12 May

Million Dollar Mortgages in Saskatoon

General

Posted by: Scott Trainor

Million dollar homes are becoming more and more common in the Saskatoon market, this article is to help you understand the difference of buying a six and a seven figure home. Areas such as Greenbryre, The Willows, Sask Cres., Spadina Cres. are home to high end homes that will check all of the boxes you are looking for. Even COVID-19 hasn’t slowed the high end home market in Saskatoon with many areas seeing strong growth.

Can you afford a million-dollar home?

Here’s the short answer: To buy a million-dollar home in Saskatoon, you’ll need an annual household income of at least $170k, as well as a cash down payment of at least $200,000. That’s the minimum you’ll need in order to qualify for a large enough mortgage.


Getting a million-dollar mortgage

Most Canadians buying a $1,000,000.00 home don’t have a million in cash just lying around. Most of them would need to save a down payment and take on a mortgage to help purchase a million dollar home.

So, can you afford to get a mortgage for a $1 million home? There are two key factors that affect your mortgage affordability – your down payment, and your gross debt service ratios.

Your down payment

Not having a big enough down payment is what eliminates most buyers from buying a million home. Saving for a down payment is hard enough, but Canadian policy is that homes with a purchase price of over $1 million require a down payment of 20% or more.

Since an insured mortgage is out of the question for a $1,000,000 home, you’ll need a minimum 20% down payment ($200,000), resulting in a typical mortgage on a million-dollar home of $800,000.

If you’re one of the few Saskatonian’s with a large enough down payment – congratulations! Now let’s look at whether you can afford the mortgage payments on a million-dollar home.

Debt service ratios

Your debt services ratios determine whether you can afford the payments on a million-dollar mortgage.

Gross debt service ratio:
Your GDS ratio controls whether you can afford the monthly carrying costs associated with your house. Your lender will add your annual mortgage payments to the costs of owning your home, then divide this by your annual household income. To qualify for the loan, the resulting ratio must be less than 39%.

Total debt service ratio:
Now let’s look at the next debt service ratio: your TDS. This ratio takes the factors above into account, but also adds in any debt requirements you may have. This ratio must stay below 44%.

To satisfy both debt service ratios, you’ll need an annual income of at least $170,000 to afford a home worth over $1 million.

The Bottom Line

Buying a $1 million home isn’t an easy feat. You’ll need a large down payment, and your debt levels should be under control. You’ll need a high income and the ability to handle renewing your mortgage at higher interest rates. The good news is that if you meet those requirements, you can afford a $1 million home’s monthly payment – or maybe even a $1.5 million house dollar monthly payment. If you’d like to see what you can approve for click here!