Now that you know what you want from a new Toronto home, the next thing you need before hitting the market, is finding your mortgage comfort zone. Your comfort zone is what you can easily pay every month without fear of stretching your budget too far. Determining this comfort zone is crucial to buying a home that is as much as you can handle and not more. Too many people find what they think of as their dream home, make an offer and move-in, only to them realize that they are now house-poor. They can pay their mortgage, but that’s it. They can’t afford any extras.
So, how do you find out just how much you can comfortably afford? It’s not hard. You just have to create a realistic budget projection based on your after tax take-home pay and all of your fixed expenses. Create an excel sheet where you list all of your monthly income. Only include your after-tax salary. Although banks will approve you at your before tax salary, that gives a false picture of what you can afford. It is always best to work with money you actually have in-hand.
Once you have listed your monthly income, next list all of your fixed expenses – these include anything that you cannot change such as rent/mortgage, insurance, debt repayment, car loans, utilities. After that list your moveable expenses such as food, gas, entertainment, restaurants, clothing, etc… You will quickly see what your spending picture is. The key to projecting a realistic budget is to estimate how much your new mortgage would cost every month and by how much your insurance, maintenance and utility bills will increase and include those numbers, as you will then get a much more accurate idea of what your extra overhead will be and how that will impact your monthly bottom line.
To find out how much a mortgage will cost, you can use any of the mortgage calculators that are offered online by the big banks. They are relatively accurate and will give you a solid idea of how much you can be expected to pay at different mortgage amounts and at different rates.
If you go into your next Toronto home purchase clearly cognizant of what it entails, then you can hit the market with confidence knowing that you can fully support the home you eventually buy.
So, how do you find out just how much you can comfortably afford? It’s not hard. You just have to create a realistic budget projection based on your after tax take-home pay and all of your fixed expenses. Create an excel sheet where you list all of your monthly income. Only include your after-tax salary. Although banks will approve you at your before tax salary, that gives a false picture of what you can afford. It is always best to work with money you actually have in-hand.
Once you have listed your monthly income, next list all of your fixed expenses – these include anything that you cannot change such as rent/mortgage, insurance, debt repayment, car loans, utilities. After that list your moveable expenses such as food, gas, entertainment, restaurants, clothing, etc… You will quickly see what your spending picture is. The key to projecting a realistic budget is to estimate how much your new mortgage would cost every month and by how much your insurance, maintenance and utility bills will increase and include those numbers, as you will then get a much more accurate idea of what your extra overhead will be and how that will impact your monthly bottom line.
To find out how much a mortgage will cost, you can use any of the mortgage calculators that are offered online by the big banks. They are relatively accurate and will give you a solid idea of how much you can be expected to pay at different mortgage amounts and at different rates.
If you go into your next Toronto home purchase clearly cognizant of what it entails, then you can hit the market with confidence knowing that you can fully support the home you eventually buy.
