Before getting into the real estate market, Jason Heath suggests meeting with a mortgage broker or specialist to do a personal assessment of all your costs to assess your budget and see how much you can borrow.

Talk to a mortgage broker and do a personal budget assessment before you start looking for a home, experts say.

How Much Mortgage Can You Afford? It’s one of the first questions any new home buyer faces.

Knowing how much you can borrow without overwhelming your head requires detailed planning and realistic goals, says Jason Heath, managing director of Objective Financial Partners.

Heath suggests that potential buyers start by meeting with a mortgage broker to make a personal assessment of your costs. Heath points out that “some people live very frugally while others spend more, and these factors are not incorporated into the amount the bank will lend to you.”

How much you can safely borrow depends primarily on the percentage of your salary that will go towards housing costs and debt payments for a mortgage of a certain size. There are two main ratios to consider which are the Gross Debt Service Ratio (GDS) and the Total Debt Service Ratio (TDS).

GDS is the percentage of your total monthly household income that covers housing costs (including mortgage payments, utilities, taxes, and apartment fees). The Canada Mortgage and Housing Corporation charges the GDS to 39 percent of your income.

TDS is the percentage of total monthly household income that covers housing costs plus other debts (including car payments, credit card debt, and other loans). CMHC limits this percentage to 44 percent of your income.

You can find a debt service calculator on the CMHC website where you can run some numbers.

To give you an idea of ​​how much you can borrow, we asked Leah Zlatkin, a mortgage broker at LowestRates.ca, to calculate the typical mortgage amount for a first-time buyer making $100,000 a year.

If you get a five-year fixed rate mortgage of 3.25 percent, you’ll have to be able to handle a mortgage with a “stress test” rate of 5.25 percent, she says. This would qualify you for a mortgage of around $528,000. Each quarter-percentage-point increase over the stress test rate would equate to about $12,000 less in funding.

With a down payment of $30,000, that means you can buy a home that costs about $560,000.

The reality, Heath says, is that many high-income professionals, including doctors and lawyers, cannot afford real estate in Toronto. That is why many are looking for homes outside the city, and are considering creating smaller apartments or providing a larger down payment.

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