Mortgage Affordability Considerations:
- Annual household income. Also consider any income changes that may impact your ability to make your payments.
- Your down payment. Currently, you are required to have at least a 5% down payment when buying a house.
- Amortization period. If you are trying to keep your regular mortgage payments low to fit the payment into your budget, you will likely want to apply for a mortgage with a longer amortization period. To save money on interest in the long run, you may want to consider a shorter amortization period and therefore monthly payments will be higher.
- Closing costs are an often overlooked expense that will definitely help determine how much money you can afford as a down payment.
- Property taxes, homeowner’s insurance, title insurance and additional expenses. Home maintenance should be factored in as well. These costs are often overlooked.
Calculating Gross Debt Service (GDS)
This is a way of estimating the maximum home-related expenses you can afford to pay each month. To qualify for CMHC insurance, the total should not exceed 32% of your gross monthly household income.
Calculating Total Debt Service (TDS)
This enables you to estimate the maximum debt load you can carry each month. It should not exceed 40% of your gross monthly household income.