What can I afford?
You will need to estimate your income, expenses, investments, savings and debt to determine what would be an appropriate mortgage for you. Bank of Montreal has an interactive worksheet that can help you with this exercise.
Some examples of these guidelines include:
- Total monthly mortgage payments should not exceed 27% - 32% of your monthly income before taxes.
- Total monthly payments for the mortgage and other loans, including credit cards should not exceed 37% - 40% of your monthly income before taxes.
To get an estimate of your mortgage, try out Dunpar’s online Mortgage Calculator
Other Home Ownership Expenses
It is a good idea to consider other monthly expenses associated with the cost of living. Such expenses may include: utility expenses (hydro, phone, cable, internet), entertainment, taxes, credit card payments, and any other recurring expenses.
You may want to consider consolidating all your expenses and any debts you may have into the mortgage of your new home, thus lowering your interest and monthly expense on things such as credit cards. A financial consultant or mortgage broker will be happy to further informing you of this commonly used solution to organizing while minimizing monthly bills.
Additional Costs
Some costs associated with the purchase of your next home are referred to as “closing costs” and are usually approximately 2% of the total purchase price.
Based on a $200,000 home - some estimated amounts are:
- Tarion Warranty Corporation enrollment fee- $520 approx.
- Land Transfer Tax $1,725
- Legal Fees $750 - $1,500
- Home insurance approx. $400-450/ year
- Hydro $400 - $900/year
You may also wish to allocate a budget for moving, storage and decorating your new home.