Real Estate

Can I afford a house my downpayment and income?

  • Last Updated:
  • Oct 3rd, 2020 8:44 am
[OP]
Newbie
Sep 28, 2020
3 posts
1 upvote

Can I afford a house my downpayment and income?

I'm looking to buy a townhouse in the spring/summer of 2021. I work in Oakville, but I'm willing to go as far as Georgetown, Burlington, Cambridge, Guelph and the good parts of Hamilton (e.g. Ancaster).
  1. My downpayment is $110,000.
  2. My combined income with my spouse is $145,000/year (before taxes and excluding bonuses).
  3. We have no debts and our credit scores are excellent.
Based on the above information, what price range and areas should we be looking at?
11 replies
Deal Fanatic
User avatar
Oct 16, 2008
9323 posts
3697 upvotes
Maple
Best to sit down with your husband with likes in mind, budget, savings, forecast. Asking us is useless, we don't know your habits, likes, etc.

Start talking to each other, search together, same goal. Happy hunting.
I hate to speculate. I hate to forecast. I am just proactive.
Member
Jul 7, 2016
422 posts
830 upvotes
One suggestion is to get a pre-approval closer to the time you are looking. Then you'll know what your buying power is and whether you are comfortable with the monthly mortgage payment. Pre-approvals are also effective for 90 to 120 days or more (depending on the lender).

A conservative rule of thumb is your monthly housing expenses should be about 28% of gross income, which in this situation would be about $3,300 a month. It also depends on your other debt obligations. If you are comfortable with this, you can get quite a large loan amount. You can also manage this number by extending the amortization period (e.g. instead of 25 years, use 30 years if you and your spouse are comfortable with it).

You could use this affordability calculator as a starting point: https://www.cmhc-schl.gc.ca/en/finance- ... calculator

I don't know your monthly expenses, but a property in the range of $700,000 to $1,000,000 can be affordable depending on your household circumstances and amortization period.

Hope this helps.
Deal Addict
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Jan 2, 2012
4230 posts
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Toronto
Barr90 wrote: I'm looking to buy a townhouse in the spring/summer of 2021. I work in Oakville, but I'm willing to go as far as Georgetown, Burlington, Cambridge, Guelph and the good parts of Hamilton (e.g. Ancaster).
  1. My downpayment is $110,000.
  2. My combined income with my spouse is $145,000/year (before taxes and excluding bonuses).
  3. We have no debts and our credit scores are excellent.
Based on the above information, what price range and areas should we be looking at?
For price range, rule of thumb is 5x income for a mortgage. So that would put you at around an $800-$830K home price after closing costs, give or take.
Deal Addict
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Jun 6, 2007
1082 posts
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Toronto
Follow these steps:

-Search www.google.com
-in the search bar, type "mortgage calculators"
-Enjoy your blessings and Donate to Charity and less privileged
Stumbled upon RFD by mistake, best mistake of my internet life i must say...... :D
Sr. Member
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Jan 30, 2008
864 posts
352 upvotes
Presents wrote: A conservative rule of thumb is your monthly housing expenses should be about 28% of gross income, which in this situation would be about $3,300 a month. It also depends on your other debt obligations. If you are comfortable with this, you can get quite a large loan amount. You can also manage this number by extending the amortization period (e.g. instead of 25 years, use 30 years if you and your spouse are comfortable with it).
I don't think this can be stressed enough. A lot of people learn the hard way that being approved for X mortgage amount doesn't necessarily mean you can afford anywhere NEAR that amount and still live the lifestyle you're used to. Sometimes, even being a little more frugal doesn't get you to affordability if you have things like transportation and childcare costs that must be paid. Definitely use the affordability calculators (and use very conservative numbers...round up your expenses!) out there and not just the ones that estimate what you'd be approved for based on income and house price.
[OP]
Newbie
Sep 28, 2020
3 posts
1 upvote
If I use the CMHC affordability calculator, it asks me to put in a mortgage interest rate. I'm assuming I have to put in 4.79% which is the qualifying rate used for the stress test, correct? When I do that, I get $725k.

The TD affordability calculator on the other hand doesn't ask me for an interest rate and tells me that I can afford up to $850k.

That's a pretty big discrepancy. Which one of these is right? I'm second guessing the TD calculator because I don't think it's taking the stress test into account.
Deal Addict
Jul 11, 2010
1261 posts
302 upvotes
Toronto
Hi,
The stress test has to be applied to see if your debt ratios are within the guidelines.
Doug Boswell
intelliMortgage Inc. Brokerage #12326
FSRA #MO09002332
Member
Nov 5, 2017
248 posts
237 upvotes
If you use calculator and try to buy something affordable than your choices will go down from detached to semi to townhomes

Go out and buy what you like, Canadian way is to get what you want and borrow as much as you can. Lots of choices Lender A to lender z, friends and family etc.
[OP]
Newbie
Sep 28, 2020
3 posts
1 upvote
Smart123 wrote: If you use calculator and try to buy something affordable than your choices will go down from detached to semi to townhomes

Go out and buy what you like, Canadian way is to get what you want and borrow as much as you can. Lots of choices Lender A to lender z, friends and family etc.
Can't tell if you're being sarcastic, but I obviously don't want to overextend myself. Nothing wrong with a townhouse or a semi considering the fact that this is going to be my first home purchase.

I would never go to a B lender because their interest rates are crap.
Member
Nov 5, 2017
248 posts
237 upvotes
Well go in the market with your calculated amount and see what u get.
Deal Addict
Nov 2, 2005
4669 posts
1941 upvotes
WFH
What do you spend on entertainment, hobbies, eating out, vacations etc? These can have a huge impact on what you can afford.

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