What can you afford?

When you prepare a budget, you’ll know what resources you can allocate to mortgage payments, living expenses and other financial situations. Everyone involved in financial decisions should also be involved. Your Realtor can assist you in helping you establish a budget, review financial qualification guidelines established by financial institutions, and even suggest some ways to obtain financing, either through traditional lenders, or another institution.

You’ll need a down payment. This can be as little as 5% of the purchase price. However, this type of purchase requires a high-ratio mortgage and insurance. Fortunately, Canada Mortgage and Housing Corporation helps Canadians purchase their first home this way, through a federal insurance program. Your Realtor can provide details on this program.

Collect the following to prepare your plan:

  • Monthly rent or mortgage payments
  • Utility payments (gas, water, power, telephone)
  • All other monthly expenses (such as food, child care, dues, etc.).
  • Annual or semi-annual expenses (such as insurance, car repair, taxes).
  • Non-fixed expenses (for example, medical expenditures) for the last year. This will give you an estimate of average expenses of this type. Records or an estimate of personal expenses (entertainment, travel, etc.)
  • Credit card statements
  • Allow for unexpected items such as medical emergencies, travel and education.

Subtract expenses from income. Could remaining funds be directed towards a mortgage, debts or additional savings? How will a home purchase fit into your budget? Also consider items like insurance, taxes, repairs and maintenance.

How much house you can afford to buy depends on two things:.

  1. How much you can afford for the monthly housing payment?
  2. How much you can invest in the down payment?

Purchasing a home involves one-time costs and monthly expenses. The largest one-time cost is the down payment. It usually represents between 5-25% of the total price of the property. In addition to the actual purchase price, there are a number of other expenses that you might be expected to pay for. These are listed below:

Typical One-Time Expenses

Mortgage Application and Appraisal Fee   At time of application

Appraisal Fee                                         At inspection

Property Inspection (optional)                   Closing

Legal Fees                                              Closing

Legal Disbursements                               Closing

Deed and/or mortgage registration          Closing

Property Survey
(sometimes provided by seller)                Closing

Land Transfer, Deed Tax or Property
Purchase Tax (in Quebec within
3 months following signing)                      Closing

Mortgage Interest Adjustment and
Take Over Fee (if applicable)                   Closing

Adjustments for Fuel, Taxes, etc.             Closing

Mortgage Insurance
(and application fee if applicable)             Closing

Home and Property Insurance                   Closing and on-going

Connection charges for utilities
such as gas, water and electricity              Date of move

Moving Expenses                                     Date of move

Other costs may include landscaping, redecorating, furnishings, appliances and repairs.

Typical monthly Expenses

Mortgage payments,maintenance, insurance, condo fees, property taxes and utilities.