Your Household Income vs Mortgage Size

[Little Dragon]

I read a couple old threads that said your initial mortgage size for a primary residence should be no more than 2-3x your household income. Is this still a valid ratio to use for Calgary? Definitely don't think it is a good ratio for most people in Vancouver/Toronto.

Curious what your ratios are/were, trying to not over-leverage myself while balancing my wants for a home.

[ercchry]

If you're not maxing out what you qualify for, you're already in the 1% for house purchases. the rule changes last year made qualifying that much more difficult. lifestyle plays a huge role too, even something as simple as a $500 car payment can decrease your buying power if you make $75k.

the only people i see doing 2-3x income are either on the low end of the market and pay scale, or are not first time buyers and have build substantial equity in an existing property already.

[sabad66]

We are about 3.6x for our primary household. If we didn't have a negative cashflow rental property i'd feel a lot more comfortable but since we do i honestly do feel a bit uneasy sometimes.

that said, 2-3x gross annual income would be a pretty good rule of thumb. i would say 4x or even 5x is do-able if you live pretty frugally and don't have a lot of other debt payments like an expensive car.

[KPHMPH]

X > 5

[lasimmon]

Just bought our first place - about 3.5x household income vs mortgage.

I think its a pretty safe amount... But i feel like we bought too much ha!

[Xtrema]

https://tools.td.com/mortgage-affordability-calculator/

According to this, if I have to spend $1500/mth outside of housing (transport/food/entertainment), with a $60K income, $10K down, I can afford a condo around $200K.

Just to confirm 3-4x seems to be the norm. Not sure if this scales up tho.

[Mitsu3000gt]

I don't think I know a single person who bought at 2-3X, if you make $100K a year that is only a $200-300K mortgage which doesn't get you much - and average household income is way less than that. 2-3X seems way too low for the average person. In Calgary I think 4-5X++ is more the norm. Banks approve closer to 8X like it's nothing, so I can only imagine how many people are completely screwed if interest rates go up

2-3X is probably smart, but not realistic for Calgary IMHO. Depends what other expenses you have as well - some people value a nicer house above things like hobbies, vehicles, going out, etc (or vise versa).

[max_boost]

I know many who bought at 2-3x

But agree, ultimately depends on your lifestyle and what you value.

[Thaco]

mine was x > 3 when we bought, but now its more like x > 1.5, not entirely happy with our living arrangements but it sure is nice to have the extra money to spend on fun stuff.. Memories with your kids can only be made for a limited time...

[killramos]

This is going to end up like the car cost / age index thread lmao

[ExtraSlow]

Max it out bitches or gtfo

[Asian_defender]

When I bought my home it was definitely more than 5x. like probably 8x. Now its about 2-3 as I've ranked up where I'm at. I also bought on my own and wanted a house so that plays into it.
If you can manage your budget properly I don't see the harm in maxing out what your approved for
After all it is your home, you should be happy with it

[CompletelyNumb]

Average Calgary Income is $67k, averaged detached home price is $418k, so that's 6x right there.

I definitely think that people making an average income shouldn't be forced to rent or live in a condo.

[Darell_n]

I don’t know anybody that was 2-3 when I bought my house in ‘04. Housing prices went full stupid shortly after.

[ercchry]

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Average Calgary Income is $67k, averaged detached home price is $418k, so that's 6x right there.

I definitely think that people making an average income shouldn't be forced to rent or live in a condo.

Assuming conventional (20%+ down payment), so no mortgage insurance involved in the loan amount. The maximum loan at 25yr am that a debt free individual making $67k would qualify for is $310k, at 20% down that’s a purchase price of around $385k

If this person had debt, it would have to be less than $279/month as an instalment loan (fixed payment) or a $9300 balance on a revolving loan (cc or loc) before it cuts into buying power... this is also completely based on a home with no condo fees. $200/month fees on a townhouse would drop it to a $302k loan, and $350 (heat included) fees on a condo would drop it to a $297k loan

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https://tools.td.com/mortgage-affordability-calculator/

According to this, if I have to spend $1500/mth outside of housing (transport/food/entertainment), with a $60K income, $10K down, I can afford a condo around $200K.

Just to confirm 3-4x seems to be the norm. Not sure if this scales up tho.

So, the above example is 4.6x... if you double income the max is now 4.7x so doesn’t scale too greatly, but moves a little. I would say this due to heating cost remaining the same, but taxes increase and those are the two other numbers that need to be factored into qualifying

[msommers]

A couple things to keep in mind so we're all comparing apples to apples:

- Does the calculation look at mortgage only or are people actually thinking purchase price?
- Does the calculation take into account condo fees

When I was working in the field, my mortgage + condo fees = 16% my yearly salary. That is now ~25% from salary adjustment. When I was in grad school it was more like 320%

[Team_Mclaren]

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I don't think I know a single person who bought at 2-3X, if you make $100K a year that is only a $200-300K mortgage which doesn't get you much - and average household income is way less than that. 2-3X seems way too low for the average person. In Calgary I think 4-5X++ is more the norm. Banks approve closer to 8X like it's nothing, so I can only imagine how many people are completely screwed if interest rates go up

2-3X is probably smart, but not realistic for Calgary IMHO. Depends what other expenses you have as well - some people value a nicer house above things like hobbies, vehicles, going out, etc (or vise versa).

He's asking household income tho. If avg is 67k like someone mentioned then it would make it 130 combined. which 2-3X would get you up to 400K. with 50K down that's not out of range.

btw: what's your X on the new 700K purchase? (I'm sure you weren't bragging about it).

[Twin_Cam_Turbo]

When I first got my mortgage, it was 2.5X my average gross income at the starting point. I was 22 at the time for reference.

[CompletelyNumb]

To answer the question, I used to be a home owner, but I didn't rebuy after moving to Calgary. Priorities shifted.

When I bought my last place, it was 2.1x my income.

[A790]

1.75x income.