Real Estate

Need a reality check - how much can I afford

  • Last Updated:
  • Jun 7th, 2021 4:46 am
[OP]
Member
Sep 15, 2013
201 posts
49 upvotes
Greater Vancouver

Need a reality check - how much can I afford

Hello RFD, I need your third-party, unbiased pair of eyes to provide insight on my situation here. I need to know how much I can realistically afford without placing my family in financial peril.

I bring home about 5K a month after tax, and my fiance about $2K pre-tax (she's self employed). I have about $120K in savings and about $30K in RRSP, and she has about $35K. I got some mortgage rates from one of the big 5 banks prior to the increase in the stress test, using my own income only. I was qualified for pre-approval for a purchase price of $550K. However, my mortgage guy told me that as long as I can put 20% down, he can qualify me up to $535K in mortgage; in other words, I could buy up to $668K approximately.

I've been looking at the $550K range in the Burnaby-New West-Coquitlam areas and things are just dismal. So I thought, we'd either get something below $500K, it's gonna be small but it will be temporary, or get something $600K plus, possibly a 2-bed, so that we can stay there even after we have kids.

What do you think I should do?

[Edit 1: No debt, no car payments. Just regular bills, thanks!]
Last edited by 2001CivicDX on Jun 3rd, 2021 12:36 pm, edited 1 time in total.
23 replies
Jr. Member
Dec 25, 2019
182 posts
172 upvotes
Your Mortgage broker is right for the amounts u can get qualified for . i would keep the RRSP and fiances savings for emergency funds and use the 120k for downpayment this would get you something around $650k with current regulation change, also your mortgage wouldnt need insurance with %20 down with that u would save $20k extra cost . Get 2 bedroom if you can , selling and moving up will be extra cost if you are planning a kid in next 5 years...

Since Fiance is selfemployed banks might not consider as regular income unless she is filing her tax every year for similar amount. i would still not add her to the picture since her income would not reliable ... this also would give you extra room for expenses especially when it comes to having newborns ...
Last edited by Easy401rider on Jun 3rd, 2021 12:35 pm, edited 1 time in total.
Sr. Member
Aug 31, 2008
998 posts
149 upvotes
Thornhill
It's hard to say without knowing your other expenses/debt. You should know your monthly mortgage add your reg expenses, utilities and taxes to get a number.l but with that income I don't see any issues unless your got some real big debt.
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[OP]
Member
Sep 15, 2013
201 posts
49 upvotes
Greater Vancouver
trky wrote: It's hard to say without knowing your other expenses/debt. You should know your monthly mortgage add your reg expenses, utilities and taxes to get a number.l but with that income I don't see any issues unless your got some real big debt.
Thanks. I edited the post. No debt, no car payments.
Sr. Member
Jun 14, 2018
995 posts
1123 upvotes
It looks like you're probably going to be stretched out a bit much if you try to buy a newer two bedroom condo in New West or Burnaby, which should set you back around $600k - $700k. Plus, you're planning to have a kid, so you're not going to know how much your expenses will balloon in the future.

Maybe just get a bigger one bedroom, perhaps with a den that you might be able to use as your kid's bedroom for the first few years, and then you can re-evaluate later.
Deal Addict
Jan 15, 2010
1198 posts
1417 upvotes
Toronto
Is that 5K net actually your monthly take home or is that 2X Biweekly paycheques?
Deal Addict
User avatar
Nov 30, 2005
1081 posts
462 upvotes
Ottawa, ON
You should try to get into a 2 bedroom place. Will be good for you guys until the 2nd child needs their own room.
[OP]
Member
Sep 15, 2013
201 posts
49 upvotes
Greater Vancouver
DaMan12 wrote: Is that 5K net actually your monthly take home or is that 2X Biweekly paycheques?
$2.5K every two weeks.
Jr. Member
Dec 25, 2019
182 posts
172 upvotes
MarinersFanatik wrote: It looks like you're probably going to be stretched out a bit much if you try to buy a newer two bedroom condo in New West or Burnaby, which should set you back around $600k - $700k. Plus, you're planning to have a kid, so you're not going to know how much your expenses will balloon in the future.

Maybe just get a bigger one bedroom, perhaps with a den that you might be able to use as your kid's bedroom for the first few years, and then you can re-evaluate later.
how come he is stretched out much , if he buys a place for $650k with %20 downpayment ,his monthly mortgage payment would $2000k , lets say strata , property tax /hydro, water etc would cost him another $1000 (strata fees are much lower in BC btw) he will still left have $4000k everymonth for expenses ... there are many $650k low rise stratas in Vancouver he can buy might not be new but still he would be ok . no need to buy something smaller which he will have to sell in couple of years and buy something bigger and pay taxes and expenses on top of it ...
Sr. Member
Jan 5, 2020
792 posts
1094 upvotes
I would buy the $600K+ 2bed condo. Having the extra space will ensure that you have enough room and will somewhat future proof your property so that you don't outgrow it so fast.

