will be considered toward the qualification of your mortgage. Being employed, self employed, or using overtime or non-traditional (translated cash) income towards your affordable purchase price is all dependent on the bank we approach and their mortgage approval guidelines.
3) Property Location – If you decide to choose a less marketable area to reside than your mortgage lender likes – this can have an overarching effect to the downside on the numbers that you get out of the calculator.
4) Mortgage Type – There is so much to discuss here. The New Mortgage Rules have made the type of mortgage product you choose (fixed, variable, term length, high ratio, conventional) directly causing a change to the number you will input into your mortgage affordability calculator. This can make an astronomical difference in how much house you can afford. This is such a game changer that it almost makes the preliminary step of going online and finding your purchase price through the bank’s online calculator obsolete.
Navigating Mortgage Calculations Effectively
The truth of the matter is the mortgage world has changed in Canada. We live in a day and age where increased government control over our financial transactions will cause more frustration. This will be felt more and more when the results of inputting numbers into online bank calculators and what is really achievable diverge. If you think that this is not another one of the bank’s tools to get you into the branch and feel compelled to take an inferior mortgage product – think again. As you are told that you don’t qualify or don’t have the necessary income to meet the calculator’s results – you may feel that there are no other options for you. But this is simply not true.
As an Independent Mortgage Agent – I work with the banks, trust companies, credit unions and mortgage only companies and scour the whole mortgage market to make that mortgage calculator work for you. There are always options available as different lending institutions are governed by different rules and then there are their own internal lending guidelines that can assist in getting you the best mortgage possible. I live to make that happen! The first step is not to go punch some numbers into an online calculator – but to reach out to me below and we can navigate the mortgage affordability calculator effectively together.