# What's your Net Income to Rental or Mortgage ratio?



## loggedout (Dec 30, 2009)

Now and historically?

The typical recommendations out there is that you should not spend more than anywhere from 25% to 35% of your net income on rent or mortgage (incl. other housing expenses? such as prop. tax, mortgage insurance, etc.). 

I'm curious to know what the real #s are for people now and to what extent, if any, this ratio has changed over time for them.

It'd be helpful for context to also know your location and other relevant details without revealing too much.

I can start: varies due to variable income but on generally ~10-15% (Southwestern GTA and and it's a "discounted" rent due to the fact that I'm living my with my parents and I'm paying for half of all housing expenses with the exception of the mortgage payments)


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## andrewf (Mar 1, 2010)

I'm spending a hair under 20% of my gross (pretax) income on rent. Utilities are included, so that is basically my housing expense. I'm saving for a down payment.


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## MoneyGal (Apr 24, 2009)

34% of net. Geez, it's been a long time since I thought about these ratios. 

I live in the east end of downtown Toronto, in a semi-detached house. I included property tax and utilities in my calculations.


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## Four Pillars (Apr 5, 2009)

I'm around 30%. 

The problem with this number is the different amortizations. Some people just get a 25 yr amortization every time they renew their mortgage. Sure their ratio might be ok but it will take them 50 years to pay it off.

I live near Money Gal.


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## real_money (Feb 16, 2010)

I spend under 10% 

Property taxes, Heat , hydro , insurance , food. all fixed expenses.


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## Addy (Mar 12, 2010)

We will have our mortage paid off April 1st, so after April 1st including all utilities (water/heat/hydro/cable/phone/cell/water) and food we come in around 8%.

I don't think food should be included, so if we take that out we sit at 4.3%

I should mention this calculation is using our Gross pre-tax incomes.


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## Maltese (Apr 22, 2009)

I pay 18% of my net income for insurance, taxes and utilities. My house is paid off. My income is obviously a lot lower than others posting.


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## MoneyGal (Apr 24, 2009)

Maltese: there's a reason that these rules and ratios are often called "rules of dumb." They don't really communicate that much, including about the income of the person for whom the ratio is calculated. 

They are useful as an affordability ratio for a lender, but even then the borrower has to come in under ratio at the point of mortgage approval, and then (theoretically) never again. 

I co-own my house with my husband, so I effectively split the total monthly costs in two - we each earn roughly the same amount. And I used net income, not gross, which made my ratio higher than someone using gross income. 

Looks like at least one other poster included food...while all others did not. 

And this measure is ONE measure of a household's cash flows - you might have a "good" ratio but a super-long amortization (as pointed out above). You may have no other assets. You may have other debts. You may be at the starting point in life, when debt and borrowing are rational, or at the mid-point (that's me), presumably having established some financial stability, or even in later life, in which case you want to have that mortgage nearly or entirely paid off. You may have bought in an expensive city (also me) or live in Saskatoon (like my sister) where total housing purchase costs are often equal to the DOWNPAYMENT required to get into the housing market here. 

So, chin up. You can't really get much insight into a person's financial situation from this one ratio. I wouldn't conclude that you are "behind" or "below" anyone here!


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## loggedout (Dec 30, 2009)

All very well said MoneyGal about the value of this number on a case by case basis, but I asked this question because I was interested in it broadly. I think it can provide a feel for housing affordability in a location. So it's definitely not to rank people or be a measure of how well one is doing, as there are so many other factors to assess beyond this number.

ASIDE: I have a sneaking suspicion that the Canadian economy is going to fall apart with the fact that living expenses are rising at a much faster pace than people's income.




MoneyGal said:


> Maltese: there's a reason that these rules and ratios are often called "rules of dumb." They don't really communicate that much, including about the income of the person for whom the ratio is calculated.
> 
> They are useful as an affordability ratio for a lender, but even then the borrower has to come in under ratio at the point of mortgage approval, and then (theoretically) never again.
> 
> ...


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## brad (May 22, 2009)

loggedout said:


> I think it can provide a feel for housing affordability in a location.


I don't see how that's true. The numbers are vastly skewed by a person's income, the price of the house they chose to buy, and the term of their mortgage (which dictates how much you pay per month). Those three variables make a huge difference, and they vary widely from household to household even on the same street.


