# House Affordability: Maximum percentage of household income towards housing costs



## briant

I'm trying to figure out how much of a house I can afford. I've used calculators from the major banks and they're telling me that I can afford a $580,000 house!  They obviously want me to borrow more, but I'm not falling for that.

I've read rules that say: housing costs should not exceed 32% of your gross household income. Housing costs include mortgage payments, property tax, and utilities. 

My questions are

1. What as a percentage of gross household income do you spend on housing costs?

2. Are their any other costs involved in home ownership that I should estimate in this calculation?

3. Is 32% even realistic? Should it be based on net (after-tax) income?

PS: Let's leave Total Debt Service ratio out of this discussion, as I don't have any current debts.

Thanks!


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## HaroldCrump

IMHO it is misleading, nay almost criminal, to use gross income as the base for these calculations.
You should always use net income because that's what you have in hand.
Most people's tax situation is fairly static and outside of their control (on a month-to-month basis).
So using gross income as the basis is very dangerous, esp. if you don't have too many fancy tax deductions other than regular RRSP.

Use net income...you'll thank yourself later.

32% of net income is a little high IMO.
That's mean you will have 68% of your net income left for everything else...groceries, clothing, entertainment/vacation, emergency funds, etc.


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## I'm Howard

Ihave owned many properties and grown quite wealthy from their ownership, saying that, in today's environment, I would not own.
Gasoline, property taxes, HST etc have taken money from people and as such, there are less buyers than sellers.
To answer your question, 30% is considered the norm, but be aware, rates could be 10% in a few years.
I would also suggest you look at a place with a basement apartment, let someone pay your mortgage off.
Good Luck.


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## HaroldCrump

To elaborate on what I wrote above, this is how you can do a defensive/conservative estimate of how much you can afford:

+ Net Income
- Groceries/food
- Clothing
- Car payments, if any
- Other essential expenses (school fees, kids' activity fees, furniture, commute, gasoline, vehicle maintenance, etc.)
- Annual emergency savings fund contribution
- Annual RRSP contribution
- Annual TFSA contribution
- Discretionary expenses (entertainment, vacation, beer, eating out, "fun", etc.)
= Income available for home ownership

Of course, you can adjust the variable discretionary expenses to yield a higher home ownership fund.
However, IMHO, the other items I listed above should take priority over maxing out your home ownership budget.

Keep in mind that givem net income as a fairly constant value, there is a clear trade off between buying a bigger/fancier house vs. the other priorities listed above.
More of one means less of the other.


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## Four Pillars

HaroldCrump said:


> To elaborate on what I wrote above, this is how you can do a defensive/conservative estimate of how much you can afford:
> 
> + Net Income
> - Groceries/food
> - Clothing
> - Car payments, if any
> - Other essential expenses (school fees, kids' activity fees, furniture, commute, gasoline, vehicle maintenance, etc.)
> - Annual emergency savings fund contribution
> - Annual RRSP contribution
> - Annual TFSA contribution
> - Discretionary expenses (entertainment, vacation, beer, eating out, "fun", etc.)
> = Income available for home ownership
> 
> Of course, you can adjust the variable discretionary expenses to yield a higher home ownership fund.
> However, IMHO, the other items I listed above should take priority over maxing out your home ownership budget.
> 
> Keep in mind that givem net income as a fairly constant value, there is a clear trade off between buying a bigger/fancier house vs. the other priorities listed above.
> More of one means less of the other.


+1

The whole "percentage of income" calculation is kind of like determining your retirement needs as a "percentage of income". 

Doing some sort of actual analysis using real costs and net income is far better, like Harold suggests.


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## George

briant said:


> 1. What as a percentage of gross household income do you spend on housing costs?
> 
> 2. Are their any other costs involved in home ownership that I should estimate in this calculation?
> 
> 3. Is 32% even realistic? Should it be based on net (after-tax) income?
> 
> PS: Let's leave Total Debt Service ratio out of this discussion, as I don't have any current debts.
> 
> Thanks!


1) I don't like using gross household income. Personally I think 25% of net household income is a good number to aim for, less if possible. Don't count on your income increasing over time, and don't count on the house value appreciating either.

2) Depending on the house, a few thousand dollars will be needed each year for maintenance (replacing a deck, furnace, roof, appliance, etc, on top of smaller maintenance issues like getting the carpets steam cleaned once in a while). Then there's property taxes, utilities, insurance, and so on.

3) 32% is 'realistic' if you don't want to do anything but service the mortgage for the next few decades.

If you buy a small, inexpensive house, you can always sell it later and buy a larger place. Many houses these days are far larger than they really need to be - take a look at the average house from 1950 and compare it to the average new house in 2010 - in that time families have become smaller, but houses have got larger!


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## Berubeland

Briant


This is a pretty horrible time to buy a house... period. 

Please read my post.... http://landlordrescue.ca/personal-residence-expense/

Asking how much house you should budget for is like asking how much should you pay for rogers cable. The least you possible can for what you need. Do you need a McMansion? 

It's the same for any other expense. How much car can you afford is the wrong question. The right question is what is the least I can spend to get transportation that will fit my requirements?

Invest the rest, if you get sick or lose your job you will have a safety net. 

Quite frankly our biggest trading partner the US and most other countries have had significant collapses of their real estate market. We are also at all time high RE prices. 

The bank of Canada is meeting with the big 5 banks and the CEO's are telling him to tighten mortgage lending up again. Interest rates are going to go up. All this will serve to clamp down appreciation of the housing market. 

So get the smallest least expensive house you need and pay it off. How about no mortgage? How about reduced utilities and expenses? Chances are that you are buying at very close to the height of the RE market. If you are building a house if the RE market goes down you may not be able to close the mortgage and you will lose your down payment. 

This has already has already happened to investors in Calgary that bought preconstruction condos. They went to close on their purchase because they were contractually bound and couldn't get a mortgage because their investment had already lost more value then their deposit. 

That's my advice right now.


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## slacker

briant said:


> I'm trying to figure out how much of a house I can afford. I've used calculators from the major banks and they're telling me that I can afford a $580,000 house!  They obviously want me to borrow more, but I'm not falling for that.
> 
> I've read rules that say: housing costs should not exceed 32% of your gross household income. Housing costs include mortgage payments, property tax, and utilities.
> 
> My questions are
> 
> 1. What as a percentage of gross household income do you spend on housing costs?
> 
> 2. Are their any other costs involved in home ownership that I should estimate in this calculation?
> 
> 3. Is 32% even realistic? Should it be based on net (after-tax) income?
> 
> PS: Let's leave Total Debt Service ratio out of this discussion, as I don't have any current debts.
> 
> Thanks!


