Are you Ready to Buy a House? How Much can you afford?

Are you financially ready to own a home?

It’s important to figure out how much you can afford to spend before you start looking for a home.

Your mortgage payment will probably be the biggest expense, but there are other costs you should be aware of. You don’t want any unpleasant surprises!

The more you know about your current financial situation, the more prepared you’ll be when you meet with your lender or broker.

These calculations will clarify your current financial picture and help you figure out how much you can afford.

Calculation 1: How much are you spending now?

First, see how much you currently spend on a monthly basis.

Consider the following sample expenses.

CMHC offers several online calculators that help with everything from figuring out your household budget to calculating your maximum home price and monthly payments.

Household expenses groceries tuition clothing gifts housing maintenance child care Loans and debts credit cards car loans personal loans lines of credit student loans mortgages for properties already owned Entertainment expenses dining out spectator events magazines and books hobbies travel Savings and donations RRSP TFSA savings accounts charitable gifts Second, subtract that number from your total monthly net income (the amount of money your household earns on a monthly basis after taxes and deductions). The difference is how much money you have left each month after expenses.

Calculation 3: Figure out the upfront costs Figure out how much you need to save to cover the upfront costs associated with buying a home. For example, have you saved enough to pay the following expenses? Down payment — the part of the home price that is paid when you make an offer to purchase Home inspection and appraisal fees Insurance costs — including property insurance, mortgage loan insurance, etc. Land registration fee — based on a percentage of the purchase price of the property Prepaid property taxes and utility bills — you may have to reimburse the seller for bills paid in advance Legal or notary fees Potential repairs or renovations Moving costs GST/HST/QST on the purchase price (for newly built homes) or on the mortgage loan insurance (if applicable)