Mortgage Basics

How to Increase Your Mortgage Amount

How to Increase Your Mortgage Amount
Written by
  • nesto
| Apr 11, 2022
Reviewed, Oct 24, 2023

Table of contents

    One of the most exciting parts of buying a home is the process of exploring your options. It’s practically like window shopping, but on a more permanent level, of course. When you eventually find that home that checks all your boxes, and maybe even surpasses your expectations, you might run into a slight problem; your budget.

    If the home you want exceeds your budget, then you would need a larger mortgage. Mortgage lenders use your financial information to determine how much you can borrow, and this very factor can be the one that robs you of your dream home.

    Now, it does not have to end at that, all you need to know is how to get approved for a larger mortgage, and this article would teach you how to increase mortgage amount.

    Key Takeaways

    • You can effectively increase your mortgage amount using several methods
    • Your debt-to-income ratio and down payment are important factors for determining how much mortgage you can access
    • Debts and a low credit score would negatively impact your mortgage application process

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    Steps to Getting a Larger Mortgage Amoun

    Getting a large mortgage is an apparent solution to your budget limitations. Fortunately, there are several ways that you can go about increasing your mortgage amount.

    While you might not necessarily be able to apply all of them, working towards making some happen would definitely do wonders for increasing your mortgage. So, here’s how to get approved for more mortgage:

    Increase Your Down Payment 

    The minimum downpayment required to buy a home in Canada ranges from between 5% to 20% of the home’s purchase price. A more expensive house would typically imply a higher minimum down payment. Here’s a breakdown of how the minimums work:

    • 5% down payment for homes priced at $500,000 and below 
    • 5% on initial $500,000 plus 10% on the balance left over for homes priced at above $500,000 but less than $1,000,000  
    • 20% flat down payment for homes priced above $1,000,000

    The exact amount you can part with as a down payment goes a long way in determining how much you are eventually able to spend on a house.  

    A larger down payment allows you to access a larger mortgage amount, providing you with more to spend on a house. Thankfully, this is a factor that you can easily work on, for instance, you can save up to make a sizable down payment.  

    Also, increasing your down payment can save you thousands of dollars in the long run. If you pay a minimum of 20%, you would not have to pay mortgage insurance  which has a double effect of reducing how much you can borrow and increasing your monthly payments. 

    Show More Income During Pre-approval

    This is a solid way to go if you are looking for how to increase mortgage pre approval. If your mortgage pre approval provider is unable to give you up to the amount you need, then you probably need an income boost. You could find out the required income for the loan you want by simply asking the pre approval provider.

    Next is the Herculean task; increasing your income. This is easier said than done, however here are some options that might work:

    • Negotiating a pay raise with your current employer is one of the best paths to take here. This is because you would be able to maintain job stability which lenders take into consideration, and potentially get a raise as well
    • Finding a better-paying job could do the trick too. You would likely get the raise that you want, however, you would be unable to immediately apply for a mortgage. Lenders want to be sure that you are stable at your job, and only working the same job for a while would prove this
    • You could also use income from interest or dividends from investments, alimony or child support, rental property income, or earnings from a side hustle or business (there has to be a 2-year earning history here too)

    Alternatively, you could boost income by taking on a co-signer like parents who have a steady income or even your partner. Your incomes are combined and you would definitely get approved for a larger mortgage.

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    Pay Off Outstanding Debts

    If you can’t get a big enough mortgage, then you should very well consider what you currently owe in debts. Your mortgage provider would examine your income-to-debt ratios to determine how much in mortgage you can handle based on your present financial situation. 

    More often than not, these debt service ratios, namely the Gross Debt Service Ratio (GDS) and Total Debt Service Ratio (TDS) effectively limit the amount most people can borrow. On average, a DTI ratio of 36% and less is considered by most lenders to be a good indication of creditworthiness. Some other lenders may allow for higher DTIs as well. 

    Improving debt-to-income ratio involves paying off debt like auto loans, student loans, credit card debt, and other lines of credit that mandate regular payments. You could also consider consolidating debt into an installment loan to aid faster repayment or extend the amortization of loan to reduce payments.

    Increase Your Credit Score

    If you are looking for how to get approved for a big loan, then you really should look for ways to increase your credit score. A higher credit score helps you obtain not only a lower interest rate but also a larger loan, in many cases. 

    Boosting your credit score involves making payments on time, as well as avoiding maxing out your credit or applying for more credit during the mortgage application process

    Find a Lower Mortgage Rate

    A lower mortgage rate has the baseline effect of reducing your mortgage payment and allowing you to pay off the principal faster. It basically helps to reduce homeownership costs. 

    Finding a lower mortgage rate is quite the adventure because it would involve comparing the various offerings available on the market and pitching them against one another. Mortgage providers differ in terms of profit margin and risk that they are willing to take on, and so, mortgage rates would differ. It is important to compare so that you don’t end up having to spend thousands extra annually. 

    Before acquiescing to any deal offered to you by a mortgage provider, ensure that the mortgage rate, as well as the terms and conditions, work for you. For instance, based on prevailing market conditions and your circumstances, a 3-year variable mortgage and a 5-year fixed mortgage could differ in terms of the eventual cost. Note that there is no guarantee here because all mortgages are stress tested at a much higher rate now.

    Similarly, a mortgage broker can be in a good position to better explain how mortgage products vary and guide you to picking one that works great for you. They offer free consultations and can effectively help you choose a mortgage product with low rates and no hidden conditions. 

    Final Thoughts

    Increasing your mortgage amount can seem like a pretty difficult task to begin, however, it does pay off in the end. Since there are options to pick from, you can opt for the ones that seem practical and doable to you. You would be able to get the home that you want, and your finances should be in a good place as well. 

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