Did you know that not all mortgage rates allow for the same maximum qualifying amount? In other words, the amount that you are able to qualify for can changed depending on which term and product you desire. For example, Tim and Judy are qualified for a $420,000 mortgage with a variable rate at prime minus 0.50% versus a $500,000 mortgage for a 5 year fixed rate at 3.49%. But why? A few years ago, the Bank of Canada instituted a BoC benchmark rate for all fixed rate mortgages less than 5 years, and all variable rate mortgages.
The current benchmark rate as of October 18th for qualifying for mortgages in Calgary and the rest of Canada is 5.34%. When someone qualifies for a 5 year fixed rate or longer, they qualify at the effective rate of the mortgage. The qualifying rate ensures they are able to service the debt in a scenario when rates go up. They government doesn't want home owners to just barely qualifying for mortgages that have shorter terms or variable rates to safeguard against rising interest rates, and thus many people who wouldn't be able to afford their payments.
If you would like to learn more about your maximum approval amount, contact Calgary mortgage broker, Luke Wile, today 403.460.7707