Bankers: "Get the largest house and mortgage you can get right now. Rates are at a historic low. It will probably never happen again in your life time."

But to answer you question, the % of household income dedicated to housing needs (rent or otherwise) depends on where you have chosen to live. If you live in Vancouver, Calgary, or Toronto, then you can expect to pay more than if you lived in a small town.

I live in the Toronto area, my financial situation only allows 30% of my net income to go towards housing needs. I can barely rent a 1 bedroom apartment with 30%.

RE is indeed overpriced right now. But. These things can remain overprice for quite a few years. Our government is actively propping up the RE market, so those of us who chose to live within our means missed out on a price correction, instead our tax dollars went to support the banks to give out loans to McMansions. Read up on the CMHC, the banks are getting the profit, taxpayers are taking on the risk.


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## kcowan

I agree with other posters. Buy the minimum that meets your requirements if you cannot find suitable rental accommodation. Don't drink the Koolaid that the real estate industry is serving. And don't trust the banks to give you good advice.


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## briant

Thanks for the tips everyone!

I live in a major Canadian city where the average sale price of a home is $450k, and the median sale price is $400k.

I'm also looking to start a family in the next 5 years. We've saved up a down payment of almost $100k. Home ownership is something we've planned for for a long time.

I've found a useful resource here:
http://www.gailvazoxlade.com/articles/home_sweet_home/afford_how_much_home.html

I'll going to narrow down what my essential expenses are just like FP and Harold suggested and see where I stand. Also thanks for the helpful warnings everyone, its important to know what kind of risks I'm getting into.

It would help me if you guys could answer #1 specifically and tell me your experiences with the debt load.


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## marina628

briant said:


> I'm trying to figure out how much of a house I can afford. I've used calculators from the major banks and they're telling me that I can afford a $580,000 house!  They obviously want me to borrow more, but I'm not falling for that.
> 
> I've read rules that say: housing costs should not exceed 32% of your gross household income. Housing costs include mortgage payments, property tax, and utilities.
> 
> My questions are
> 
> 1. What as a percentage of gross household income do you spend on housing costs?
> 
> 2. Are their any other costs involved in home ownership that I should estimate in this calculation?
> 
> 3. Is 32% even realistic? Should it be based on net (after-tax) income?
> 
> PS: Let's leave Total Debt Service ratio out of this discussion, as I don't have any current debts.
> 
> Thanks!


Don't buy the house you can afford buy the house you need .If bank says you can afford $580,000 then I would buy something in the $350,000 or lower range .Of course you can impress your friends with a big house but you need money for other stuff.I have friends who live in a big house but cannot afford to furnish it.
Don't compromise your comfort level and life style for a bigger home.Buy close to your work too so you save on travel expenses.I think anything over 25% net pay for mortgage/taxes is going to get uncomfortable.
Make sure you have at least $5000 house fund plus two months expenses in a savings account after your closing costs,most home buyers go for broke on closing day and that is a horrible situation to be in if your furnace breaks on the coldest day in February.


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## jamesbe

IMO you can't use percent, just do the math figure how mich everyone cost you per month and how much you want in savings etc and go from there. My housing cost is about 50% of my net monthly. It's high but that is because I am aggressively paying down the mortgage. I chose to take almost a double it on my payments to force me to pay it off. Sometimes it is tight, but it is a decision I chose. 

If I dropped my payments to bank standards I would be around the 32% of net certainly not gross.


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## Berubeland

1. What as a percentage of gross household income do you spend on housing costs?

Not sure exactly - my house is paid off, I have utilities and property taxes and repairs/maintenance.

2. Are their any other costs involved in home ownership that I should estimate in this calculation?

Repairs and maintenance, possible upgrades if you buy a crappy house that needs improving. 

3. Is 32% even realistic? Should it be based on net (after-tax) income?

Only if you like working for the bank.... it should be based on what you need. Less is more.


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## Dana

briant said:


> It would help me if you guys could answer #1 specifically and tell me your experiences with the debt load.


We have recently put our mortgage on project status and have entered a kill-the-mortgage mode. We are determined to pay off our mortgage in the next 3 years, so we are currently spending 50%+ of our net income on housing costs. 

Comparatively, our mortgage was never huge. The largest mortgage we have ever had is $187,500 and that was 4 years ago. We are not debt averse people, we have leveraged many times, so our mortgage debt never bothered us when we were younger and we focused most of our financial resources on growing our investment portfolio. 

Then we had kids, gave up one full-time income, entered middle age and suddenly the choices and freedom that a mortgage-free existence can provide have become very appealing. 

My advice to someone purchasing their first home would be to purchase what you need in a marketable location. I would also counsel against purchasing a 'starter home'. Moving is expensive (legal fees, r/e fees, land transfer fees, incidental moving costs etc.) and when I look at the financially successful people in my life, most of them have lived in the same house for a *long* time and I don't think that is a coincidence.


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## crazyjackcsa

I've never liked the % of income, it is very dependent on (obviously!) Your income. If you made a million dollars a year, you could afford to spend 60% on a home and still live well.

But anyway, my mortgage is about 20% of our net pay, and I find that to be the top of the limit for us.

What kills us is taxes and utilities, I figure it's another 14% for taxes, insurance, natural gas, water and electricity.

As an aside, I also find it odd when people compare the age vs. the size of the home, My 1908 foursquare is about 2800 square feet, my parents 1970 rancher is 2500, so apparently houses are got smaller before they got larger.


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## marina628

Another thing is interest rates , can you afford that mortgage if the interest rates are 6-7% or are you counting on a 2.25% variable rate?


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## marina628

crazyjackcsa said:


> I've never liked the % of income, it is very dependent on (obviously!) Your income. If you made a million dollars a year, you could afford to spend 60% on a home and still live well.
> 
> But anyway, my mortgage is about 20% of our net pay, and I find that to be the top of the limit for us.
> 
> What kills us is taxes and utilities, I figure it's another 14% for taxes, insurance, natural gas, water and electricity.
> 
> As an aside, I also find it odd when people compare the age vs. the size of the home, My 1908 foursquare is about 2800 square feet, my parents 1970 rancher is 2500, so apparently houses are got smaller before they got larger.


I just moved from a 1600 sq ft bungalow to a 3200 sq ft Bungaloft with another 1500sq ft that will eventually get finished in basement.First thing that happened was house insurance went from $700 a year to about $1400 a year ,double the purchase price of last house means double insurance bill.
We have those fancy rain showers and our showers have seats in them , this means extra $60 per quarterly water bill as we all seem to spend longer in the shower.Property tax bill went up about $2000 a year from old house and heating bill is about 60% of the old house as well.
In 1990 i was spend $200 a month for my hydro ,gas ,cable and phone bill.Today these bills total more than $500 a month.I am paying about 25% of my net income on my mortgage ,utilities and taxes but I have doubled my mortgage payments up for almost a year now.Just wanted to add that Tdbank told us we qualified for $1,132,967 Mortgage when we bought out last home.I told them they are nuts ,we got just over $340,000 because of $100,000 we borrowed on behalf of my business.My gift to myself is to be mortgage free before my 50th birthday in 7 years.


