Your Borrowing Power Might Have Increased Without You Even Knowing It!

Snezhana Todorova
Mar 08, 2024By Snezhana Todorova

While all the eyes were on the Bank of Canada, and their expected rate hold, let’s jump to what has been happening to the fixed rates in the last several months.

I have seen many clients who are still on the fence and waiting for the “rates to drop” further in order to act and get their feet wet.

Here is a real live example of a couple I am working with. I wanted to share their story because it reflects the changes happening in the real estate market, especially when it comes to affording a mortgage.

Of course, their names have been changed, and I will call this cute couple Mike and Molly. They have been looking for a home since late Fall, and their strong determination keeps their search for their dream home alive. And now there is some good news for them!

Let’s look at some numbers for  them to show how affordability in the housing market is changing. Let's compare what they could afford at the end of 2023 to what they can afford in early March 2024.

Snezhana looking at the camera with her hands on the closed computer

In November 2023, with a 3-year fixed-rate mortgage at 6.39% over 25 years, compared to today's 3-year fixed-rate mortgage at 5.14% over the same period, there was a big shift in affordability.

Their situation has not changed in both November 2023 & March 2024, and their ballpark figures are:

- Down payment: $120,000
- Molly’s Income: $85,000
- Mike’s Income: $62,000
- No debts and excellent credit

November 2023:

Their budget, inclusive of property taxes, heating costs, and default insurance, allowed for a purchase price of $640,000 with a mortgage balance of $544,840 and a monthly payment of $3,613.22.

March 2024:

Their budget, inclusive of property taxes, heating costs, and default insurance, would allow for a purchase price of $700,000 with a mortgage balance of $606,520.00 and a monthly payment of $3,593.44.

Mortgage DetailsNov 2023March 2024Difference
Subject Property Value$640,000$700,000$60,000
Mortgage Amount$530,000$590,000$60,000
Insurance Premium Amount$14,840$16,520$1,680
Requested Loan Amount$544,840$606,520$61,680
Payment FrequencyMonthlyMonthly

So, let's break it down. If we compare today's scenario with what it was before, buyers now could swing about $60,000 more in the purchase price. Plus, they'd end up with a lower monthly payment of just under 20 bucks and a bigger mortgage balance, all thanks to the decreased fixed-rate interest.

Basically, what this tells us is that the housing market is always shifting. There's no one "perfect" time to buy. If you got pre-approved back in November/December, now's the time to circle back with your mortgage broker. You might be surprised at the numbers.

But hey, let's keep things real. This example is just to give you an idea of what's happening in the market. It's not financial advice or a promise of pre-approval.. Remember, rates and terms can change quicker than you can say "sold."

If you're thinking about taking the plunge into homeownership, why not shoot me a message? Let's chat about your options, dive into what's going on in the market, and figure out a plan that works for you. Your dream home could be closer than you realize.

Book a call with me here