Toronto Real Estate
Information
How Much House Can You Afford?
The amount of loan for which you qualify is based on two different
calculations. Using what are known as qualification ratios, lenders
evaluate your income and long-term debts to determine a "safe"
amount for your mortgage payments. A fairly standard ratio is 28/33.
Certain mortgage plans sometimes use more liberal ratios - for example,
the FHA currently uses 29/41.
How it works: With a 28/33 ratio, you'd be allowed to spend up to 28%
of your gross monthly income for mortgage payments.
The lender will then run a different calculation. This one is your
loan payment and debt payments combined, which may not exceed 33% of
your gross monthly income.
To calculate exactly how much you may borrow, you also need an estimate
of current interest rates.
Suppose you had $1,000 a month for mortgage payment; at 7% that would
let you borrow about $160,000 on a 30-year loan. At 6% the loan amount
would be nearly $175,000. If your rate were 8%, the loan amount would
be a bit less than $150,000.
As part of this calculation, you also need to estimate and include
the property taxes, homeowner’s insurance, and Homeowner Association
fees (if applicable) you might need to pay, which are considered part
of your monthly expense.
Further Information:
Planning Your Home Purchase
Checking Your Credit Rating
Pre-qualification and Pre-approval on a Mortgage
Becoming an Educated Buyer: Research Neighbourhoods
Becoming an Educated Buyer: Your List of Home Requirements
Assess Your Finances: Checklist
Assess Your Finances: Compare buying with renting
Assess Your Finances: Calculating the cost of homeownership
Assess Your Finances: What you can deduct
Interest Rates and How They Change
Closing Costs
Other Closing Costs
Figuring Out Your Monthly Income
Figuring Out Your Monthly Debt
Amount of Your Down Payment
How Much House Can You Afford?
Virtually Toronto Real Estate (home)
| Selling Toronto Real Estate | Buying Toronto
Real Estate | Contact Us | News/Info
| Toronto Real Estate Agents | Toronto Commercial Real Estate | Toronto
Real Estate Services | Our Newsletter | Toronto Luxury Real Estate
| Toronto Neighbourhood Information |
Toronto Real Estate Glossary