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## osc

Total mortgage = 2x annual income.


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## jamesbe

^ that's pretty much dead on what I am now... until I move. Thought we could sell our current house for more, but then the market crashed so my new mortgage will be more.. oh well.


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## MoneyGal

Like many other people here, I think it is *crazy* to determine how much house you can "afford" based on how much money a bank wants to lend you in the form of a mortgage. 

One thing I've said before and apparently am going to say again is that I feel quite strongly that a house should be carry-able on the income of ONE person in the household...this gives you flexibility in the case of job loss, illness or disability, or, for younger couples, if you have kids and one of you wants to stay home/out of the workforce for a few years. Too many times I've see what I see as an unfortunate situation in which mom is essentially forced back to work because the family needs the income...or, worse yet, to my mind, the family says they "can't afford" to have more than one child because they can't afford daycare for two. 

(Leaving aside whether the optimal number of children is zero, one, two or some other number - I just don't like it when people cannot fulfill on important [to them] non-monetary goals [like adding to their family] because they have made monetary choices which rule other choices out.)


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## andrewf

The problem is that, in competing for housing with DINKs, people buying a house on one income will have to resign themselves to the bottom of the barrel. I see some valuations of post-war shacks in Toronto with serious structural, electrical, plumbing problems and it blows my mind. The house itself can't be worth more than $125,000 or so, which implies that the residual value is that of the land--so 75% of the value of property is land.


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## kcowan

In additon to the good advice upthread, it is important to buy something that will last you ten years. The frictional costs of moving are very high. 

And don't forget that cost of your residence include taxes, utilities and insurance in additon to any maintenance and upgrades. So 25% of net income does not just mean mortgage servicing.


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## brad

Another way to think about this is to look only at your total cost: mortgage plus interest. You might think, "no problem, I can afford a $450,000 house," but if you take out a 30-year mortgage you'll be paying something like another $250,000 in interest (assuming 4% interest and ~25% downpayment). So really you're going to be spending $700,000 for this house. That's a lot of money.

My approach was to forget about what I qualified for (the house we purchased cost less than half what we were qualified to buy), and instead focused my goal on paying as little interest as possible. Everyone is eager to stop "throwing money away" in rent, but most people lack the same level of motivation to avoid throwing away much greater sums in interest. And when you pay rent, at least it's going to a landlord, not a bank. 

So I bought a house that was just big enough for our needs, no more (it's under 1,000 square feet), and set up an accelerated bimonthly payment schedule on a 15-year mortgage, augmented by lump-sump payments, so we can pay off our mortgage in less than 10 years. In the long run this will save us tens of thousands of dollars in interest, and we're living in the house of our dreams and have no intention of moving, ever.


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## MoneyGal

andrewf said:


> The problem is that, in competing for housing with DINKs, people buying a house on one income will have to resign themselves to the bottom of the barrel.


This is known as the "two-income trap" (and while that is an American book, many of the insights are applicable to Canada). 

There are ways out of the trap, though, and the main one (employed by me, and absolutely advocated by my boss and co-author, Moshe Milevsky) is to NOT buy until you have significant savings, so that your mortgage is relatively small (even in a location - I live in downtown Toronto - where house prices are high). There are many arguments against home ownership as a way to build wealth and these are *compounded* when you buy early in life, with little if any savings, and high ongoing interest costs. 

Someone once said to me (and this is to Brad's point in particular), "you can rent space, or you can rent money." This helped simplify the rent vs. buy decision for me.


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## Four Pillars

MoneyGal said:


> This is known as the "two-income trap" (and while that is an American book, many of the insights are applicable to Canada).
> 
> There are ways out of the trap, though, and the main one (employed by me, and absolutely advocated by my boss and co-author, Moshe Milevsky) is to NOT buy until you have significant savings, so that your mortgage is relatively small (even in a location - I live in downtown Toronto - where house prices are high). There are many arguments against home ownership as a way to build wealth and these are *compounded* when you buy early in life, with little if any savings, and high ongoing interest costs.
> 
> Someone once said to me (and this is to Brad's point in particular), "you can rent space, or you can rent money." This helped simplify the rent vs. buy decision for me.


Actually, that's not what the "two income trap" is.

When a working couple spends all their money on costs that can't easily be eliminated (ie mortgage), then they are trapped because if they lose one income or have a medical emergency (in the US), they can't recover. That's the "two income trap".

I did a review of the book - highly recommend it.

http://www.moneysmartsblog.com/the-two-income-trap-book-review/ 

As for the single person who gets shut out of all the good areas - I think that's life. The only way to counter-act is to buy something small enough that you aren't in competition with families (ie single bedroom condo).


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## andrewf

Mike, I was referring to single-income families, so typically a one bed condo would be unsuitable.


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## briant

marina628 said:


> Another thing is interest rates , can you afford that mortgage if the interest rates are 6-7% or are you counting on a 2.25% variable rate?


Good tip Marina. I'm going to do some what if scenarios when I'm crunching the numbers to see. Here is a good link I found for historic interest rates in Canada: http://www.canequity.com/mortgage_rate_history.stm


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## MoneyGal

I think you and I are agreeing, FP. 

Elizabeth Warren talks about the _rise_ of the "two-income trap" with women increasingly entering the workforce - driving house prices up so that it takes two incomes to afford them (in "good" neighbourhoods with decent public schools - that's the U.S. angle which differs from Canada). 

You are describing what it's like to be in the trap. I am describing where the trap came from, if that makes sense. Because of the "two-income trap," families with only one "regular" income are shut out of good houses (unless they avoid the trap through various means, one of which I described - buy later).


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## briant

Four Pillars said:


> Actually, that's not what the "two income trap" is.
> 
> When a working couple spends all their money on costs that can't easily be eliminated (ie mortgage), then they are trapped because if they lose one income or have a medical emergency (in the US), they can't recover. That's the "two income trap".


Great advice FP, and MoneyGal. It's important to wait until we have a substantial down payment so that we can still afford the mortgage on one income.


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## MoneyGal

While we're on this topic, the *other* main reason for delaying house purchases has to do with the "human capital" argument. 

Here's the argument: When you are young, your greatest asset is your (unmonetized) human capital, which you will see dividends from over a very long period of time, like a gold mine or an oil well. 

