View Full Version : Percentage of Net Income to Home?
Sailz
03-09-2009, 01:58 PM
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
03-09-2009, 02:16 PM
30% is bang on.
Redlyne_mr2
03-09-2009, 02:23 PM
depends on your lifetyle IMO.. I went 15% to allow me to keep buying car parts, skis, trips etc. :)
calgarys_finest
03-09-2009, 02:27 PM
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
03-09-2009, 02:29 PM
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
03-09-2009, 02:45 PM
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
03-09-2009, 02:51 PM
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
03-09-2009, 02:54 PM
Originally posted by el-nino
32% is required. :confused: Since when is there a minimum?
sputnik
03-09-2009, 02:57 PM
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
03-09-2009, 03:03 PM
so 32% of your gross income.
Good to know.
jonnycat
03-09-2009, 03:20 PM
29% net in a much softer market
el-nino
03-09-2009, 03:21 PM
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
Is this the truth? Gross or net?
Future home owner, so this would be good to know?
AZ REALTY
03-09-2009, 03:27 PM
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
03-09-2009, 03:28 PM
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
03-09-2009, 03:47 PM
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
03-09-2009, 03:50 PM
yes this is based on gross.
Jim Rome99
03-09-2009, 04:33 PM
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
03-09-2009, 04:35 PM
Originally posted by ExtraSlow
Just to be clear, that's percentage of Gross Household income, right?
Yes, gross monthly income (before deductions).
blownz
03-09-2009, 04:49 PM
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.
I dont know if I agree blownz. Truth, "poverty sucks" but to expect people to only put out 25% of gross income is a bit silly.
say you make 50k a year. thirty percent of that is 1250 a month. That's supposed to cover mortgage&taxes?
You're hard pressed to RENT a nice 2bdrm apartment for that kind of money in calgary.
Personally, my gf and I spend about 20% of our gross combined income on taxes, mortgage (20 year amortization) and utilities (elec,water/sewer,heat).
ChappedLips
03-09-2009, 05:00 PM
Yep its 32% but try to keep it below that so you can actually have a life!
ckangarloo
03-09-2009, 06:45 PM
Originally posted by 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!
Wow, you are joking right? I couldn't sleep at night if I was in your situation (I'm at 24.5% and renting!).
Tik-Tok
03-09-2009, 06:58 PM
Right now we're at about 28%, however when we have kids it'll be up to 42% :( (planning on wife staying at home full time until they're school age)
I'll probably have to pick up contract work on the side if we want any nice vacations.
Aleks
03-09-2009, 07:06 PM
This year ~ 7-8% of gross. Probably a lot higher next year :banghead:
JordanLotoski
03-09-2009, 10:15 PM
mines 9.52%..haha and iam always stressing for some reason
Originally posted by MIWYFSHOT
mines 9.52%..haha and iam always stressing for some reason
tell me about it
what my claimed 20% figure at the top of the page discounts, is how much I've spent on renos... in two months I've probably dropped close to 10k thus far and have plans for another 10 before the year is up :nut:
Euro838
03-10-2009, 09:24 AM
Originally posted by ckangarloo
Wow, you are joking right? I couldn't sleep at night if I was in your situation (I'm at 24.5% and renting!).
I'm kidding about the last part (I think). Don't think I could become a blue collar worker. Is a foreman or site supervisor considered blue or white collar? As for bankruptcy, I think that would be my last resort.
I thinking like this here:
Originally posted by 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.
As long as I can manage the payments (somehow), not going to short change my life. The only good thing is that living in Calgary, there's not that much to really do. That's why I need vacations and toys.
And for those without jobs or recently lost theirs, there are jobs out there (white and blue collar). It just not as easy as walk in the door anymore. People will actually have to market themselves well enough to land a position.
blownz
03-10-2009, 11:53 AM
Originally posted by prae
I dont know if I agree blownz. Truth, "poverty sucks" but to expect people to only put out 25% of gross income is a bit silly.
say you make 50k a year. thirty percent of that is 1250 a month. That's supposed to cover mortgage&taxes?
