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What Should I Budget for a Home Purchase?
Before making a home-buying & mortgage decision, you should calculate both the one-time and ongoing costs associated with buying and operating the home.
As a guide for preparing a budget, consider the following:
Costs associated with the purchase of a home include:
- * Appraisal fees
- * Cost to obtain a survey
- * Land transfer taxes (property transfer tax, 1st time buyers may be exempt)
- * CMHC / GE CAPITAL mortgage insurance (if applicable) In most cases this included in the mortgage
- * Moving expenses
- * Property taxes
- * Legal fees
- * Home insurance
- * Strata costs (if applicable)
- * GST (if applicable)
- * Adjustments (tenants deposits, rents)
We recommend that you consult with an experienced real estate lawyer or notary public who will provide estimates of some of these costs at the outset of your planning.
Ongoing housing costs include:
- * Monthly mortgage payments
- * Property taxes
- * Mortgage life insurance. Life insurance is good idea but not normally a requirement
- * Heating costs
- * Costs of secondary financing, such as a second mortgage (if applicable)
- * Condominium or strata fees (if applicable)
- * Operating and maintenance costs
General Rules
Your monthly mortgage payments, taxes, heating costs, and 50% of condominium fees should not exceed 32% of your gross annual income. This is called your Gross Debt Service Ratio.
Your Gross Debt Service Ratio plus monthly payments on any other outstanding debts (including loan payments, car payments, credit card payments, and department store accounts, etc.) should not exceed 40% of your gross annual income. This is called your Total Debt Service Ratio or TDS. Your Total Debt Service ratio should not exceed 42% of your gross monthly income. Some lenders will allow up to 50% TDS
Under normal circumstances, you should budget about 2% of the value of your home to cover annual operating and maintenance costs which are not included in your Gross or Total Debt Service Ratios. Some of the costs listed are fixed costs and some can be managed like heating and maintenance costs.
If you have questions regarding costs we would be happy to answer any mortgage or home buying questions that you may have. Don't hesitate to contact us for professional advice. |
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