When you are in that stage of life, it does not make sense to take a large fraction of your *financial* capital (or, worse yet, a large fraction of your financial capital which represents only a very small fraction of your total mortgage commitment) and put in into another undiversified, large, illiquid allocation. 

Instead, build up (diversified, liquid) financial capital as you monetize your human capital over time...then buy later, when you are exposed to much less overall financial risk.


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## Four Pillars

MoneyGal said:


> I think you and I are agreeing, FP.
> 
> Elizabeth Warren talks about the _rise_ of the "two-income trap" with women increasingly entering the workforce - driving house prices up so that it takes two incomes to afford them (in "good" neighbourhoods with decent public schools - that's the U.S. angle which differs from Canada).
> 
> You are describing what it's like to be in the trap. I am describing where the trap came from, if that makes sense. Because of the "two-income trap," families with only one "regular" income are shut out of good houses (unless they avoid the trap through various means, one of which I described - buy later).


I agree that single income families are shut out of good houses because of the 2-income trap - my point is that their situation is not in itself the 2-income trap, which is what you stated.

Andrew - Sorry, I didn't catch that distinction. I don't know what single income families can do to compete, other than to keep renting or have the non-working spouse look for a job (and then they can work their way into their own 2-income trap).

MG - I think the single biggest mistake younger people make is buying a property too early and then being tied to that city. Yes, they can probably sell - but it's not easy. As you say, their human capital is their most valuable asset and they need to be able to maximize it by being mobile enough to move to better opportunities.

One of the problems in the US is that so many people are underwater on their house (especially younger people) that they can't afford to move if they get a better job (or a job) in a different area. I don't have any stats, but I suspect this is one of the reasons their unemployment rate has stayed so high.


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## marina628

I was in a car accident in 1997 that left me permanently disabled ,I spent 31 months without ANY INCOME while insurance companies fought about fault .I was a passenger in a car that was hit side on by a charter bus but because my injuries were so severe each side fought extremely hard not to be blamed.I did not drive but because of no fault insurance my husband's insurance ended up paying my medical bills.Then our insurance joined the lawsuit to recover their costs.It was the most horrible experience we went through and at times I had to choose home care over mortgage in the end.My husband ended up leaving his full time job so we could save the home care expenses and he worked part time when our daughter was in school and I could manage 3 hours or so.Because we bought the house we could afford we were able to keep the house .I spent $78,000 over 5 years on lawyers and an average of $15,000 a year on my own home care .With good credit and $30,000 loan from my parents we managed.I ended up eventually getting my 31 months pay but it was taxed in one year so resulted in HUGE tax deduction. All that did was pay off my debts the accident cost us.I then had to wait another 5 years to get my insurance settlement ,the bus company was faulted .
I was receiving $1680 monthly long term benefits from my work but took a lump sum tax free payout in 2007.I am still in a wheelchair but over the years have adapted to my new life and because of this accident I now have a successful online business that I built using my insurance settlement.
So everyone reading this , from somebody who has survived the worst case scenario ,ask yourself if you can survive financially if not only you lose your job but require costly personal care that our government does NOT pay for.
Marina


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## jamesbe

Just to stick the other argument in there....

All I see from history is the opposite of what everyone is saying here 

I bought my first house in 2001, I wanted to buy in 1998 but was convinced I should not buy in case I find a job elsewhere etc etc. Well in 2001 the same home I could have bought in 1998 went from about $100k to $170k.

Now that same home that I bought in 2001 for $170k sells for $270k (that's barely 10 years... actually 9 since it was the end of 2001). I of course did pay interest over that time, but the money I put on the mortgage prior to buying was going to my landlord, buying the house actually was slightly cheaper than renting at the time.

I see many co-workers now starting out, asking how the heck can I afford a home. They are $300k for townhomes now out in the burbs, if I would have waited I would have been saying the same thing. I'm glad I bought young! I've since upgraded twice to singles and gained about $100k in further equity. I'm only 32 now, my plan is to "cash out" in another 10 years, downgrade to a smaller home and sell my big home keeping the equity. 

My quick maths shows (of course I can only guess) that I will be doing better than had I played the stock market and paid rent that's for sure. Even considering the cost of moving etc.

Of course I diversified as well which is always important. And Ottawa always seems somewhat sheltered although I have seen a flattening of the market recently.


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## MoneyGal

Well, in order to make a fair apples-to-apples comparison, you would need to compare your "buy housing" strategy to a similarly leveraged strategy in the stock market. 

Here's one calculator which allows you to model some scenarios: 

http://www.ic.gc.ca/eic/site/oca-bc.nsf/eng/ca01821.html

I gotta tell you though, as someone who makes a living working with these kinds of calculators, _you can make them say anything you want_ depending on what assumptions you plug in.


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## Four Pillars

@jamesbe - MG is right - houses are typically very leveraged - at least, early on.

I'm in the same situation - I bought at the end of '99 and have done extremely well. However, that doesn't mean I go around telling people that real estate is the best way to wealth. It was for the period that I've been a homeowner, but it might not be for the near future.

It's all about risk - if buy a house and it goes up in value, then you are fine (or better than fine). You can sell the house easily if necessary or just live in it. 

However, if the house goes down in value and you want to move - you might have lost a lot of money. And you might not be able to afford to move. In this case - you've lost the bet and might be paying for it for a long time.


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## Berubeland

The mathematical fallacy that people use to calculate how much they have paid for their house is the following. 

They use the purchase price as their metric. 

They need to count how much they have paid for their house, plus property taxes and maintenance less RE transaction fees. 

So if you bought a house and paid $50,000 down and $2000 per month for 5 years/60 months including taxes and maintenance, their cost would be $170,000 plus when they bought they had to pay lawyer and land transfer and possible CMHC fees. 

Add all that up and figure out how much you actually made. 

The purchase price is irrelevant, what matters is how much you spent in cold hard after tax cash.


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## jamesbe

@MG, while I agree you must do that comparison for argument sake.

VERY VERY few people would ever even consider leveraging against stocks (But that is an entire other thread as we know). It certainly isn't something easily done with 5% down


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## Guest

Fwiw ... I've tracked my home operational expenses (gas, water, hydro, taxes, cable, phone, internet) since 2001. Cost per month 2001 ... $760; cost per month 2010 ... $1500. Given that hydro alone will double over the next few years, I'd say my monthly expenses 5 years down the road might well be $2500 ... thats $30K/yr ... and that's in after tax dollars ... something you might think about.

My case, I have essentially 2 houses attached and rent out rooms in "the other half" to cover 1/2 the expenses (I like renting out rooms ... I deal with only one person at a time ... not say a family). When I "retire", I'll do some upgrades and increase the rent to cover the expenses so I'm not affected by rising costs. My opinion ... North Americans are over housed ... down the road many will l have to get used to sharing. When I was a kid there were always people living upstairs, as were there at my grandparents.


