How to calculate how much you’re spending now, what you can afford and your future expenses.

Are you financially ready to own a home? Look into these 5 calculations and questions before you meet with your broker or lender.

1. Compare how much you currently spend on expenses and debt payments with the amount you have saved or invested.
2. How much can you afford to spend on housing each month without risking your financial health?
3. How much do you need to save to pay for the upfront costs of buying a home?Upfront costs include:
   • the down payment
   • home inspection and appraisal fees
   • insurance costs
   • land registration fees
   • prepaid property taxes or utility bills (the buyer reimburses the seller or builder)
   • legal or notary fees
   • potential repairs or renovations
   • moving costs
   • GST/HST/QST on a newly built house or mortgage loan insurance
4. How much would you be spending each month with homeownership expenses added to your current financial situation?
5. What is your credit score? You can demonstrate your ability to consistently pay bills and debts with a copy of your credit report.

QUALIFYING FOR A MORTGAGE

2 affordability rules determine how much you can spend on housing without risking your financial situation.

As a new homeowner:

• It is recommended that your monthly housing costs should be no more than 32% of your average gross (pre-tax) monthly income. This percentage is known as your gross debt-to-income or gross debt service (GDS) ratio. CMHC restricts the GDS ratio at 35% to qualify for an insured mortgage.
• It is recommended that your monthly total debt load should be no more than 40% of your average gross (pre-tax) monthly income. This percentage is known as your total debt-to-income or total debt service (TDS) ratio. CMHC restricts the total debt service (TDS) ratio at 42% to qualify for an insured mortgage.

Get a better idea of your GDS and TDS ratios with the debt service calculator.

You can explore your budget options with the mortgage affordability calculator.

GOVERNMENT OF CANADA PROGRAMS FOR HOME BUYERS

First-Time Home Buyer Incentive. The Incentive helps first-time homebuyers without adding to their financial burdens. Eligible first-time homebuyers who have the minimum down payment for an insured mortgage can apply to finance a portion of their home purchase through a shared equity mortgage with the Government of Canada.

Home Buyers’ Amount. This is a $5,000 non-refundable income tax credit amount on a qualifying home acquired during the year. For an eligible individual, the credit will provide up to $750 in federal tax relief.

Home Buyers’ Plan (HBP). This program allows you to withdraw up to $35,000 in a calendar year from your registered retirement savings plans (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability.

GST/HST New Housing Rebate. You may qualify for a rebate of part of the GST or HST that you paid on the purchase price or cost of building your new house, on the cost of substantially renovating or building a major addition onto your existing house, or on converting a non-residential property into a house.

DON’T QUALIFY FOR A MORTGAGE?

You can still take several steps toward homeownership.

• Meet with a credit counsellor to improve your financial situation.
• Pay off some loans or other debts.
• Save for a larger down payment.
• Lower your home price range.
• Adjust your budget to spend less or save more.