In British Columbia, the prices of homes have skyrocketed. It can be as high as $900,000 or higher. That’s why we have been hearing people asking questions like- “How much mortgage can I afford with a 125k salary?”
At this salary, you should consider other personal factors as well. Let’s break down what home you can afford in Surrey’s market.
So, How Much Can You Really Afford?
When you earn a $125,000 salary in one year, you can afford buying a home with a mortgage.
A mortgage will be around $550,000 to $625,000. Undoubtedly, this range will depend on many factors. Watch out for your monthly debts, down payments and your pending interest rates, etc.
If your salary is $125,000/year, then you might get $10,400/month before tax. But you have monthly debts of $500 and a down payment of $100,000. On top of that, you have 5.5% interest rates.
When a mortgage is calculated based on these numbers, you can afford a mortgage of around $600,000. You can look for homes in the $700,000–$750,000 range, depending on your down payment.
What Lenders Look At for Mortgage Eligibility
So, how will you know that you’re qualified to get a mortgage? Remember that lenders don’t look at your 125k salary as the only factor. They need a bigger picture of your financial health.
Let’s simplify how lenders decide what you can afford.
1. Gross Debt Service (GDS) Ratio
The GDS ratio includes factors like mortgage payments and property taxes. Whether your salary is 125k or 150k, this amount should not exceed 35% of your gross income per month.
2. Total Debt Service (TDS) Ratio
This includes all your debts. Your credit cards, car loans, student loans are all included. The TDS rate should also be under 42% of your monthly earnings.
3. Down Payment
The larger you pay down, the more you can afford. For a 20% down payment, you don’t need to pay mortgage insurance. And you can even qualify for other mortgages.
4. Interest Rates
If interest rates are low, you can afford more mortgages. If we talk about the current rate of 5.5% in Surrey, you are likely to afford less mortgage.
Note: As you can see, $125,000 is a solid income. But your debts, down payment, and credit history are just as important. Two people earning the exact same salary could qualify for very different mortgage amounts.
Final Thoughts: Know Your Numbers
The grinding question, how much mortgage can I afford with $125K salary? Understanding the range and what factors affect this range is important. You can plan smarter and avoid pitfalls. But every buyer is different, as your debts, scores, rates all factor in.
You can get clear numbers and expert advice from professionals in the field, like Asim Ali. Get personalized mortgage solutions and current rate information all in one place.