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## MoneyGal

jamesbe said:


> @MG, while I agree you must do that comparison for argument sake.
> 
> VERY VERY few people would ever even consider leveraging against stocks (But that is an entire other thread as we know). It certainly isn't something easily done with 5% down


I am not suggesting that people should employ leverage in investing in the stock market. What I am saying is that if you are going to say that real estate is a "better investment" than stock market investing - or even if you want to find out whether it is a better investment or not - you need to compare scenarios which are truly comparable. What makes RE a "good investment" is often the use of leverage.


----------



## Sherlock

I think another factor to consider when determining what percentage of your income to spend on housing is your age.

Considering how many elderly people have no sources of income other than CPP and OAS, I would estimate that a typical elderly couple is forced to devote significantly more than a third of their income to maintain their paid off home, especially if they own a big house with high taxes.

I know my parents (both retired, no RRSPs, combined income under 30k/yr) get just barely enough money from CPP/OAS to pay their tax and hydro and other basic living expenses. If they hadn't paid off their mortgage while they were still working, there is no way they'd be able to carry one now, they'd have to live in an apartment and with their income it'd be a very crummy apartment.


----------



## marina628

rikk said:


> Fwiw ... I've tracked my home operational expenses (gas, water, hydro, taxes, cable, phone, internet) since 2001. Cost per month 2001 ... $760; cost per month 2010 ... $1500. Given that hydro alone will double over the next few years, I'd say my monthly expenses 5 years down the road might well be $2500 ... thats $30K/yr ... and that's in after tax dollars ... something you might think about.
> 
> My case, I have essentially 2 houses attached and rent out rooms in "the other half" to cover 1/2 the expenses (I like renting out rooms ... I deal with only one person at a time ... not say a family). When I "retire", I'll do some upgrades and increase the rent to cover the expenses so I'm not affected by rising costs. My opinion ... North Americans are over housed ... down the road many will l have to get used to sharing. When I was a kid there were always people living upstairs, as were there at my grandparents.


I think these numbers are about right,utilities will be a big one to watch in future.


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## jamesbe

Wow, my utilities are much lower than $1500 a month WTH? 

I live in a 2600sq/ft home my hydro/water/heat total per month is about $220.


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## MoneyGal

He's adding in property taxes, phone and cable bills.


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## Pigzfly

I think you're fishing for numbers that other people are living with to give yourself a better idea?

We are at about 19% of gross household income, for mortgage, strata fee (includes all utilities) and taxes. Insurance is about $200/yr, so won't affect much.
We choose to spend about 60% of gross, to aggressively pay down the mortgage.
I would give you net income numbers, but I am guessing at our after tax household income.

My parents have a rule of thumb that a mortgage should be based on one person's income. As long as you get flexibility in the terms, you can pay more than that, but when adversity hits you can trim to a much smaller payment.


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## jamesbe

MoneyGal said:


> He's adding in property taxes, phone and cable bills.


That brings me to about $630, let's say $650 give or take.


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## HaroldCrump

Why would you guys include phone, cable and other such bills into the cost of home ownership?
Those costs would be the same if you were to rent.


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## Four Pillars

HaroldCrump said:


> Why would you guys include phone, cable and other such bills into the cost of home ownership?
> Those costs would be the same if you were to rent.


Agreed. Might as well include your food bill and daycare.


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## Guest

And I didn't identify insurance ($940) in the list but did include the cost ... so ... gas, water, hydro, taxes, insurance, cable, phone, internet for 2010 ... $1500/month. My home is in Ottawa, Westboro ... there are currenetly 7 adults living in the 3800 ft sq home and sharing the expenses ... my opinion, not bad at ~$200/month each.


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## Guest

The OP asked for housing cost ... to be helpful, I posted mine ... I happen to live in a house ... perhaps the apartment dwellers might contribute their costs to house 7 persons ...


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## Plugging Along

rikk said:


> And I didn't identify insurance ($940) in the list but did include the cost ... so ... gas, water, hydro, taxes, insurance, cable, phone, internet for 2010 ... $1500/month. My home is in Ottawa, Westboro ... there are currenetly 7 adults living in the 3800 ft sq home and sharing the expenses ... my opinion, not bad at ~$200/month each.


You can't really divide up all the costs per person to get an accurate cost of how well you are doing in terms of a per person basis. Fixed cost such as taxes, insurange, cable, phone and internet don't go up with each person. I could say that we have 700 people in the home, and then the cost is only $2 per person. This is why couples live cheaper per person than singles. 

If you wanted to figure out how frugally you are living you would base it on the variable costs per person.


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## Guest

Plugging Along said:


> You can't really divide up all the costs per person to get an accurate cost of how well you are doing in terms of a per person basis. Fixed cost such as taxes, insurange, cable, phone and internet don't go up with each person. I could say that we have 700 people in the home, and then the cost is only $2 per person. This is why couples live cheaper per person than singles.
> 
> If you wanted to figure out how frugally you are living you would base it on the variable costs per person.


Sure ... I was going off topic ... just saying there is more than one way to skin a cat ... oops .. that's further off topic and probably not politically correct ... are the three family cats aren't looking over my shoulder? Nope ... good, ok, adios all


----------



## Plugging Along

*For us*



briant said:


> I'm trying to figure out how much of a house I can afford. I've used calculators from the major banks and they're telling me that I can afford a $580,000 house!  They obviously want me to borrow more, but I'm not falling for that.
> 
> I've read rules that say: housing costs should not exceed 32% of your gross household income. Housing costs include mortgage payments, property tax, and utilities.
> 
> My questions are
> 
> 1. What as a percentage of gross household income do you spend on housing costs?
> 
> 2. Are their any other costs involved in home ownership that I should estimate in this calculation?
> 
> 3. Is 32% even realistic? Should it be based on net (after-tax) income?
> 
> 
> Thanks!


When we bought our first home together, we took out a mortgage for about 1/2 of what we were approved for. My spouse and I made roughly around the same amount, and we wanted to have the ability to live off of one income (it would be really tight), if we needed too. Also my spouse was contractor so the income was varied a fair bit too. It could be feast or famine at any time. 

We saved for a larger downpayment (~28%), had no other debt. We did have my spouse condo that we decided to keep as a rental, but that didn't really count as debt in our mind. 

As the other posters have stated, you should be very careful in how much you spend on a home. I do believe that you should buy the home that you need for future considerations. We didn't buy a started home, and thought our home was more than enough space for 2 future kids, however, I did not anticipate that we would have a live in nanny, and both of us working from home at times. I wish we would have bought the next bigger house (1 more bedroom), at the time was about $50000 more. Now, to upgrade to the equivilent house size, it would cost us about $150K more, plus moving costs.

