It’s no secret that buying a house can be expensive, especially in more populated areas of Canada, where the cost of living is high in general. Plus, the approval process is very tough and includes steps like the mortgage stress test. This can cause many prospective homebuyers to shy away from the process.
Even if you have a decent income, qualifying for a small $300,000 mortgage can be tough.
How Much Income Do You Need To Qualify For A $300,000 Mortgage?
These days, the average price of a house can vary greatly depending on where the property is located and what condition the home is in. A similar principle applies to the financial institutions that provide mortgages. Every lender has different requirements and your chances of qualifying for a $300,000 mortgage will rely heavily on your financial situation.
One of the biggest deciding factors is your income, which must be sufficient enough to cover any mortgage payments, interest and fees you’ll encounter during your amortization period. Lenders will look at numerous factors to determine how much income you need to qualify for a $300,000 mortgage, including the Canadian Mortgage Stress Test, your monthly expenses for your home, your down payment and other relevant factors.
Income Required For A $300,000 Mortgage
According to the BMO Mortgage Affordability Calculator, you can afford a ~$300,000 mortgage (or ~$325,000 valued house) if you:
- Have an average yearly income of $55,000.
- Offer a down payment of $25,000
- Get approved for an interest rate of 2.50% during your stress test.
- Agree to pay $11,998 in mortgage default insurance.
What Would My Mortgage Payments Be For A $300,000 Mortgage?
Now let’s see what your mortgage payments would be like using a 5-year fixed term (closed) and $25,000 down payment with a 3.0% interest rate, $12,000 of default insurance, different amortization periods and a monthly or bi-weekly payment plan:
15 Year Amortization
| 15 Year Amortization | |
| House Price | $325,000 |
| Down Payment | $25,000 (8%) |
| Mortgage Amount | $300,000 |
| Mortgage Default Insurance | $12,000 |
| Total Mortgage | $312,000 |
| Interest Rate | 3% |
| Monthly Payment | $2,152 |
| Bi-Weekly Payment | $990 |
20 Year Amortization
| 20 Year Amortization | |
| House Price | $325,000 |
| Down Payment | $25,000 (8%) |
| Mortgage Amount | $300,000 |
| Mortgage Default Insurance | $12,000 |
| Total Mortgage | $312,000 |
| Interest Rate | 3% |
| Monthly Payment | $1,727 |
| Bi-Weekly Payment | $795 |
25 Year Amortization
| 25 Year Amortization | |
| House Price | $325,000 |
| Down Payment | $25,000 (8%) |
| Mortgage Amount | $300,000 |
| Mortgage Default Insurance | $12,000 |
| Total Mortgage | $312,000 |
| Interest Rate | 3% |
| Monthly Payment | $1,477 |
| Bi-Weekly Payment | $679 |
How Much Interest Would You Pay On A $300,000 Mortgage?
When it comes to mortgages, interest is one of the most important costs to consider, as it can drastically change the size of your loan payments and total debt. The amount of interest you’ll have to pay overall depends on your interest rate and amortization term.
Here are some examples using the same factors above (5-year fixed/closed mortgage, $25,000 down payment, $12,000 in CMHC insurance) and monthly mortgage payments:
15 Year Amortization Period
| Interest Rate | Interest Paid Over 5-Year Term |
| 1.5% | $19,667 |
| 2.0% | $26,331 |
| 2.5% | $33,044 |
| 3.0% | $39,804 |
| 3.5% | $46,611 |
25 Year Amortization Period
| Interest Rate | Interest Paid Over 5-Year Term |
| 1.5% | $21,224 |
| 2.0% | $28,409 |
| 2.5% | $35,643 |
| 3.0% | $42,921 |
| 3.5% | $50,237 |
How Much Do You Need As A Down Payment For A $300,000 House?
The minimum down payment required depends on the value of the home you’re looking to purchase. Houses under $500,000 require a down payment of at least 5%, while houses valued between $500,000 and $1,000,000 require 5% on the first $500,000 and 10% on the remainder.
To avoid paying mortgage default insurance, you’ll need to offer your lender a down payment of at least 20% (of the home’s purchase price).
Minimum Down Payment Amounts
Below, we’ve demonstrated how much you’ll need as a down payment based on varying house prices (in the 300,000s).
| $300,000 | $350,000 | $375,000 | |
| 5% | $15,000 | $17,500 | $18,750 |
| 10% | $30,000 | $35,000 | $37,500 |
| 15% | $45,000 | $52,500 | $56,250 |
| 20% | $60,000 | $70,000 | $75,000 |
How Much Mortgage Loan Insurance Would You Need To Pay If You Offer The Minimum Down Payment?
Mortgage loan (or default) insurance protects the lender if you start missing payments and can’t make them up within a reasonable timeframe. As mentioned, most lenders require you to buy CMHC insurance if you put less than 20% of a home’s price down.
Your premium will usually be 0.6% – 6.5% of your total borrowed amount, based on your loan-to-value ratio or LTV (mortgage amount divided by purchase price). It can be paid upfront in a lump sum or divided amongst your mortgage payments. Essentially, if you offer a lower down payment, you’ll have to pay a higher mortgage insurance premium.
So, if you’re only able to make a minimum 5% down payment on a $300,000 house, the Canada Mortgage and Housing Corporation will charge you $11,400 for insurance.
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Why Do Smaller Down Payments Qualify For Lower Mortgage Rates?
READ ARTICLECan You Qualify For the First-Time Home Buyer Incentive With A $300,000 House?
The First-Time Home Buyer Incentive is a federal program that gives Canadians 5% or 10% of a home’s purchase price for a down payment. It’s a ‘shared equity’ mortgage where the government shares the profits and losses of your property’s value. You then pay the borrowed percentage back within a 25-year period or when you sell the home.
Overall, your ability to qualify for the First-Time Home Buyer Incentive depends on your annual income and the location of the home. You can borrow up to 4 times (or 4.5 times for homes in Toronto, Vancouver and Victoria) of your income (up to the maximum Qualifying Annual Income).
The maximum Qualifying Annual Income that you can have to become eligible is $120,000 (or $150,000 in Toronto, Vancouver and Victoria). As such, any home that’s worth $480,000 or less ($675,000 in the cities listed above) can qualify for this incentive.
Bottom Line
Considering how much a house can go for in this day and age, $300,000 is a relatively small mortgage, so it’s possible to qualify for one under the right circumstances. In the end, to qualify for a $300,000 the most important elements to have are a decent annual income, good credit, a reasonable down payment and low debt.
