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Bob's Guide to BUYING Your Home "What You Can Afford" Worksheet

Step 1

Calculate Your Gross Debt Service Ratio (GDS). "Most lenders say that your monthly housing expenses (principal, Interest, and taxes) should not exceed 30% of your family income (before personal income taxes)." To calculate your Gross Debt Service Ratio (GDS):
Take your total monthly gross (before tax) income. $ ____________________
Multiply it by the maximum GDS Ratio (30%). x .30 $ ____________________
This is the maximum amount available for your mortgage payment (principal and interest),
property taxes, and 50% of condo fees (if applicable).
$ ____________________

Example: John and Nancy have a gross family income of $ 66,000. per year, or $ 5,500. per month. No more than $ 1,650. ( $ 5,500. x 30% ) can be applied to housing expenses.

Step 2

Calculate Your Total Debt Service Ratio (TDS):

"Your TDS takes into account monthly housing expenses plus other debts and loans you may have."

To calculate your Total Debt Service Ratio (TDS):

Take your monthly gross (before tax) income. $ ____________________
Multiply it by the maximum TDS Ratio (40%). x .40 $ ____________________
Subtract your regular monthly expenses (e.g. credit cards, car payments, personal loans). $ ____________________
This is the maximum amount available for your mortgage payment, property taxes, and 50% of condo fees (if applicable). $ ____________________

Example: John and Nancy have a gross family income of $ 66,00. per year or $ 5,500. per month. They also have two car payments totalling $ 575. per month, a student loan of $ 150. per month, and credit card payments of $ 175. per month. They can apply no more than $ 1,300. of their monthly income to housing costs ($ 5,500. x 40% = $ 2,200. - $ 900. = $ 1,300.).

Step 3

Calculate the amount available to apply to your monthly mortgage payment. "This figure will be used to calculate how much mortgage you are eligible for."


To calculate this amount:

Identify the lower of your GDS or TDS: $ ____________________
Subtract an approximate amount for property tax. $ ____________________
This is the amount we will now use to calculate how much
mortgage you are eligible for.
$ ____________________

Step 4

Determine The Purchase Price You Can Afford.
Using the figure calculated in Step 3, find the closest matching number in column A (see below). The corresponding number in column B (see below) is your approximate eligible mortgage amount. In column C (see below) record the down payment amount that you have available. In column D (see below) add the numbers identified in column B and C together. This approximately equals the price of the home that you can afford.

In the example of John and Nancy, the amount calculated in Step 3 was $ 1,125. They also have saved a down payment of $ 30,000. With a monthly payment of $ 1,125. (refer to column A) they are eligible for an approximate mortgage of $ 130000. (refer to column B). With their down payment of $ 30,000., they can afford to buy a home worth approximately $ 160,000.

A. MONTHLY PAYMENTS B. ELIGIBLE AMOUNT OF MORTGAGE
(cost includes principal and interest per month based on interest rate of 10% and 25 year amortization)
$ 269. $30,000
$ 358. $ 40,000.
$ 448 $ 50,000
$ 537. $ 60,000
$ 626 $ 70,000
$ 716. $ 80,000.
$ 805 $ 90,000.
$ 895 $ 100,000.
$ 984. $ 110,000.
$ 1,074. $ 120,000.
$ 1,163. $ 130,000.
$ 1,253. $ 140,000.
$ 1,342. $ 150,000
$ 1,432. $ 160,000
$ 1,521 $ 170,000
$ 1,610. $ 180,000.
$ 1,700. $ 190,000.
$ 1,789. $ 200,000.
C DOWN PAYMENT AVAILABLE
+ ____________________
D
HOUSE PRICE YOU CAN AFFORD
= ____________________


Don't forget that the down payment must be at least 10% of the purchase price of the home, unless you qualify for Canada Mortgage and Housing Corporation's (CMHC) 5% down program for first-time buyers.

Please note that all amounts are approximate. Columns A & B are based on an interest rate of 10%. Rates do vary. If rates are higher, you would be eligible for a smaller mortgage. If rates are lower, your mortgage could be higher.

These calculations do not take into account mortgage insurance premiums for high-ratio mortgages.

Your Coldwell Banker Sarazen Real Estate professional Mortgage Specialist who will help you decide the financing terms and options that are right for you.