Can You Afford Your Dream Home?

Whether your dream home is a Victorian character home in the city, a sleek condo with 360-degree views, or a sprawling rancher in the suburbs, figuring out how much house you can afford is critical before making any decisions.

“A helpful place to start is by figuring out your Gross Debt Service (GDS) Ratio,” recommends Phil Dorner, president of the Ontario Real Estate Association.

Gross Debt Service Ratio is a calculation of the total maximum housing payment that you can afford, including your mortgage, property taxes, heating and cooling costs, and condo fees.

Here are the steps to figuring out your GDS Ratio:

•  Add up your gross monthly income and multiply by 32 percent. This figure is the maximum monthly housing payment that you can afford. It should never exceed 32 percent of your gross monthly income.

•  You must also factor in one-time costs and insurance. These include a home inspection, lawyer fees, Realtor fees, moving expenses and HST on new houses.

•  Be sure to consider the size of your down payment, your interest rate and the number of years on your mortgage.

For help figuring out what you can realistically afford to pay for a home, enlist the services of a Realtor. Your Realtor will help you understand property financing, taxes, insurance and the steps you will have to take as a buyer to complete a real estate transaction. You can also contact the Ontario Real Estate Association (OREA) at 1-800-563-HOME for free guides on home buying and selling.

For more information, visit www.wedothehomework.ca. 

This article is provided by local REALTORS® and the Ontario Real Estate Association for the benefit of consumers in the real estate market.