How do I pay for everything? I am finding it hard to budget, enjoy life and get ahead! How Can I afford to buy my first home?
This is a burning question and stressful feeling inside most of us.
In order to help you understand and put perspective on this a little better I put together the following scenario:
Assuming a New home Purchase of $500,000 that includes a Self contained apartment.
Using the Stress Test – 5% down payment,
Home owner incentive,
Renting the upstairs – $1500 per month
credit score above 680 ( no outstanding debts)
Household Income of approximately $90,000 will allow you to purchase for up to $500,000 with a little wiggle room depending on the lender and their rental offset calculation.
Qualifying using 39/44% debt service ratios
The more money your household brings in the larger the purchase price can be provided you have the saved down payment.
Now you ask yourself is this realistic. Each waking hour you are presented with ways to spend your hard earned income and you wonder if you can afford it and how it will impact your future.
I really like my Starbucks Grande Chai Tea latte at $4.25 x 3 per week I really like a half bottle of Chianti after work at $10 per half bottle or three Bud Lights before the game. X 5 week
I really like my afternoon Tim Hortons with soup and sandwich at $10 x 5 per week
My trip to Marshalls or Winners just cost me $50 x 1 per week
A dinner out at the Keg is $100 x 2 per week
Gas for my car at $70 per week
Groceries, Daily health items, Insurance, car payment, Rent, heat, cable TV, Netflix, Crave TV, movie rental add up to approximately $2,700 per month
Does the above sound familiar to you?
All in all the above totals $3,831 per month AFTER TAX DOLLARS of $45,972 per year.
This means you have to earn approximately $65,000 per year gross before income tax to afford the items listed above.
If you are earning $90,000 before tax you should be able to put aside approximately $10,000 per year towards the down payment taking you approximately 4 years to save up the appropriate down payment. Remember to put these savings into an RRSP to take advantage of the First time home buyer RSP incentive. Known as the Home Buyers Plan RSP.
Assuming your income and home prices increase equally with inflation.
If it is a condo you are looking to buy the Condo fee has to be calculated into the affordability.
It is complicated but possible.
With the help of a mortgage professional to run your own personal scenario we can make sure you obtain the dream of home ownership.
Contact your local mortgager agent to provide you with your own personal outline.