We were at about ~25% of one of our incomes, we could have easily taken on a little more, and gained more. My advice would still be try to do it off of one income, but if you have room to go a little higher in that one income, and think you will need the space, then do it. We're now at about ~20% of the lowest income, but put more in to pay it off faster. (all number based on net)

Other things you should think about in terms of ownership is the cost to furnish the home. With more space, people want to buy more for each room, and that is really expensive. There may be other things you need to pay for if the house is not new. We had to pay for complete carpet cleaning as they had pets, and I'm really allergic, another $700. 

I would really try to plan out what you see your family will be like in the future. Moving is really expensive. Get a house large enough to meet your future needs, but without maxing out your current budget.


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## marina628

briant said:


> I'm trying to figure out how much of a house I can afford. I've used calculators from the major banks and they're telling me that I can afford a $580,000 house!  They obviously want me to borrow more, but I'm not falling for that.
> 
> I've read rules that say: housing costs should not exceed 32% of your gross household income. Housing costs include mortgage payments, property tax, and utilities.
> 
> My questions are
> 
> 1. What as a percentage of gross household income do you spend on housing costs?
> 
> 2. Are their any other costs involved in home ownership that I should estimate in this calculation?
> 
> 3. Is 32% even realistic? Should it be based on net (after-tax) income?
> 
> PS: Let's leave Total Debt Service ratio out of this discussion, as I don't have any current debts.
> 
> Thanks!


Please do your homework before you buy ,you can get estimate on insurance,utilities and property taxes but you also need to allow for maintaining the house .Yearly furnace check ups ,painting the house -will you do it or hire somebody?Lawn Care -if you are buying a $580,000 house your neighbor does not want a cheap ******* next door counting his pennies , you need to take care of the yard , do the snow clearing ,maintain the garden etc.These things all add up as well.
If you buy a new home you need to allow landscaping , fence ,window coverings ,central vac ,air conditioning and all these other things people expect to find in a $580,000 house .
Resell homes - I sold my 9 year old house because I did not want to be the one who has to replace windows ,carpets etc in the next 5-10 years.Consider all these future expenses in your budget too.You did not indicate if you are married or have kids.I have a 18 year old and kids have friends who like to hang out ,we rather they be hanging out at home a safe than be out god knows where so our home has always had a place the kids can play their video games without driving the adults insane lol.You need to practically buy what you need for the next 10 years ,if no kids yet assume you will have 2 or 3 moving in your space and have at least two bathrooms!


----------



## brad

marina628 said:


> Lawn Care -if you are buying a $580,000 house your neighbor does not want a cheap ******* next door counting his pennies , you need to take care of the yard , do the snow clearing ,maintain the garden etc.These things all add up as well.


Oh, I can think of exceptions! 

Our next-door neighbor is a millionaire who hires professionals to do his yard work and housekeeping; we keep our lawn in reasonable shape (mowing, that's about it, no weed removal; we let the dandelions, clover, and buttercups take as much space as they like), and he's never complained. Unless you're ruled by a neighbourhood association or you have neighbours who are likely to lodge a complaint with the authorities, I firmly believe that you should maintain your home and property to suit your standards, not to please your neighbours. It's important to get along with your neighbours, but it's not important to care what they think about you.

We get along fine with all our neighbours, but I imagine most of them think we're strange; we're non-conformists and do things our way.


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## marina628

I was referring to the cost to buy the lawn mower ,snow blower etc .Not $50,000 landscaping bill Also when OP is ready to sell that $580,000 house the next buyer will look at curb appeal.I grew up in newfoundland ,my parents have a 3 acre garden and never seen anyone use weed killer on a dandelion until i moved to Ontario in 1985 
My current neighbour has 11 acres ,we have about a 1/3 -1/2 that we bought from him to build our house on ,We cut some grass this year that he said was not cut in the 30 years he owned the land lol.


----------



## briant

Sherlock said:


> I think another factor to consider when determining what percentage of your income to spend on housing is your age.


Good idea. Both of us are 27 and looking to start a family.


----------



## briant

Pigzfly said:


> I think you're fishing for numbers that other people are living with to give yourself a better idea?
> 
> We are at about 19% of gross household income, for mortgage, strata fee (includes all utilities) and taxes. Insurance is about $200/yr, so won't affect much.


Yeah that's right. Thanks for being specific about your situation. From the responses I've received, it seems like people on this message board sit at around 20-25% of their net income. While others pay it down aggressively up to as much as 50% net income.


----------



## briant

MoneyGal said:


> He's adding in property taxes, phone and cable bills.


@Rikk & others. By housing costs I only meant mortgage payments, property tax, and utilities.


----------



## briant

Plugging Along said:


> When we bought our first home together, we took out a mortgage for about 1/2 of what we were approved for. My spouse and I made roughly around the same amount, and we wanted to have the ability to live off of one income (it would be really tight), if we needed too. Also my spouse was contractor so the income was varied a fair bit too. It could be feast or famine at any time.
> 
> We saved for a larger downpayment (~28%), had no other debt. We did have my spouse condo that we decided to keep as a rental, but that didn't really count as debt in our mind.
> 
> As the other posters have stated, you should be very careful in how much you spend on a home. I do believe that you should buy the home that you need for future considerations. We didn't buy a started home, and thought our home was more than enough space for 2 future kids, however, I did not anticipate that we would have a live in nanny, and both of us working from home at times. I wish we would have bought the next bigger house (1 more bedroom), at the time was about $50000 more. Now, to upgrade to the equivilent house size, it would cost us about $150K more, plus moving costs.
> 
> We were at about ~25% of one of our incomes, we could have easily taken on a little more, and gained more. My advice would still be try to do it off of one income, but if you have room to go a little higher in that one income, and think you will need the space, then do it. We're now at about ~20% of the lowest income, but put more in to pay it off faster. (all number based on net)
> 
> Other things you should think about in terms of ownership is the cost to furnish the home. With more space, people want to buy more for each room, and that is really expensive. There may be other things you need to pay for if the house is not new. We had to pay for complete carpet cleaning as they had pets, and I'm really allergic, another $700.
> 
> I would really try to plan out what you see your family will be like in the future. Moving is really expensive. Get a house large enough to meet your future needs, but without maxing out your current budget.


Great advice! Your post has helped me the most  thank you.
We are also trying to save up a larger down payment, which means we may have to wait another year or so.

The point you made about furnishing the "extra" space makes a lot of sense. I was looking into houses with a bonus room, but I realized it would probably an extra expense to furnish it and wouldn't be used as much as the main floor living room anyway.


----------



## marina628

briant said:


> Good idea. Both of us are 27 and looking to start a family.


