Investing

How much of your mortgage approval did you use?

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  • Jul 29th, 2015 4:35 am
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[OP]
Newbie
Apr 29, 2015
75 posts
4 upvotes
Oakville, ON

How much of your mortgage approval did you use?

when you purchased your house, how much of your approval did you use? Advice has been given that you should not exceed 75% of what you are approved for!
21 replies
Deal Addict
Jun 6, 2015
1435 posts
233 upvotes
75%!

Didnt know about the 75 rule haha
Banned
Apr 23, 2015
994 posts
162 upvotes
Toronto, ON
0%. This mortgage bonanza will end in disaster and I don't want any part of it. My main focus is on how to best shield my investments from Canada's impending mortgage crises.

My investments are 20% invested in Canadian assets and I am planning on reducing that to 0%. However, a lot of other countries are also being very financially irresponsible so it is difficult to figure out where to invest - it is like trying to find a wife at a brothel.
Deal Addict
Jun 6, 2015
1435 posts
233 upvotes
Stupid analogy.

Apart from that are you using forex to acquire assets outside Canada
Banned
Nov 17, 2014
942 posts
757 upvotes
Ontario
About 75% also but just sort of happened that way. Wasn't a number we shot for.
Sr. Member
Aug 6, 2014
830 posts
300 upvotes
Ottawa, ON
about 80%. didn't know about the 75% rule either, we would have definitely used 100% if we found a place we liked for that price.
Sr. Member
Feb 10, 2015
607 posts
228 upvotes
Milkman16 wrote: when you purchased your house, how much of your approval did you use? Advice has been given that you should not exceed 75% of what you are approved for!
Carebra wrote: 75%!

Didnt know about the 75 rule haha
Seems like an arbitrary number to me.
Deal Addict
Jan 27, 2015
1037 posts
462 upvotes
Edmonton, AB
HumansOfToronto wrote: 0%. This mortgage bonanza will end in disaster and I don't want any part of it. My main focus is on how to best shield my investments from Canada's impending mortgage crises.

My investments are 20% invested in Canadian assets and I am planning on reducing that to 0%. However, a lot of other countries are also being very financially irresponsible so it is difficult to figure out where to invest - it is like trying to find a wife at a brothel.
Not sure if R/E will crash in Canada, given that our dollar is so cheap to buy. There are tons of foreign investors lining up to buy our over-priced real-estate.

As for your investments, your strategy will render you less than optimal result. It is always about buy & hold: buy low-cost index funds and hold on for dear life. My portfolio is 25% each of Bonds, CAD Equities, US Equities, and Int'l Equities. Right now, US Equities are expensive resulting in me pouring more money in on CAD Equities.

Once you have come up with an asset allocation, you stick to it if you want optimal results. Changing your allocation strategy mid-stream is the main reason why your average citizen does not even earn average results despite using the indexing strategy.
Sr. Member
Nov 13, 2007
878 posts
124 upvotes
Toronto
The question is funny. It's should not be the bank, telling you what you can/cannot afford. You should be doing your own budgeting to come up with a number that you can afford comfortably. The mortgage rate is at historic low. 5-year variable closed is at 2%. If the interest rate goes up by 1% (which is not much), the cost of borrowing goes up by 50%.

"His basic guideline: The monthly cost of your mortgage and property taxes, plus the monthly portion of your annual home insurance bill, should not eat up more than 25 to 30 per cent of your monthly net pay."
Deal Expert
User avatar
Jul 5, 2004
26886 posts
6104 upvotes
I don't recall being given a maximum amount. I recall telling the bank the most I was interested in borrowing and we worked starting from that number. I had no interest in going above $400k (ended up bying for $315k), although with both our salaries, I assume we could have been approved for as high as $700k.

So around 50% I guess.
Deal Fanatic
User avatar
Apr 29, 2008
7959 posts
4705 upvotes
Montreal
I said the amount I wanted for approval, they said OK.

No idea how much they would have approved maximum... not sure why I should care.
Deal Addict
Mar 2, 2005
2032 posts
333 upvotes
That's a meaningless number I think. One has to be rational and determine what is it s/he or they are comfortable with. I did my numbers and used a lot less than what the bank had approved me for. I had a plan in place before purchase including contributions to RRSP/RESP and didn't want to skim on those. Its not a dream house by any means, has only two bathrooms, no dual vanity and walk in closets etc, but its in a quiet part of town and in a very good neighbourhood with good schools. We are very content and have never ever regretted our decision to stay within our means.
Deal Addict
Nov 6, 2007
1373 posts
664 upvotes
North York
cashinstinct wrote: I said the amount I wanted for approval, they said OK.

No idea how much they would have approved maximum... not sure why I should care.
I think usually you can get a mortgage of 4 or 5 times of annual income but people can totally get up to 6 x if the down payment is like more than 50% of the total value of the house.

We only used one of our income for mortgage pre approval and we only ended up using about 60% of it.
Deal Addict
Jun 6, 2015
1435 posts
233 upvotes
superping wrote: The question is funny. It's should not be the bank, telling you what you can/cannot afford. You should be doing your own budgeting to come up with a number that you can afford comfortably. The mortgage rate is at historic low. 5-year variable closed is at 2%. If the interest rate goes up by 1% (which is not much), the cost of borrowing goes up by 50%.

"His basic guideline: The monthly cost of your mortgage and property taxes, plus the monthly portion of your annual home insurance bill, should not eat up more than 25 to 30 per cent of your monthly net pay."
Very good point.

Who is "his"
Member
User avatar
Feb 2, 2010
371 posts
83 upvotes
Vancouver
superping wrote: The question is funny. It's should not be the bank, telling you what you can/cannot afford. You should be doing your own budgeting to come up with a number that you can afford comfortably. The mortgage rate is at historic low. 5-year variable closed is at 2%. If the interest rate goes up by 1% (which is not much), the cost of borrowing goes up by 50%.

"His basic guideline: The monthly cost of your mortgage and property taxes, plus the monthly portion of your annual home insurance bill, should not eat up more than 25 to 30 per cent of your monthly net pay."
I don't think this 25-30 is realistic. Of course everybody wants to have this scenario but with these numbers pretty much nobody can afford a decent place.

Lets say making 100k which means about $5900 per a month. 5800*0.30=$1770. $1770-$50 insurance-$100 property tax=$1620. That means about $350k mortgage. What can you get with that money?

Am I missing any point?
Deal Fanatic
User avatar
Apr 29, 2008
7959 posts
4705 upvotes
Montreal
I don't think Vancouver prices are realistic... guidelines/ideas such as 25-30% of monthly net pay don't have to change to account for the prices in Vancouver.

I am at around 25% of monthly net pay for mortgage/property taxes/home insurance.
Member
User avatar
Feb 2, 2010
371 posts
83 upvotes
Vancouver
cashinstinct wrote: I don't think Vancouver prices are realistic... guidelines/ideas such as 25-30% of monthly net pay don't have to change to account for the prices in Vancouver.

I am at around 25% of monthly net pay for mortgage/property taxes/home insurance.
Yeah totally agree with you but what I see is that it'll never change. At the best case scenario it'll be stable so if you gotta live here, you have no choice
Member
May 11, 2015
241 posts
133 upvotes
Toronto
0% apparently to qualify for a mortgage you need a job

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