Guide to BUYING Your Home       " What You Can Afford" Worksheet "

Step 1

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: John and Mary 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.

Step 2

Calculate Your Total Debt Service Ration (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: John and Mary 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.).

Step 3

Calculate the amount available to apply to your monthly mortgage payment. "This figure will be used to calculate how much mortgage you are eligible for."

To calculate this amount:

Identify the lower of your GDS or TDS:	$ ____________________
Subtract an approximate amount for property tax.	$ ____________________
This is the amount we will now use to calculate how much mortgage you are eligible for.	$ ____________________

Step 4

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 John and Mary, 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 10% and 25 year amortization)

$ 269.	$ 30,000.
$ 358.	$ 40,000.
$ 448.	$ 50,000.
$ 537.	$ 60,000.
$ 626.	$ 70,000.
$ 716.	$ 80,000.
$ 805.	$ 90,000.
$ 895.	$ 100,000.
$ 984.	$ 110,000.
$ 1,074.	$ 120,000.
$ 1,163.	$ 130,000.
$ 1,253.	$ 140,000.
$ 1,342.	$ 150,000.
$ 1,432.	$ 160,000.
$ 1,521.	$ 170,000.
$ 1,610.	$ 180,000.
$ 1,700.	$ 190,000.
$ 1,789.	$ 200,000.

C DOWN PAYMENT AVAILABLE + ____________________

D HOUSE PRICE YOU CAB 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 10%. 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.

Return to: Guide to BUYING Your Home

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