Ok well buy a house that you can afford on your income because after kid#1 comes along you will be paying $1000+ a month after tax money for daycare then kid#2 comes along and you may be looking at as much as $1500 a month after taxes for good daycare.The grandparents babysitting for free will work out maybe 1-2 days a week until they get sick of it. Also kids are expensive!That alone will throw your budget to hell.I have two kids 18 and 7 but also have a nephew who overbought ,counted on both incomes and under estimated what two children two years apart will do the the family budget.He owes more on his home than he did 8 years ago because the credit line is supplementing the daycare bills.His wife also lost her job after 13 years and went from $54,000 a year income down to a $13.00 an hour job.


----------



## marina628

briant said:


> Great advice! Your post has helped me the most  thank you.
> We are also trying to save up a larger down payment, which means we may have to wait another year or so.
> 
> The point you made about furnishing the "extra" space makes a lot of sense. I was looking into houses with a bonus room, but I realized it would probably an extra expense to furnish it and wouldn't be used as much as the main floor living room anyway.


For us the bonus room is worth the extra money.You don't notice it much when kids are little but as soon as they hit 8+ and they want to watch their movies ,video games etc ,you will appreciate your own quiet space.
Our first home we had until our oldest was eight and only one living room TV ,Sailor moon , Barney all these kids shows I heard in my sleep.I would then have to share the TV with my husband at night .The extra space and TV room will save on entertainment budget lol.These days we all have our own computers and everyone has their own TV so life is very peaceful and more productive as we work from home.


----------



## briant

marina628 said:


> Ok well buy a house that you can afford on your income because after kid#1 comes along you will be paying $1000+ a month after tax money for daycare then kid#2 comes along and you may be looking at as much as $1500 a month after taxes for good daycare.The grandparents babysitting for free will work out maybe 1-2 days a week until they get sick of it. Also kids are expensive!That alone will throw your budget to hell.I have two kids 18 and 7 but also have a nephew who overbought ,counted on both incomes and under estimated what two children two years apart will do the the family budget.He owes more on his home than he did 8 years ago because the credit line is supplementing the daycare bills.His wife also lost her job after 13 years and went from $54,000 a year income down to a $13.00 an hour job.


Agreed. We're lucky to have available grandparents a short distance away. I've always had an emergency fund, and we're both very frugal people. We've decided to spend $380k maximum and waiting another year to have a bigger down payment. I hope to update this thread next year to tell everyone how it goes


----------



## briant

marina628 said:


> For us the bonus room is worth the extra money..


A bonus room does sound nice


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## marina628

You may want to get approval with rate lock in if you think you will buy soon.Rates are generally good for 120 days and many expect them to go up a bit . I have a 3200sq ft Bungaloft (Basically a two storey with master on ground floor)2010 construction and it is a smart tech home ,everything is high efficiency.My gas bill invoiced December 9 was $128.09 ,my hydro bill was $145.92 ,water bill every three months for family of 4 about $50 a month.
My insurance on this house is $1400 a year.I also have a $230,000 detached home I have as investment property ,this insurance bill is only $800 a year so the value of the house affects the cost of insurance.My investment property is 6 years old only 1400 sq ft and my tenants pay probably $170 A MONTH for hydro/gas combined.I pay the water bill there and it is about $30 a month.Heating bills for january/february will probably go up to $160.00 or so .

Marina


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## marina628

briant said:


> Agreed. We're lucky to have available grandparents a short distance away. I've always had an emergency fund, and we're both very frugal people. We've decided to spend $380k maximum and waiting another year to have a bigger down payment. I hope to update this thread next year to tell everyone how it goes


Very wise choice at least if something comes up and you need to get a credit line you know in bank's eyes your income can support it.If i were buying my first home I think i would look for one under 5 years old where the current owner has spent the money finishing the basement , fence is done and child safe and they have the window treatments done.I spent $1600 at Covers buying curtains for my new home.We bought panels that were $39.99 each + tax and the rods were maybe $30-$40 each.We tried to go cheap but look nice and that was as cheap as we could do a house this size.You can count on $5000+ for a deck too so all these things you want adds up if you had to buy it in a new home.Utility hook ups on new house also are expensive and not always part of the deal.
I am currently looking for another investment property so spend an hour a day on mls ,last house we bought i must have looked every day for 6 months .Looking online is part of the fun and do your research it will pay off.


----------



## marina628

briant said:


> A bonus room does sound nice


Forgot to remind you of all the stuff that comes with a baby , playpen ,swings etc.Forget having to furnish the two rooms because the baby stuff will furnish one.Buy a house where you can see the baby from the kitchen when cooking ,your life will be easier and good luck !


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## Plugging Along

briant said:


> Great advice! Your post has helped me the most  thank you.
> We are also trying to save up a larger down payment, which means we may have to wait another year or so.
> 
> The point you made about furnishing the "extra" space makes a lot of sense. I was looking into houses with a bonus room, but I realized it would probably an extra expense to furnish it and wouldn't be used as much as the main floor living room anyway.


Now that I have two kids, I would LOVE a bonus room. This is the point I was trying to make. When we first got our home, I didn't think about kids wanting to play in another area, I was thinking, how I am going to furnish this, so I decided not to get more house than I needed so I wouldn't have to pay for it nor furnish it. In hind sight, I would have still been under the 32% on one income, so it would have been affordable, and should have got the larger house.

If you could EASILY afford the slightly larger house, you can always get it, and leave it unfurnished too. I had my almost my whole house furnished before kids. Once they arrived, I found I had to get rid of furniture (glass is not great for babies), and then rebuy some of it to be more practical (and safe) Looking back, some of the things I wanted to finish the look, we didn't need, and now I have less room for my kids to play, and store their stuff (and the come with LOTS of stuff)

Also, consider resale, when you have bonus room, usually the cost per square footage compared to similar houses without bonus rooms is well worth it. From an financial standpoint, a bonus is a good value. I had numbers I ran years ago for bonus room vs. no bonus room. Our house is a different set up, so didn't have that option.


----------



## marina628

Also buy cheap furniture your children will wreck everything you buy !It is tough to tell the kids don't eat in the living room when my husband is on the sofa watching a movie with his gourmet snacks .Now i forget that rule just make them go get a clean facecloth put some soap and water on it and wipe their hands before they touch anything lol.Eight months into my new sofas and no stains or spills to report!
Plugging along -how old are your kids?


----------



## Plugging Along

marina628 said:


> Forgot to remind you of all the stuff that comes with a baby , playpen ,swings etc.Forget having to furnish the two rooms because the baby stuff will furnish one.Buy a house where you can see the baby from the kitchen when cooking ,your life will be easier and good luck !


Well said. Also, consider if you have more than one child, and plan to have them in there own rooms, don't bother furnishing the other rooms. It's a pan to to move the child into a new room, when there is stuff already in there. 

