* This scenario is for those who are looking to buy a home under $500,000.00. Please consult a mortgage professional to determine how much you qualify for before any purchase.
This example is based on total household gross income of $100,000.00
GDS - Gross Debt Service Ration
Accounts for housing cost
The following can be attributed to GDS:
-
Mortgage (principle + interest)
-
Property Tax
-
Heat
-
1/2 of Condo Fee
TDS Total Debt Service Ratio
Accounts for housing cost and other debts
TDS = GDS (housing cost) + Other debts
$100,000 of Mortgage with stress test would need $600 to service per month
Assuming the house hold gross (pre-tax) income is $100,000
GDS
= $100,000 X 39% = $39,000 (per year)
= $39,000 / 12 (months)
= $3,250
Out of the GDS of $3,250 subtract the following:
$ 120 - For Heat (standard number used by lenders)
$ 350 - Property Tax ( can be more or less depending on where you are buying)
= $2,780 - The total amount left to service mortgage
We know that for a $100,000 mortgage we need $600 of GDS income. So therefore dividing $2,780 by $600 and then multiplying that by $100,000 would give us the maximum mortgage.
$2,780/$600
= 4.63 X $100,000
=$463,000
TDS 44% (housing cost + other debts)
Since we already have the housing cost (39%) already figured out, we know that 5% (44%-39%) will go towards other debts.
5% of $100,000
= $5,000/ Year or $416/month
If this calculation is by any means confusing, please give us a call. 401Team helps you buy and sell homes in Greater Toronto Area. We have team members specializing in Durham and Peel Region.
☎️ Ragu Rajaguru- 416.712.2006
Real Estate Broker, ABR, SRS
☎️ Shan Perinpanathan - 416.655.4040
Real Estate Broker, ABR, SRS
☎️ Ragu Paramsothy- 416.731.7148
Real Estate Broker, B.Sc
Info@401team.com
401TEAM.COM
Real Value and Results that MOVE You!
