Tirytory

So we've started looking at houses. Think it will help me settle a bit more (although doing pretty nicely so far) and also don't want to pay someone else's mortgage.

So the husband earns a good wage, and the bank will lend us money but we don't want to go up to what they say we can borrow. Those with mortgages, how did you calculate it? Two times salary, three times, a percentage of monthly income. We've looked at prices and exchange rated them, and they would be very comfortable UK terms but not sure that's a sensible way of looking at it. Finding the Ontario housing market a bit of a minefield.

Any perspectives would be good, running out of rental time....

bats

Are you staying forever then? It costs a fair but to sell a house here.

Dashie

We stayed considerably under our limit too. I would start by looking at what sort of house you want, and where. See how much it will cost you per month. Are you financially comfortable at the level you pay out now for rent etc? Then go by that, remembering to take into account taxes, insurance and some savings for maintaining your home. If you think you can afford a little more, go up, if not, go down

SchnookoLoly

We went to the bank to get a preapproval... the bank told us what we would be approved for, and we just laughed. Yes, technically we could make the payment, but we'd be eating ramen noodles and sleeping in a cardboard box in an empty bedroom.

We used an online mortgage calculator (every bank has one) to get an idea of the biweekly payment. Then we looked at the net amount that hits the bank account every two weeks, and calculated out from there.

Income: x
Mortgage: y
Other deductions (taxes, mobile phone, etc etc etc etc)
Groceries: [estimate]
General spending: z
Savings: a
Car (payments, gas, insurance, etc): b

And then just made sure that it all looked sensible. We just worked through it that way playing with numbers and comparing some of our actuals. There's a ton to make sure to account for, too - car insurance, mortgage insurance, house insurance, property taxes, utility bills, cable/phone/internet...

Ah the fun of being an adult.

But that was how we approached it. A lot of it depends on what kind of lifestyle you're living and not just "x times salary". Did you buy your car, or are you making payments? Are you saving up for travel? Do you have children? Do you want to have children? Will you have to furnish your house? And so on and so on and so on.

Oakvillian

If you're currently renting and are comfortable with the monthly outgoings for that, then why not use that as the basis for a total housing outgoing (mortgage payment, plus property tax, plus allowance for maintenance, plus whatever utilities are currently included in your rental) you're happy with, and go from there - effectively, subtract all the non-mortgage housing expenses and then use the bank's mortgage calculator in reverse.

I don't think it's any longer as simply as a salary multiple calculation. The bank's idea of affordability may not be the same as your idea of a sensible figure. Don't forget, too, that unless you have a reasonable deposit you will be stung for CMHC insurance, etc.

Just to add another layer of confusion, there are tricks you can play with the repayment structure as well - the RBC do a thing they call "accelerated bi-weekly payment, but I'm sure other banks have similar systems... the bank calculates a repayment based on twice-monthly payments (i.e. 24 per year), but that's a bit awkward if the money's coming into the account from an employer on a 2-weekly cycle, so it makes sense to pay 26 times a year instead. That can help to reduce the effective amortization period by a surprising margin, without making a noticeable difference to your bank account

Tirytory

Ha, maybe not forever, but probably for a good few yrs. Accepted the work situation- started the nurse stuff, but will prob look around for something else. Everybody else is happy. I'll get there as long as I keep busy.

Realtors fees seem to make for high house prices as I can see...

Tirytory

Paid monthly so that's not an option. Have the required deposit to avoid CHMC insurance. We'll prob be slightly over our rent, but I think we're paying under market value for our rental currently.

Edited to add I guess we could still do that accelerated payment thing, just need to be disciplined..

bats

You're in a pricey area. Move down here. We have a hospital your husband could work a few shifts at. Actually he could do that anyway!

JonboyE

There is stuff here to read

http://britishexpats.com/wiki/Category:Housing-Canada

and

http://britishexpats.com/wiki/Category:Mortgages-Canada

That will give you a useful primer.

Siouxie

You should talk to a broker rather than a bank. Ask about the newcomers to Canada mortgage, if you don't have a credit rating you can use alternative proof of credit worthiness.

http://www.cmhc-schl.gc.ca/en/hoficl...C_Newcomer.pdf

Novocastrian

Aside from all the other good advice here's another bit: factor in the effect of future interest rate increases. I'd bet that this isn't going to happen soon, but I'd also hedge that bet by calculating whether I could easily (not happily) afford a doubling or more of the interest rate, say three years from now.

Tirytory

Thanks Siouxie and Novo, I think the interest rate is quite competitive. I get that Novo, but I guess by then you've paid three yrs worth of mortgage or hopefully overpay, plus a much more established business for the husband. The bank would allow us a lot lot more, but I remain risk averse. I always score very cautious on those financial risk assessments I've been given a few times by financial advisors..

Novocastrian

Fair enough. I'm the same. But remember that in the first 3 years your payments are mainly interest (and property taxes); you've hardly paid back any principal by then.

Tirytory

I know. Overpayment is key.... We did on our last property and would hope to move on after 3-5 yrs, it's part of our 3yr plan plan apparently. I didn't know we had one. My 3 yr plan is to go travelling

dbd33

Something else to consider is that properties in rural or small town Ontario take a long time to sell. When looking at properties you can find out how long they've been on the market, do that, then consider that moving away from a purchased property will entail not only a bill for 6% of the price of the property but that many months, or years, of miserable polishing of the place in order that people can trudge around it in muddy boots.

Renting isn't always the wrong thing to do.