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):
| Take your total monthly gross (before tax) income. |
$ ____________________ |
| Multiply it by the maximum GDS Ratio (30%). x .30 |
$ ____________________ |
| This is the maximum amount available for your mortgage payment (principal and interest), property taxes, and 50% of condo fees (if applicable). |
$ ____________________ |
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.
|
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):
| Take your monthly gross (before tax) income. |
$ ____________________ |
| Multiply it by the maximum tdS Ratio (40%). x .40 |
$ ____________________ |
| Subtract your regular monthly expenses (e.g. credit cards, car payments, personal loans). |
$ ____________________ |
| This is the maximum amount available for your mortgage payment, property taxes, and 50% of condo fees (if applicable). |
$ ____________________ |
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.).
|
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 |
B
ELIGIBLE AMOUNT OF MORTGAGE |
| cost includes principal and interest per month based on interest rate of 6.50% and 25-year amortization) |
| $ 202 |
$ 30,000. |
| $ 270 |
$ 40,000. |
| $ 338 |
$ 50,000. |
| $ 406 |
$ 60,000. |
| $ 474 |
$ 70,000. |
| $ 572 |
$ 80,000. |
| $ 610 |
$ 90,000. |
| $ 610 |
$ 90,000. |
| $ 678 |
$ 100,000. |
| $ 746 |
$ 110,000. |
| $ 814 |
$ 120,000. |
| $ 882 |
$ 130,000. |
| $ 950 |
$ 140,000. |
| $ 1,018 |
$ 150,000. |
| $ 1,086 |
$ 160,000. |
| $ 1,154 |
$ 170,000. |
| $ 1,222 |
$ 180,000. |
| $ 1,290 |
$ 190,000. |
| $ 1,358 |
$ 200,000. |
C
DOWN PAYMENT AVAILABLE
+ |
D
HOUSE PRICE YOU CAN AFFORD
= |
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.
| Home Purchase Cost Estimate |
| 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. |
| Fixed costs |
| Purchase Price |
$__________ |
| GST (if applicable) |
$__________ |
| Legal fees and disbursement |
$__________ |
| Lawyer's fees |
$__________ |
| Land transfer tax (if applicable) |
$__________ |
| Appraisal fee |
$__________ |
| Status certificate fee (if condo) |
$__________ |
| Home inspection fee |
$__________ |
| CMHC fee |
$__________ |
| Mortgage loan insurance premium* |
$__________ |
| Sub total |
$__________ |
| *could be incorporated into your mortgage |
|
| Monthly costs after purchase |
| Mortgage Payment |
$__________ |
| Condominium fee |
$__________ |
| Property taxes (adjustments to) |
$__________ |
| Sub total |
$__________ |
| Other potential costs |
| Furniture, appliances, etc... |
$__________ |
| Moving expenses |
$__________ |
| Renovations/repairs |
$__________ |
| Sub total |
$__________ |
| |
|
| Total estimated cost |
$__________ |
|
