subject: Planning For Your First Home Purchase In Ontario [print this page] If you are renting right now and have dreams of owning your first home don't just jump right into it. Proper planning will ensure that you don't purchase a home that you cannot afford and that you are prepared for the increased expenses that come with maintaining a property that you own.
As a rule of thumb your new monthly mortgage payment should not exceed 30% of your gross monthly earnings. Alternately your new monthly mortgage payment and all of your monthly payments to loans, credit cards and other debts should not exceed 40% of your gross monthly income.
If you are fortunate and your rent is low or you live with a family member, here is one formula you can apply that will prepare you for your first home purchase and will enable you to save some money to put towards your down payment.
The first thing you must do is determine the maximum mortgage you are prepared to borrow and estimate what your new mortgage payment would be. You can do that by using online mortgage calculators that are available on most of the major banks websites. Now add to the mortgage payment $500 per/mo to factor utilities and add an additional $300 per/mo to factor a property tax payment. The total will represent the total monthly payment if you were to purchase a home and obtain a mortgage.
Subtract the total of your monthly rental payment from the total from step one. The difference is the amount you should save for the next 12 months if you want purchase a home at the carrying cost that you estimated in step one.
For example, if your current rental payment is $1200 per/mo and you are planning on purchasing a $300,000 home with a 5% down payment your monthly carrying costs could add up to $2500 per/mo.
Following this formula would mean that you would need to save $1300 per month for 12 months and at the end of 12 months you would've accumulated $15,600 in savings to put towards your down payment. You also will have proven to yourself that you can afford to carry the new home that you want to purchase.
For more information about planning your first home purchase or preparing for your first mortgage visit www.trueassess.com.
