Mortgages
Know What You Can Afford. Shop With Confidence.
Not sure how much of a mortgage you qualify for? Use our handy calculator to figure out how much you can really afford. 
Choosing a home that you can afford will allow you to enjoy the rewards of home ownership with comfort and peace of mind. Consider the following three areas in determining how much you can afford: Determine your debt load To determine what you can afford, use these two simple calculations: Gross Debt Service ratio (GDS) The GDS looks at your proposed new housing costs (mortgage payments, taxes, heating costs, and 50% of condominium fees, if applicable). Generally speaking, this amount should be no more than 32% of your gross monthly income. For example, if your gross monthly income is $4,000, you should not be spending more than $1,280 in monthly housing expenses. Total Debt Service ratio (TDS) The TDS ratio measures your total debt obligations (including housing costs, loans, car payments, and credit card bills). Generally speaking, your TDS ratio should be no more than 40% of your gross monthly income. Keep in mind that these numbers are prescribed maximums and that you should strive for lower ratios for a more affordable lifestyle. Before falling in love with a potential new home, you may want to obtain a pre-approved mortgage. This will help you stay within your price range and spend your time looking at homes you can reasonably afford. The pre-approval meeting is the time to find out about different mortgage products that are available to suit your particular needs. First-time buyers may want to ask about special programs such as the CMHC 5% down payment option and the federal government's "RSP Home Buyers' Plan". A pre-approval meeting can also be treated as a fact-finding mission to go over closing costs. For example: land transfer tax, legal fees and other disbursements. A good rule of thumb is to budget about 2% of the purchase price for closing costs. People who buy new homes from builders pay 6% GST, which is often included in the purchase price. Once the mortgage is pre-approved, we commit to the interest rate for 90 days.⊃1 You can shop with confidence, knowing how much you can spend for the home of your choice. And there's no obligation. If you don't find a home you like in the first 90 days, you can renew your pre-approval at the interest rate in effect at that time.  Figure out a purchase price you can handle How much house is affordable? Ideally, new home buyers should create a budget and calculate their debt service ratios. However, here is a rule of thumb that some choose to follow: It works like this: Start with the household's gross annual income (salaries, wages, and taxable income before taxes). Multiply by 3.4. Example: people with an annual household income of $60,000 can reasonably afford a $204,000 home. Home Price Guide
Leave yourself money for other expenses Home buyers be prepared: Some people are surprised when they discover that the purchase price and mortgage payments are not the only costs associated with owning a home. A financial buffer should be kept in case of cash emergencies, home repairs or other unexpected events. Monthly take-home pay should also comfortably cover living expenses such as food, clothing, insurance, gas, car repairs, entertainment, vacations and other debts. Everything seems to cost more than expected, from paint, wallpaper and curtains to general upkeep and property taxes. Ask a real estate agent (or your Mobile Mortgage Specialist) to help you estimate some of these additional costs for houses in your preferred area. Related topics:
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