How much mortgage can I afford?
The first thing to do when looking for a new residence is to find out how much mortgage you can obtain. The amount you can afford depends on factors such as the applicants’ personal and monthly expenses (car payments, credit expenses, etc.), home owner expenses (heating costs, condo fees, property taxes), and the household income of applicants buying the home. With the help of the calculator below, you can gauge the maximum buying price that you can afford.
Finding an Affordable Mortgage Payment
Essentially, a majority of potential homeowners are able to finance a property valued at between two and two-and-a-halftimes their yearly gross income. Using this formula, someone making $100,000 annually can get a mortgage of between $200,000 and $250,000. Remember that this formula is only a general guideline you can use to determine your mortgage.
There are other additional factors you need to keep in mind when thinking of a property. First, know your lender’s opinion on what you can afford (and how they came up with the figure). In addition to that, determine the type of home you want to acquire. Ask yourself what amenities that you’d like in your new residence, and whether you will live there for many years to come or for a short time.
Incomes vs Expenses
It doesn’t matter whether you want to acquire a mortgage on your own or with another person, be it a joint owner, a spouse or a partner. It’s of vital importance that you know your current expenses and income.
Determine your expenses in the course of the next five years. You’ll obviously spend a certain amount on material comforts, so it’s a good idea to calculate an approximate amount for the following:
• Credit card and loan balances
• Pet food, vet bills, and insurance
• Entertainment
• Travel/vacation
• Daycare/home help
• Car lease or payments
• Transportation
• Insurance (home and auto)
• Clothing
• Groceries
• Internet
• Cell Phone
Do not leave out some future planning, for instance setting a side 10% of what you make monthly as savings.
Gross Debt Service Ratio
The amount to be paid as shelter costs shouldn’t exceed 32 per cent of your gross annual income (heating costs, mortgage principal and interest costs, property costs, and 50 per cent condo fees if applicable).
Total Debt Service Ratio
Your yearly shelter costs and all other household expenses such as loan payments, line of credit, and credit card should be paid for by 40% of your gross yearly income at the most.
Our Mortgage Calculator
If you want to become a homeowner, you’ll need to do a lot of planning and research. Understanding the amount you can spend will help you identify and purchase your dream home. Our mortgage calculator is designed to aid you in finding your approximate mortgage and monthly payments. All you need to do is fill out the required information and you’ll get your results.
Contact the Ability Mortgage Group 410-210-4241
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