You're hard pressed to RENT a nice 2bdrm apartment for that kind of money in calgary.
Personally, my gf and I spend about 20% of our gross combined income on taxes, mortgage (20 year amortization) and utilities (elec,water/sewer,heat).
Living below your means is not always easy or fun (especially when so many people are concerned with image-see euro838's posts) but I was just saying that it is smart to not stretch yourself as thin as the banks will let you and to be more comfortable.
When the economy gets rough as it is starting to now it is the people at the higher levels that have to worry.
Originally posted by Tik-Tok
Right now we're at about 28%, however when we have kids it'll be up to 42% :( (planning on wife staying at home full time until they're school age)
I'll probably have to pick up contract work on the side if we want any nice vacations.
This is exactly one of the reasons it is good to stay below the maximum and why I did. When we purchased our last house, we knew after we were settled we wanted to have kids so we planned for being a one income family then. We started at 14% which seemed crazy, but on just my income at the time it would have been 24% which seemed to be a good amount. Luckily now with increases in income I am at only 18% which gives us tons of room to do what we want and not have to worry about money.
Sure we could have had a much nicer house but it has been nice to not be house poor.
UndrgroundRider
03-10-2009, 06:40 PM
I'm sitting at 22% right now, and I wouldn't be comfortable going any higher. The fiance and me are at a point where our long term savings, investments and plans are all in perfect harmony. We can manage a few unexpected emergencies and still be in the clear.
If we were at 30% we'd lose that safety net.
88jbody
03-10-2009, 07:13 PM
my rent is 40% of my take home pay before heat ect...
I pay 1300/month for a 4 br bungalow nice place in a good area...(based on my salary not bonus that can be hit)
and I rent a garage elsewhere
shit that aint good! but I guess I'll just hope for hitting good bonus to change that
tsi_neal
03-10-2009, 08:31 PM
Originally posted by 88jbody
my rent is 40% of my take home pay before heat ect...
I pay 1300/month for a 4 br bungalow nice place in a good area...(based on my salary not bonus that can be hit)
and I rent a garage elsewhere
shit that aint good! but I guess I'll just hope for hitting good bonus to change that
these days you can get all that in a mortgage for less...
Did my math im about 30% for all my monthly bills except food. I still manage to save a reasonable amount and live life happily. Any higher and I would definatly have to make noticeable sacrifices.
cooperS
03-11-2009, 12:22 PM
sorry i am kinda lost here. i am an expected first home owner. so does it mean that i am safe if i am at 30% including mortgage payment, insurance, taxes, utilities, grocery of my gross net income? or w/o the monthly bills?
thanks guys
el-nino
03-11-2009, 12:55 PM
32% of your gross income can go towards your principle, Interest, tax and heat.
40% can go towards PITH and other credit card and loan debts.
So for easy number sake if you make 100k/year you can afford a 32000/year. Which is 2666.67/month mortgage payment that includes your property tax and up to 100/month for heat.
The other 8% can go towards car payments and credit card debts.
88jbody
03-11-2009, 04:52 PM
Originally posted by tsi_neal
these days you can get all that in a mortgage for less...
Did my math im about 30% for all my monthly bills except food. I still manage to save a reasonable amount and live life happily. Any higher and I would definatly have to make noticeable sacrifices.
my house, utilities, phone and cable come to 65% of my take home. then I need to buy food and gas. that is no car payment, no credit card debt. then add about 600/month in food for a family of 4. then all the expenses for the kids in school and so on
I can't find a house that has what I have now house and garage for under $330,000 unless I move to dover or other area's I don't want to move.
my issue is saving for a downpayment is very hard when you only have a few hundread dollars a month left after everything is paid and hope I don't want to spend any on my car
Powered by vBulletin® Version 4.2.4 Copyright © 2024 vBulletin Solutions, Inc. All rights reserved.