How Much Home Can you Afford?

It’s very exciting to go home shopping. Before you head out to start your search you should first sit down and really plan out your finances. Visit the Mortgage Advisors website for tools and resources to help calculate your household budget and how much you can borrow toward the purchase of a new home.      

Fixed Expenses

Your total income will be your best gauge to finding out what can you reasonably afford to buy. You will need to write down what you will pay out every month, beginning with your fixed expenses, such as potential mortgage, and property taxes on your new home.

Utilities

Then you will factor in your monthly utility payments. Remember, utility expenses will vary wildly throughout the year. If you are doing your expense calculations in a month like May or September when you have lower utility usage, make sure you account for the winter (high heat bills) and summer (high cooling bills).

Maintenance

Next you should calculate your yearly maintenance amounts, which will vary depending on whether you buy a condo or a freehold home. A general rule for home maintenance is a minimum of one per cent of the home value per year. Keep in mind that an older home will have more maintenance costs than a newer build.

Life Expenses

Donʼt forget to add in life expenses like groceries and entertainment, car payments, gas and student loans.

Lifestyle Changes

While you are factoring in your salary and payment schedule you may want to look at future lifestyle changes that would affect your income. Welcoming a new baby for example will change both your income and add many child-centered expenses. If you like to travel or take family vacations you want to incorporate those type of expenses so you can also maintain your current lifestyle and be comfortable with your budget.

Pre-Qualified Mortgage

Speak with one of our mortgage advisors today to start the pre-approval process. This will give you a clearer picture of the amount that you can borrow and help you stay on budget during your house hunt. You will then be able to look for homes in your comfort zone and not be disappointed when you fall in love with your dream home only to find out that you just can’t afford to purchase it.

Down Payment

Your down payment will also factor into what you can afford. You can buy a home with as little as 5% down payment as an insured mortgage. Canada Mortgage and Housing Corporation (CMHC) offers mortgage loan insurance for those with less than a 20% down payment. The premium is based on your mortgage amount and is payable as part of your mortgage payments. To avoid mortgage insurance premiums 20% down payment is required. Speak with a mortgage broker from the Mortgage Advisors to figure out the best mortgage solution for you. Once you have a clearer understanding of your financial picture, you can start the search for your new home.