How much are you able to pay?
The amount you can invest in a property depends on two major factors: the money you have available for a down payment and mortgage payments that you will need to include in your monthly budget. Other factors, such as indirect costs, must be considered as well. This section of my site provides the tools you will need to assess how much you are ready to invest in your next property.
The down payment
The down payment is the personal contribution you make to fund your future property. This cash amount is deducted from the purchase price and the balance represents the financing required to complete the purchase.
Financial institutions typically require a minimum down payment, so be sure to find out from your lender. The bigger your down payment, the smaller your monthly mortgage payments.
However, a down payment of less than 20% of the purchase price of the property requires that the loan be secured by a mortgage insurer, such as the Canada Mortgage and Housing Corporation (CMHC), through a mortgage loan insurance premium. The concept of an insured mortgage versus a conventional mortgage is explained in detail in the Financing section.
You may choose to make mortgage payments on a weekly, semimonthly, or monthly basis. These payment amounts must be calculated as accurately as possible so you can enjoy both your new home and a lifestyle that suits you. Use the financial capacity analysis tool below to determine the best mortgage payment amount for you.
Analyzing your financial capacity
Analyzing your financial capacity is essential. Even if you meet bank ratios and are offered a very attractive mortgage loan amount, you still need to ensure your personal budget balances and corresponds to your lifestyle.
Use the checklist below to help set up your budget and analyze the monthly amount to go toward housing costs.
|Groceries and dining out (including alcohol)||$|
|Clothing and personal expenses||$|
|-maintenance and repairs||$|
|-insurance, license, and registration||$|
|Home maintenance and repairs||$|
|Telephone - Internet - Television||$|
|Furniture and other consumer goods||$|
|Savings (RRSPs, etc.)||$|
|Financial expenses (credit card, bank charges, etc.)||$|
|Monthly household expenses||$|
|SUMMARY OF CALCULATIONS|
|Net family income||$|
|Monthly household expenses (above)||$|
|Monthly budget for housing costs||$|
*The above table is from the Association des courtiers et agents immobiliers du Québec Buyer Practical Guide
Remember that various fees will also be added to the purchase price of your property. Here is a detailed list with examples of customary fees.
- Transfer tax. Use our Welcome Tax Calculator tool to assess this amount;
- Moving expenses;
- Evaluation fee: An evaluation is often required by your financial institution to determine the lending value of the property;
- Building inspection fees;
- Professional fees and related expenses (notaries, lawyers, etc.);
- Mortgage insurance premium plus applicable taxes: Applicable only if your down payment is less than 20% of the purchase price;
- Prepaid utilities and property taxes: Amounts prepaid by the seller must be reimbursed;
- Co-ownership fees (if applicable);
- Certificate of water quantity and quality (for wells);
- Oil/gas costs (if applicable)
This non-exhaustive list includes the fees most frequently encountered during a normal transaction. You can view a more comprehensive list in the CMHC "Consumer Guide" at www.schl.ca.