No one wants to be house-poor.

Sure, while we’re shopping the market it’s easy to see ourselves living in homes that may be just a touch out of our reach. “Well make it work,” you say. “I’ll work overtime.”

Imagining yourself in homes like these is borderline unfair – stop torturing yourself! The point of upgrading your home isn’t to work harder or longer to pay for it, the point is to put yourself and your family somewhere comfortable where you can enjoy life.

Lenders use a pretty simple formula for calculating a buyer’s preferred debt-to-income-ratio. In short, your debt should account for no more than 43% of your gross monthly income, and no more than 28% of that should be reserved for your mortgage.

So, If you bring in $4,000, $1,720 of that should be the absolute max you’re spending on debt each month, with $1,100 going toward your mortgage. Ideally you’d be lower than that, and indeed lower payments within that $4,000 salary would help secure your loan. These payments include cars, credit cards and other loans that are coming out of your account each month whether you want them to or not.

It makes sense, doesn’t it? The lender is saving you from yourself, in a sense. You don’t want to be house poor, and the Bank of Canada certainly doesn’t want you to be either!

Call us today, let’s talk about your options.