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What You Can Afford
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Step 1
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Calculate Your Gross Debt Service Ratio (GDS).
"Most lenders say that your monthly housing expenses (principal, Interest, and taxes) should not exceed 30% of your family income (before personal income taxes)."
To calculate your Gross Debt Service Ratio (GDS):
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Take your total monthly gross (before tax) income.
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$ ____________________
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Multiply it by the maximum GDS Ratio (30%). x .30
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$ ____________________
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This is the maximum amount available for your mortgage payment (principal and interest), property taxes, and 50% of condo fees (if applicable).
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$ ____________________
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Example: Will and Grace have a gross family income of $66,000. per year, or $5,500. per month. No more than $1,650. ( $ 5,500. x 30% ) can be applied to housing expenses.
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Step 2
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Calculate Your Total Debt Service Ratio (TDS):
"Your TDS takes into account monthly housing expenses plus other debts and loans you may have."
To calculate your Total Debt Service Ratio (TDS):
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Take your monthly gross (before tax) income.
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$ ____________________
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Multiply it by the maximum TDS Ratio (40%). x .40
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$ ____________________
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Subtract your regular monthly expenses (e.g. credit cards, car payments, personal loans).
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$ ____________________
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This is the maximum amount available for your mortgage payment, property taxes, and 50% of condo fees (if applicable).
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$ ____________________
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Example: Will and Grace have a gross family income of $66,000. per year or $5,500. per month. They also have two car payments totalling $575. per month, a student loan of $150. per month, and credit card payments of $175. per month. They can apply no more than $1,300. of their monthly income to housing costs ($5,500. x 40% = $2,200. - $900. = $1,300.).
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Step 3
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Calculate the amount available to apply to your monthly mortgage payment. "This figure will be used to calculate how much mortgage you are eligible for."
To calculate this amount:
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Identify the lower of your GDS or TDS:
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$ ____________________
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Subtract an approximate amount for property tax.
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$ ____________________
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This is the amount we will now use to calculate how much mortgage you are eligible for.
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$ ____________________
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Step 4
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Determine The Purchase Price You Can Afford.
- Using the figure calculated in Step 3, find the closest matching number in column A (see below).
- The corresponding number in column B (see below) is your approximate eligible mortgage amount.
- In column C (see below) record the down payment amount that you have available.
- In column D (see below) add the numbers identified in column B + C together.
This approximately equals the price of the home that you can afford. In the example of Will and Grace, the amount calculated in Step 3 was $ 1,125. They also have saved a down payment of $ 30,000. With a monthly payment of $ 1,125. (refer to column A) they are eligible for an approximate mortgage of $ 130000. (refer to column B). With their down payment of $ 30,000., they can afford to buy a home worth approximately $ 160,000.
A
MONTHLY PAYMENTS
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B
ELIGIBLE AMOUNT OF MORTGAGE
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cost includes principal and interest per month based on interest rate of 6.50% and 25-year amortization)
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$ 202
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$ 30,000.
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$ 270
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$ 40,000.
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$ 338
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$ 50,000.
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$ 406
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$ 60,000.
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$ 474
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$ 70,000.
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$ 572
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$ 80,000.
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$ 610
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$ 90,000.
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$ 610
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$ 90,000.
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$ 678
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$ 100,000.
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$ 746
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$ 110,000.
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$ 814
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$ 120,000.
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$ 882
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$ 130,000.
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$ 950
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$ 140,000.
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$ 1,018
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$ 150,000.
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$ 1,086
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$ 160,000.
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$ 1,154
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$ 170,000.
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$ 1,222
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$ 180,000.
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$ 1,290
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$ 190,000.
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$ 1,358
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$ 200,000.
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C
DOWN PAYMENT AVAILABLE
+
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D
HOUSE PRICE YOU CAN AFFORD
=
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Don't forget that the down payment must be at least 10% of the purchase price of the home, unless you qualify for Canadian Mortgage and Housing Corporation's (CMHC) 5% down program for first-time buyers.
Please note that all amounts are approximate. Columns A & B are based on an interest rate of 6.5%. Rates do vary. If rates are higher, you would be eligible for a smaller mortgage. If rates are lower, your mortgage could be higher.
These calculations do not take into account mortgage insurance premiums for high-ratio mortgages.
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Home Purchase Cost Estimate
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Use the form below to help you calculate the potential costs associated with buying a home. Mario will help you calculate the costs associated with your particular purchase.
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Fixed costs
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Purchase Price
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$__________
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GST (if applicable)
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$__________
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Legal fees and disbursement
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$__________
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Lawyer's fees
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$__________
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Land transfer tax (if applicable)
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$__________
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Appraisal fee
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$__________
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Status certificate fee (if condo)
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$__________
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Home inspection fee
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$__________
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CMHC fee
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$__________
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Mortgage loan insurance premium*
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$__________
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Sub total
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$__________
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*could be incorporated into your mortgage
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Monthly costs after purchase
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Mortgage Payment
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$__________
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Condominium fee
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$__________
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Property taxes (adjustments to)
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$__________
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Sub total
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$__________
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Other potential costs
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Furniture, appliances, etc...
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$__________
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Moving expenses
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$__________
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Renovations/repairs
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$__________
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Sub total
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$__________
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Total estimated cost
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$__________
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