Calculating home buying costs for Canadians
There are a number of formulas and calculators out there to help younger and first-time homebuyers determine how much they can afford to spend on a home.
Your income, current debts, monthly payments for your current debts, housing-related costs, closing and one-time costs along with current spending processes are all factors to consider. And when that’s all said and done, there still needs to be money for food, furniture, other expenses, fun, savings and emergencies.
The two big calculations lenders will look at are your Gross Debt Service Ratio (GDS) and your Total Debt Service Ratio (TDS).
Gross Debt Service Ratio
This calculation considers your income, monthly payments and housing-related costs such as taxes and insurance. A Gross Debt Service Ratio calculator is available here.
You want this number to be under 30% to 32%.
Total Debt Service Ratio
This calculation takes into account your monthly housing costs, credit cards and other liabilities like car loans, as well as your gross monthly income. A Total Debt Service Ratio Calculator is available here.
You want this number to be less than between 37% and 40%.
The Canada Mortgage and Housing Corporation has a great calculator and worksheet for Canadian home buyers who want to know how much they can afford and what to expect to pay for a home along with all of the little “extras” many people tend to forget about here: Canada Mortgage and Housing Corporation Homebuying Calculator. Alternative GDS and TDS ratio calculators are also available at the above link.
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