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## MoneyGal (Apr 24, 2009)

There are lots of (competing) ways to measure housing affordability. If you want a set of recent, national statistics, here's one source: this report provides a section on housing costs relative to income. 

http://www.vifamily.ca/library/cft/famfin09.pdf


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## Berubeland (Sep 6, 2009)

My house in the GTA was paid off in five years. 

First I got a cheap house that required significant renos. Not many people would be willing to sacrifice living with one kitchen cabinet which is what I did for the first five years until I could afford to put a semi-decent one in

Second it had a basement apartment in it which I rented out 

Third, during those five years I worked 18 hour days at least. I had a futon in my living room which often saw me collapsed on it simply because i was too tired to go any further. 

Now that same house comprises like 99% of my net worth and a significant portion of my income which is pretty low right because I am building a business. 

I am extremely grateful I did pay the damn thing off, since then I have been ill for a while, been pregnant and sick for a while, and can generally go tell anyone I like to go stuff themselves including people I work with. Not having large payments is a real blessing when it comes to starting a business. Overhead will choke your growth and force you to go get a "real" job faster than anything.


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## MoneyGal (Apr 24, 2009)

OT but Berubeland, _do I ever hear you_. 

I've been through most of the life events that derail a financial plan, including a costly divorce, a couple of pregnancies, and a diagnosis of a chronic disease after several years(!) of constant illness. The only thing that has consistently saved my bacon is my affinity for saving and my dislike of spending. 

Back to your regularly scheduled discussion...


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## Sampson (Apr 3, 2009)

I've been anywhere between about 12% on our first condo, to 51.5% when we bought our second place, to 36.6% (now).

Those eggshells were creaking about a year and a half ago, but we renegotiated our mortgage interest rate, and both my wife and I got significant raises.

Regardless of the ratio of paying for housing, we've maintained savings rates between 25-40%, and 25% on 'stuff' (transportation, food, entertainment), and anywhere between 10-20% for annual mortgage pre-payments.


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## John_Michaels (Dec 14, 2009)

Electicity/Property Taxes/Gas/Water Heater/House Insurance + Renovation spending ~5%.
Caveats - house is paid for, traded off on-going renovations instead of the mortgage. Also, 2009 familiy income was within the top 5% for Canada referencing 2004 StatsCan data so that significantly skews the percentage of course.

Referencing Berubeland's comments, I whole-heartedly agree, when asked, I would say pay off the house before any other savings (other than emergency funds) - - - when life turns for the worse, the flexiblity from a low overhead is priceless.


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## ShowMeTheMoney (Apr 12, 2009)

I live in the west end of Toronto.
Housing costs including property taxes, gas, hydro,cable, phone, house insurance are 20% of my take-home pay.
When I had a mortgage that rose to 42%.
I paid off the mortgage but I still owe money to family that helped out so I could keep the house upon my divorce some years ago. I now have a new partner who helps out a great deal with expenses. Since I want to pay off this remaining debt as fast as possible I put all I have (except maxed out RRSP and TSFA contributions) towards it, so I still have some savings.
I just did the calculation including my income supplemented by my partner's "rent" and including all my debt repayment as a housing expense, that brings it to a whopping 63% of net income. 
I live frugally but I'm no miser. I have a decent income, so I guess that's why I don't feel too stretched.


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## Dana (Nov 17, 2009)

We live just east of toronto. We pay 35% of our net income to: mortgage, property taxes, house insurance, life insurance, hydro, water, natural gas, cable, internet, cell phones and maintenance. This also includes increasing our bi-weekly mortgage payment by 75%.


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## Y&T2010 (Dec 29, 2009)

I've been thinking of moving to Toronto... and checked out the MLS listings, OMG you really get some BANG for your buck!! =)

Some of those apartments/ townhouses are so beautiful in DT Toronto!

For the price of a 3 bedroom townhouse in Toronto, you get a 1 BT 500 sq apartment here in Vancouver.


