Real Estate

Help determining max mortgage

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  • Mar 29th, 2016 12:53 pm
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Deal Guru
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Feb 2, 2014
11233 posts
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Toronto
ksgill wrote: Just because the lender will approve him for 1.3M does not mean OP that afford it. I know what you mean but OP isn't asking from a mortgage approval perspective but from the "ability to service loans" perspective.
Perhaps my comment was misleading, but it read the second sentence, I was simply implying that he is can get the financing from the lender. Having said that, I just realized I used the word "afford" in the first sentence.

The title of this thread is "help determining max mortgage" and that is what I did. I do agree, that for the most part, borrowers should take the max mortgage available to them.
Kevin Somnauth, CFA
Principal Broker/Owner - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative
Member
Apr 19, 2012
278 posts
69 upvotes
GTA
ksgill wrote: I think you are being overly optimistic in your scenario. Here is how I see it:

Income: ~$10,000/month

Mortgage: $3260/month
Utilities: $600/month
Property tax: ~500/month
Maintenance: ~100/month
Car Payment: $600/month ($300/month x 2 Cars)
Insurance (cars): $400/month
Insurance (house) ~$100/month
2 Kids afterschool/daycare/food/clothes: $2500/month (at least in Toronto, after tax breaks etc.)
Groceries for 4: $750/month
Clothes/Gifts: $100/month

Total housing/debt Cost: $8500

Using the ball park figures above, you are left with ~$1500/month that you can use for vacations, long term savings etc. This doesn't account for the time that OP loses his job, gets sick or the interest rate rises (this is very likely in the 25 years that he'll have the mortgage for. For these reasons, I'd suggest OP keeps his budget under 750k.
Where does the 10k net income come from? Our net income is about 8400, although my wife is a teacher and I contribute to a company pension plan before paycheck is deposited so that may eat into things a bit.

I've modified your numbers a bit, let me know what you think:

Income: ~$8400/month

Mortgage: $2800/month (775k - 180k @ 2.89% over 25 years)
Utilities: $600/month
Property tax: ~333/month
Maintenance: ~100/month
Car Payment: $600/month ($300/month x 2 Cars)
Car gas: $360/month
Car tolls: $500/month
Insurance (cars): $220/month
Insurance (house) ~$100/month
2 Kids afterschool/daycare/food/clothes: $2500/month (at least in Toronto, after tax breaks etc.)
Groceries for 4: $750/month
Clothes/Gifts: $100/month

Total housing/debt Cost: $8963

So based off this, it looks like we'd be -$500/month. I feel like the kids cost is over estimated a bit but still not a good situation.
Member
Apr 19, 2012
278 posts
69 upvotes
GTA
To add onto this a bit more. Our current utilities =$422, kids = $0, and groceries = $250.

So total housing/debt cost pre kids is: $6033.
Newbie
Mar 27, 2016
1 posts
I don't think $2500/month for kids is an overestimation. Obviously it depends on your location, ages of kids and personal circumstances, but daycare alone for two kids in the GTA can easily be above that. We have a 13 month old, paying $1750/month for daycare. In our area daycare for infants range from $1500-2200, but there is such a demand for spots that you don't really have much of a choice (at least at the outset) where you go, you have to take any open spot. To be fair, daycare drops around $250 a month once the kid is 18 months, and another few hundred at 2 1/2 years. But if you have a one year old and a three year old, you can expect to be paying around $3K just for daycare.

Of course there are other options (home care, relying on relatives), and some areas are cheaper, but I don't think you want to get a mortgage that will severely limit your childcare choices down the road.

Our household income is around the $200K mark, and our mortgage about $500K. We only have one car (paid for), so our expenses are a lot lower in that area. We are quite comfortable, but another kid in the mix will really stretch the budget until the older one is in full time school.

Personally, I don't think you can afford to upgrade your house now. Save a bigger downpayment, space your kids out a lot (4+ years in between), or change your lifestyle substantially (ie. get rid of a car). Or wait until your kids are in full time school and the years of high daycare costs are behind you.
Deal Addict
Sep 5, 2009
3301 posts
1486 upvotes
notsureofitiall wrote: Where does the 10k net income come from? Our net income is about 8400, although my wife is a teacher and I contribute to a company pension plan before paycheck is deposited so that may eat into things a bit.

