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?
· See how much you currently spend monthly. Consider the following sample expenses.
o Household expenses
o groceries
o tuition
o clothing
o gifts
o housing maintenance
o childcare
o Loans and debts
o credit cards
o car loans
o personal loans
o lines of credit
o student loans
o mortgages for properties already owned
o Entertainment expenses
o dining out
o spectator events
o magazines and books
o hobbies
o travel
o Savings and donations
o RRSP
o TFSA
o savings accounts
o charitable gifts
Calculation 2: Subtract that number from your total monthly net income (the amount of money your household earns monthly after taxes and deductions). The difference is how much money you have left each month after 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.
Click here to go to CMHC - designing a Home Budget Worksheet