Go to Main Content

Advertisement

By David Hodges on January 30, 2014
Estimated reading time: 1 minute

How much to spend on a home in the city

By David Hodges on January 30, 2014
Estimated reading time: 1 minute

Buying a house in a major city with 32% of your GDS is unrealistic.

Advertisement

The Canadian Mortgage and Housing Corporation (CMHC) says housing costs shouldn’t exceed more than 32% of your gross monthly income—a figure called your Gross Debt Service (GDS) ratio. However, buying a house in a major city with 32% GDS is unrealistic, says mortgage broker Rob McLister. Take Toronto, where the average bungalow costs $568,000. A family with a $96,000 annual income would be priced out of the market. But by increasing their GDS to 38% that same home is now within their reach. In fact, a GDS of up to 39% can be reasonable, says McLister, provided the higher debt load is offset by other strengths like outstanding credit, good future earnings potential and sufficient emergency savings. GDS

GDS

*Assumes a 3.39% 5-year fixed rate 25-year amortization mortgage, 0.75% property taxes, 10% down payment; includes heating costs.

Comments Cancel reply

Related Articles

A smiling young woman takes a selfie in her new home.

Unsure about buying a home? Why you should open an FHSA now anyway

Unsure about buying a home? Why you should open an FHSA now anyway

Canadian couple outside of home, wondering if they should transfer it to their corporation.

Is transferring your principal residence to your corporation a good idea?

Would swapping a house for cash from a corporation save on taxes? And is this tactic worth it in...

Is transferring your principal residence to your corporation a good idea?

A maintenance worker outside the Bank of Canada building on Wellington Street in Toronto

Bank of Canada lowers key interest rate by 0.5%

On Wednesday, the central bank announced a jumbo rate cut—its fifth cut in a row since June—and signalled a...

Bank of Canada lowers key interest rate by 0.5%

MoneySense at the MoneyShow: ETFs & Investing Strategies

Here’s how to get your free ticket to attend the MoneyShow virtual expo.

MoneySense at the MoneyShow: ETFs & Investing Strategies

Why are mortgages so expensive in Canada?

Why are mortgages so expensive in Canada?

A young woman surrounded by moving boxes in her new home

Looking for a mortgage in B.C.? Don’t limit your options to the big banks

Looking for a mortgage in B.C.? Don’t limit your options to the big banks

Calgary skyline

Alberta called—“What I wish I’d known before making the move”

“After rushing into the real estate market, I quickly learned I wasn’t ready for the real cost of home...

Alberta called—“What I wish I’d known before making the move”

Bank of Canada delivers half percentage point rate cut

The central bank lowers its key interest rate to 3.75% and says it now must keep inflation at 2%....

Bank of Canada delivers half percentage point rate cut

25 personal finance highlights from the last 25 years

From legislative changes to economic trends and consumer behaviours, here are 25 financial highlights that defined the last two...

25 personal finance highlights from the last 25 years

Canadian Financial Summit 2024: MoneySense sessions and free tickets

Canadian Financial Summit 2024: MoneySense sessions and free tickets