I've modified your numbers a bit, let me know what you think:

Income: ~$8400/month

Mortgage: $2800/month (775k - 180k @ 2.89% over 25 years)
Utilities: $600/month
Property tax: ~333/month
Maintenance: ~100/month
Car Payment: $600/month ($300/month x 2 Cars)
Car gas: $360/month
Car tolls: $500/month
Insurance (cars): $220/month
Insurance (house) ~$100/month
2 Kids afterschool/daycare/food/clothes: $2500/month (at least in Toronto, after tax breaks etc.)
Groceries for 4: $750/month
Clothes/Gifts: $100/month

Total housing/debt Cost: $8963

So based off this, it looks like we'd be -$500/month. I feel like the kids cost is over estimated a bit but still not a good situation.
I have a very similar houselhold income, with high pension contributions. I have accelerated my mortgage payments and now I am paying $3033 per month and don't feel financially stressed at all. I also have daycare expenses so our scenarios are very similar.

Notes: I think your property tax estimate is low, you car toll estimate is crazy high, your utilities estimate is high. In general your car related expenses are very expensive. With my $3033 mortgage it costs $6500 to completely fund our lives every month. So your $8400 should work.
Member
Apr 19, 2012
278 posts
69 upvotes
GTA
dgnr8 wrote: I have a very similar houselhold income, with high pension contributions. I have accelerated my mortgage payments and now I am paying $3033 per month and don't feel financially stressed at all. I also have daycare expenses so our scenarios are very similar.

Notes: I think your property tax estimate is low, you car toll estimate is crazy high, your utilities estimate is high. In general your car related expenses are very expensive. With my $3033 mortgage it costs $6500 to completely fund our lives every month. So your $8400 should work.
Thanks for your response.

Property tax on new house will be about 4k. Tolls are exact, not an estimate. I commute from Milton -> Richmond Hill so I take the toll alot for quality of life reasons as my wifes hours aren't flexible I need to commute at bad times to spend time with her. Once we have kids I expect the tolls to go down as I would commute later to take care of the kids in the morning but I'm sure something else would offset this savings by then.
Deal Guru
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Oct 24, 2012
11641 posts
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Montreal
Based on generic conservative qualification criterion, your max mortgage qualification would be 710,000$.
You could probably get close to 900,000$ if you are crazy and go for a lender that has the most liberal qualification.
Deal Fanatic
Nov 24, 2013
6479 posts
3344 upvotes
Kingston, ON
dgnr8 wrote: I have a very similar houselhold income, with high pension contributions. I have accelerated my mortgage payments and now I am paying $3033 per month and don't feel financially stressed at all. I also have daycare expenses so our scenarios are very similar.

Notes: I think your property tax estimate is low, you car toll estimate is crazy high, your utilities estimate is high. In general your car related expenses are very expensive. With my $3033 mortgage it costs $6500 to completely fund our lives every month. So your $8400 should work.
$600/mo does seem high for utilities. Heating/cooling 6,000sqft or something? ;)

Sounds like highballing just to make sure you have enough cushion, so that I get. By the time you're full-on 2 kids in daycare though (unless you have twins) you will have had time to ease in and adjust to changes. I imagine parental leave will be a temporary take-home cut, but probably still doable by not needing daycare during those periods. Reduced income during parental leave years will also affect Canada Child Benefit calculation and maybe get you a little more out of that. It's also not full-on groceries for 4 for a while (kids eat fairly cheap until they're 10 or so) which will help you save up some rainy day cushion.
Member
Apr 19, 2012
278 posts
69 upvotes
GTA
In a later post I stated $422/month utilities, that covers both of our cell phones, internet, water, hydro and gas. Yes, I left $600 to highball and also the fact that 2 additional kids will eventually cause them to go up... and possibly even force me to get cable again.

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