You may have heard about a decline or have received one yourself in regard to the affordability of your mortgage.
The fact that you cannot afford this mortgage payment does not necessarily mean you are declined. All it means is you will have to seek out Alternative Lending options.
These lending options extend this affordability, which means they take your ratios and extend them.
Extended ratios typically include two calculations: the gross debt service (GDS) ratio and the total debt service (TDS) ratio.
GDS looks at the percentage of a borrower’s income required to cover housing costs, including mortgage payments, property taxes, heating expenses, and half of any condominium fees. Meanwhile, TDS includes all of a borrower’s debt obligations, such as credit card payments, car loans, and other personal loans, in addition to their housing costs.
To qualify for a mortgage in Canada, borrowers are typically required to meet certain ratios.
Generally, these ratios sit at 39% GDS and 44% TDS on all Triple-A lending. They exist to ensure that borrowers are not taking on more debt than they can afford. Once you exceed these ratios, and they go over 39% and 44%, we will look at other lenders that allow a higher threshold for your approval.
An example of a lending type that allows for extended ratios would be B-Lending.
For more information about these percentages and what they mean check out our post on insured mortgages.
It’s important to note that these ratios are just one factor lenders consider when assessing a borrower’s ability to repay a mortgage. Lenders also look at a borrower’s credit score, employment history, and other factors.
It’s important to understand these extended ratios and ensure they are within the preferred ranges when applying for a mortgage. This can help increase the chances of your mortgage being approved, and may also help borrowers avoid taking on more debt than they can afford.
Always talk to a Broker/Agent about your approval and get a full understanding of what Borrower Type you are before you go into a mortgage transaction. Some extended ratio lenders charge Mortgage Fees.
