Percentage of Net Income to Home?

[Sailz]

Hi I am just wondering what you guys think is appropriate and reasonable for what percentage of your monthly net income should be spent on your mortgage. I am asking this in the context of cities like Calgary and Vancouver (Higher home prices in relation to incomes). I have heard 30% but I am just wondering what you guys think?

Thanks

[max_boost]

30% is bang on.

[Redlyne_mr2]

depends on your lifetyle IMO.. I went 15% to allow me to keep buying car parts, skis, trips etc.

[calgarys_finest]

Originally posted by Redlyne_mr2
depends on your lifetyle IMO.. I went 15% to allow me to keep buying car parts, skis, trips etc.

I went 50% to mask my addiction to ramen noodles and halo 3.

[calgarygts]

I'm sitting at around 27% (mortgage and taxes) and I'm pretty comfortable, I still ski as much as I want to and go on vacations every year.

[el-nino]

32% is required. and 40% percent in total of PITH payments. That is principal, interest, tax and heat.
If you have a good credit score some banks will allow up to 42% and I have gotten away with 44%.

[Euro838]

I'm one of those people that Jim Rome99 doesn't like White collar with mortgage and property taxes over 100% of my net income! I just borrow against the HELOC what I am short so technically my debt level never goes down!

I also like vacation and toys! HELOC's only at 2.5% so it's like free money! I'll just declare personal bankruptcy when my total debt exceeds the value of my home! (And start all over working hard as a blue collar worker) LOL!

[Eleanor]

Originally posted by el-nino
32% is required.

Since when is there a minimum?

[sputnik]

Originally posted by el-nino
32% is required. and 40% percent in total of PITH payments. That is principal, interest, tax and heat.
If you have a good credit score some banks will allow up to 42% and I have gotten away with 44%.

Those percentages are for gross income.

[civic_rida]

so 32% of your gross income.
Good to know.

[jonnycat]

29% net in a much softer market

[el-nino]

yessir. the 32% is not the minimum but more so the maximum.
Here is the CMHC page http://www.cmhc.ca/en/co/buho/hostst/hostst_002.cfm

[supe]

Is this the truth? Gross or net?

Future home owner, so this would be good to know?

[AZ REALTY]

There are 2 ratios banks will use to determine your level of affordability.

GDS (Gross Debt Service) ratio = ((total monthly housing payments (principal & interest + property taxes + heating costs)/gross monthly income)) x 100 = 32% max.

TDS (Total Debt Service) ratio = ((total monthly payments (GDS amount + other monthly non-housing debts)/gross monthly income)) x 100 = 40% max.

Keep in mind these are the maximum ratios required to be approved for a mortgage. This doesn't mean you should purchase a house at a value that maximizes these ratios. The banks usually lend more than people can truly afford.

[el-nino]

This is the truth. That number can go up but then you start looking at alternative banks such as Wells Fargo who at one point went up to 70%.

[ExtraSlow]

Originally posted by AZ REALTY
There are 2 ratios banks will use to determine your level of affordability.

GDS (Gross Debt Service) ratio = ((total monthly housing payments (principal & interest + property taxes + heating costs)/gross monthly income)) x 100 = 32% max.

TDS (Total Debt Service) ratio = ((total monthly payments (GDS amount + other monthly non-housing debts)/gross monthly income)) x 100 = 40% max.

Keep in mind these are the maximum ratios required to be approved for a mortgage. This doesn't mean you should purchase a house at a value that maximizes these ratios. The banks usually lend more than people can truly afford.

Just to be clear, that's percentage of Gross Household income, right?

[el-nino]

yes this is based on gross.

[Jim Rome99]

For me, a bigger concern would be job security. If I knew my job were secure for the duration of the mortgage, I would have no problem going all the way to 35%, but definitely no more than that, including all fees and taxes.

Right now? Roughly 10-11% of my gross income goes on rent, heat, electricity, cable and internet.

[AZ REALTY]

Originally posted by ExtraSlow


Just to be clear, that's percentage of Gross Household income, right?

Yes, gross monthly income (before deductions).

[blownz]

What the bank will lend you and what is reasonable are two very different things imo. The 32% is too high to be comfortable unless you are very thrifty and want to drive a beater and seldom ever go on a nice vacation.

25% of gross is much more comfortable imo. Less if you can. It is no fun to be house poor. Plus if you end up having to deal with a job loss or cut in pay you can cope better and not be forced to sell.

Remember, look at all the problems so many people are in because of how much the banks would lend them.