Assuming both of you are first time homebuyers, you can withdraw the entire $65K from your RRSPs under the first time home buyers plan. You will easily be able to come up with 20% downpayment and closing costs and still have a nice chuck leftover.

In respects to monthly carrying costs, you're looking at about $3K a month. Its a bit tight but I would still go for the 2bed.
Sr. Member
Jun 14, 2018
995 posts
1123 upvotes
Easy401rider wrote: how come he is stretched out much , if he buys a place for $650k with %20 downpayment ,his monthly mortgage payment would $2000k , lets say strata , property tax /hydro, water etc would cost him another $1000 (strata fees are much lower in BC btw) he will still left have $4000k everymonth for expenses ... there are many $650k low rise stratas in Vancouver he can buy might not be new but still he would be ok . no need to buy something smaller which he will have to sell in couple of years and buy something bigger and pay taxes and expenses on top of it ...
There's a bunch of other expenses like groceries, insurance (car, home, life), vehicle fuel, cable, internet, cell phone and other miscellaneous stuff. Then there are all of the kid's expenses, with potentially daycare being the biggest one if they choose to go that route, and RESP. They might even want to start early on investing for their retirement as well.

All of these expenses add up and it's going to be close for OP if they decide to max out the mortgage. Ultimately, up to OP and his wife to decide what they want to do. If they know how much they are currently spending every month and what expenses will look like after they buy, it's going to help them make the best decision possible.
Jr. Member
Dec 25, 2019
182 posts
172 upvotes
MarinersFanatik wrote: There's a bunch of other expenses like groceries, insurance (car, home, life), vehicle fuel, cable, internet, cell phone and other miscellaneous stuff. Then there are all of the kid's expenses, with potentially daycare being the biggest one if they choose to go that route, and RESP. They might even want to start early on investing for their retirement as well.

All of these expenses add up and it's going to be close for OP if they decide to max out the mortgage. Ultimately, up to OP and his wife to decide what they want to do. If they know how much they are currently spending every month and what expenses will look like after they buy, it's going to help them make the best decision possible.
he has 4k for those expenses more than enough for them even with kids. His fiance self employed no need for daycare as long as she can manage to work from home ....They are not maxing out since we dont even count her income ...thats the cushion for them .... if they count her income to they can max out and buy some thing for $850k which i wouldnt suggest .. but $650K , they can manage easily ... just dont go caribbean twice a year and buy luxury cars and dine every week at luxury downtown restaurants with ur kids , they would be ok ...
Deal Guru
Feb 29, 2008
14649 posts
10901 upvotes
Buy as much property as you can afford. If it's a 2 bed then buy a 2 bed or 1+1 with 2 baths.
Deal Addict
Jan 15, 2017
4137 posts
3643 upvotes
2001CivicDX wrote: $2.5K every two weeks.
Mortgage qualification is usually based on gross salary. What is your gross annual salary? How long has your finance been self-employed?
Deal Fanatic
User avatar
Dec 27, 2009
7427 posts
4703 upvotes
Victoria, BC
In your situation, I think you are safe going with the bigger 2 bedroom place. Good luck with the search. Things are outrageous there (I'm in Victoria and it's nuts enough here, let alone where you are).
Sr. Member
Mar 30, 2017
832 posts
540 upvotes
always max it out, you can always squeeze extra $ if you frugal a bit more. Inflation will take care of payment down the road.
profit at 117.61% since 11/10/2020 to be exact😎
Jr. Member
May 29, 2020
129 posts
203 upvotes
Echoing what others said, don't buy a 1br only to sell it in a couple year. You'd be lucky to break even in such a short time frame, and moving sucks.
[OP]
Member
Sep 15, 2013
201 posts
49 upvotes
Greater Vancouver
Thank you all for your responses. It appears that he consensus is to up the budget and go for 600K+.
Deal Addict
Mar 2, 2017
1782 posts
3173 upvotes
Toronto/Markham
Where are you in you in your career? Are you at the top of your earning potential, middle, just starting out? What about your fiance?

It's pretty 'normal' to stretch yourself when you are young and have a lot of room for earning potential. Myself personally I stretched myself pretty significantly with my first purchase, but I also knew my income would 2x-3x over the next 5-10 years. It was still super stressful, but it's a calculated risk you can make based on your risk tolerance. Ideally you buy something for the long haul and not something you have to sell again in 3-5 years.
Realtor, Investor, CPA
[OP]
Member
Sep 15, 2013
201 posts
49 upvotes
Greater Vancouver
RichmondCA wrote: Where are you in you in your career? Are you at the top of your earning potential, middle, just starting out? What about your fiance?

It's pretty 'normal' to stretch yourself when you are young and have a lot of room for earning potential. Myself personally I stretched myself pretty significantly with my first purchase, but I also knew my income would 2x-3x over the next 5-10 years. It was still super stressful, but it's a calculated risk you can make based on your risk tolerance. Ideally you buy something for the long haul and not something you have to sell again in 3-5 years.
I would say I'm about to exit the early stage and entering into the middle stage. I should receive my P.Eng. license by mid-June this year. Fiance is early stage she's a piano teacher.

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