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## andrewf (Mar 1, 2010)

Y&T2010 said:


> I've been thinking of moving to Toronto... and checked out the MLS listings, OMG you really get some BANG for your buck!! =)
> 
> Some of those apartments/ townhouses are so beautiful in DT Toronto!
> 
> For the price of a 3 bedroom townhouse in Toronto, you get a 1 BT 500 sq apartment here in Vancouver.


Only in comparison to Vancouver does Toronto look cheap. That would make me nervous to own property in Vancity.


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## Alexandra (Apr 3, 2009)

I'm at 27%. 

I live in downtown Toronto, west-siiiide, in a semi-detached Victorian. 

Like others have mentionned, I am not sure this is a good indicator of affordability though - it so happens that we have a 50-year mortgage and we make more than the average Joe.


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## loggedout (Dec 30, 2009)

andrewf said:


> Only in comparison to Vancouver does Toronto look cheap. That would make me nervous to own property in Vancity.


If Vancouver makes Toronto look cheap, I would be very scared about owning property in Vancouver too because I am already afraid of owning property in Toronto and its surrounding regions. I don't forecast a rosy horizon for the economy in Ontario.

I understand that this ratio isn't the best indicator of affordability, as its more complicated, but for me, it's just about providing a feel for things.


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## rebel_ins (Apr 6, 2009)

I spend a little under 21% of my net income on rent (utilities, hydro, etc. included). I rent a one bedrom in Toronto, in the Broadview/Danforth area. I intend to buy a residence someday, however with the current prices in the GTA I am happy to rent and keep saving until the housing market corrects itself.


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## heyjude (May 16, 2009)

Y&T2010 said:


> I've been thinking of moving to Toronto... and checked out the MLS listings, OMG you really get some BANG for your buck!! =)
> 
> Some of those apartments/ townhouses are so beautiful in DT Toronto!
> 
> For the price of a 3 bedroom townhouse in Toronto, you get a 1 BT 500 sq apartment here in Vancouver.


This is what it would cost you to buy a standard condo (2 bed) in Winnipeg:

_Standard condominiums rose 1.7 per cent, increasing from $141,000 to $143,400 in Westwood, while South St. Vital experienced a 20.4 per cent rise from $140,000 to $168,600._

http://www.winnipegrealtors.ca/Editorials.aspx?id=1070 

For the price of your Vancouver 1 Bedroom 500 sq foot condo (I'm guessing $500K), you could buy this:

http://www.winnipegrealtors.ca/viewer.aspx?ID=1005584&type=residential 

Real estate is VERY local!


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## canadianbanks (Jun 5, 2009)

loggedout said:


> If Vancouver makes Toronto look cheap, I would be very scared about owning property in Vancouver too because I am already afraid of owning property in Toronto and its surrounding regions. I don't forecast a rosy horizon for the economy in Ontario.


That's what I'm thinking too. I’m curious to see what happens with the GTA RE market with the huge rush in listings in the last few weeks. Maybe this time around we will have a real correction .

And to answer the original poster I spend around 20% of my Net income on housing.


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## Sherlock (Apr 18, 2010)

I'm spending about 38% of my net income on rent for my 1br apartment in Toronto. You really can't rent an apartment for under $1000 around here unless it's really dumpy or in a bad neighborhood.


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## m3s (Apr 3, 2010)

Just under 20% of my net income goes to mortgage/utilities/property tax.

It's a 10-year-old starter home that's more than enough space for me, 10 mins from work. Population of my town is 20k (the Toronto/Vancouver types are not for me)

I don't have a budget but my records also show
10% on entertainment
10% on food
15% vehicles
5% misc
40% savings/mortgage prepayments


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## IamMe (Apr 22, 2010)

loggedout said:


> All very well said MoneyGal about the value of this number on a case by case basis, but I asked this question because I was interested in it broadly. I think it can provide a feel for housing affordability in a location. So it's definitely not to rank people or be a measure of how well one is doing, as there are so many other factors to assess beyond this number.
> 
> ASIDE: I have a sneaking suspicion that the Canadian economy is going to fall apart with the fact that living expenses are rising at a much faster pace than people's income.


Part of the problem is that the people reading these forums has an inherent bias towards frugality (which coincidentally I also agree with) ... so you won't necessarily get a good representative sample this way..


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## oneworld (May 3, 2010)

I rent a 1 br apartment in Toronto and it is about 27% of my net income.


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