By looking at your budget, you can determine the mortgage size you can handle.
A mortgage loan is a form of debt, and, like other forms of debt,
mortgage lenders require regular payments of interest and re-payment of
the capital borrowed.
Most people also have other forms of debt: car loan,
student loan, credit card payments. The total debt load should be manageable
because income has to sustain regular living expenses too.
The TD Canada Trust Mortgage Navigator and Mortgage Calculator
will help you figure out comfortable levels of borrowing and repayment.
A manageable mortgage payment can also be determined by calculating Gross
Debt Service Ratio (GDS) and Total Debt Service Ratio (TDS).
GDS looks at the ratio between gross annual income, and the annual carrying
costs of a mortgage, plus taxes, utilities and 50% of condominium fees,
if applicable. To meet the GDS qualification, annual carrying costs should
not exceed 32% of gross annual income.
TDS examines the ratio between gross annual income and total annual debt
costs. These costs include: mortgage payments, taxes, heating, and payments
on any other debts owed, such as personal loans, credit card debts and others.
To meet the TDS qualification, total annual debt costs should not exceed
37% of gross annual income.
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