One more consideration, I know this is far off, but you may want to think about what your child care views are. In our area, it was almost the same price to have a live in nanny as daycare for one, and much cheaper for two or more, plus lots of convience if you work alot. We went with a nanny, but ended up have to move our office in the gargage for a little bit. If this is something you want to consider, have your a nanny/guest suite in the basement. This also makes it easier if you have grandparents staying over night.


----------



## Plugging Along

marina628 said:


> Also buy cheap furniture your children will wreck everything you buy !It is tough to tell the kids don't eat in the living room when my husband is on the sofa watching a movie with his gourmet snacks .Now i forget that rule just make them go get a clean facecloth put some soap and water on it and wipe their hands before they touch anything lol.Eight months into my new sofas and no stains or spills to report!
> Plugging along -how old are your kids?



Great advice again, I'm looking at your posts for insight when mine grow up. My girls are 2 & 5. We still have the rule no eating on the couch, but have found that the 2 year old has a really good arm, and when angry, and fling food from her booster chair to the couch and coffee table. I did spend extra for leather couches upstairs as they wipe off really easily. Didn't do that for the basement, and it's a mess there.


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## atrp2biz

Plugging Along said:


> In our area, it was almost the same price to have a live in nanny as daycare for one, and much cheaper for two or more, plus lots of convience if you work alot. We went with a nanny, but ended up have to move our office in the gargage for a little bit. If this is something you want to consider, have your a nanny/guest suite in the basement. This also makes it easier if you have grandparents staying over night.


Our nanny has been great. Our costs for a nanny under the live-in caregiver program are $710 biweekly, which excludes the tax benefit for child care services (which I haven't worked out yet for 2010). She has been an absolute life-saver for us and does everything (cook, clean and of course take care of the little one).


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## marina628

We have leather and hardwood except upstairs in kids living room we just got basic berber there and they still have a fabric three year old sofa to destroy lol Although the fabric guard is holding up.I still remember when my oldest was two and she took a bag of cheesies in the living room.I had sea foam green carpet and ivory sofas.She was wiping her hands in the carpet and when i spotted her and yelled at her to stop ,she turned around and pushed herself up on the sofa with two wet messy cheese coated hands.Sixteen years later the memory is still fresh lol.Same child who got into a bottle of nail polish i had not used in years and painted her legs and the bathroom floor lol.The pain is less if you did not pay too much in beginning for stuff


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## marina628

atrp2biz said:


> Our nanny has been great. Our costs for a nanny under the live-in caregiver program are $710 biweekly, which excludes the tax benefit for child care services (which I haven't worked out yet for 2010). She has been an absolute life-saver for us and does everything (cook, clean and of course take care of the little one).


I have a disability and pay nearly $15 per hour for a PSW .What is the rate of pay you should pay under this program , how do i get myself on this?I definitely have extra room for live in September when Daughter moves out .Also we will have extra two bedrooms by summer when the basement gets done.I am paying over $2800 a month now for my PSW .


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## MoneyGal

Marina: Here is basic information for you - 

http://www.cic.gc.ca/english/work/caregiver/index.asp


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## atrp2biz

I have heard good things about this agency. They have fairly stringent requirements for their nannies. We had a temporary nanny that tried to be included in their pool of nannies but was rejected.

http://www.diamondpersonnel.com/care_services.php


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## Plugging Along

Marina: If you google the Live in Caregiver program, there are different rates depending the province, and very specific rules that must be followed. I know under the program, it is more expensive long term care vs. child care. I'm at work, so can't pull up my links. 

Some of the rules are that you must offer full time hours to a max of 44 hours per week. You can dedect live in expenses (which have a max for each province). In AB, the min is $9.65/hour for 44 hours/week, and a max $320 room and board dedection per month. As the employer you must pay their portion of CPP and EI too. For long term care, it's about $1 more an hour.

If you are interested, and I can looked it up another time.


----------



## Plugging Along

Plugging Along said:


> Marina: If you google the Live in Caregiver program, there are different rates depending the province, and very specific rules that must be followed. I know under the program, it is more expensive long term care vs. child care. I'm at work, so can't pull up my links.
> 
> Some of the rules are that you must offer full time hours to a max of 44 hours per week. You can dedect live in expenses (which have a max for each province). In AB, the min is $9.65/hour for 44 hours/week, and a max $320 room and board dedection per month. As the employer you must pay their portion of CPP and EI too. For long term care, it's about $1 more an hour.
> 
> If you are interested, and I can looked it up another time.


Here's the link for the wages by region:
http://www.hrsdc.gc.ca/eng/workplaceskills/foreign_workers/advertReq/wageadreq.shtml#a07


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## Berubeland

My choice for a sofa with 2 dogs and one child was the Ektorp sofa from Ikea. It boasts totally removable sofa covers that can be washed or changed. I hunted around in the reduced section of Ikea and now have 3 covers for each sofa. 

If the dog gets sick or has dirty feet or the kid drops a glass full of apple juice or even takes his diaper off and has a wee on the couch you throw the throw the entire sofa cover in the washing machine. I probably would have thrown out my sofa 10 times in the last year if it weren't for this feature.


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## marina628

Rachelle you are the best !I love Ikea too have never bought a sofa there.Thanks for all the links guys.I have a Seperate Company registered for my home care .I get somebody Monday -Friday days only and as I said we average about $2700 a month in expenses.My husband is here saying get somebody from Philippines because he loves Adobo lol.We have three employees part time ,one lady has been with me 8 years ,her husband is a Doctor and her kids are grown so she comes only Tuesday and Friday morning to get our daughter off to school and does my physical therapy.Definitely this looks like something that would benefit us.


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## kcowan

HaroldCrump said:


> Why would you guys include phone, cable and other such bills into the cost of home ownership?
> Those costs would be the same if you were to rent.


True in a rent vs buy decision. But if you are talking about percentage of income spent on your living arrangement, it is more relevant and should be counted in either scenario. Cable is sometimes included in apartments as well as heating. In our case, electricity is included and the heating is electric.


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## DavidJD

If the op is asking which to do based on affordability (among other things added in the last 8 pages); the question should be what can afford?

If I added $600 to your rent right now - living expenses remaining the same - could you handle it for 4 years? How about $700 more than you are paying now. Can you still live and spend the way you want? Where will that cash come from? Savings?

If you can figure out an amount that is comfortable (current rent of $950 + $700) than you can afford to pay $1,650 for mortgage payment, taxes, insurance...(all mentioned above).

Now you have an idea of what you can afford, today and in the near future, and if you can find a house that meets your needs and you like, that costs that much per month to own and occupy.

There you go.

How much more can you spend?


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## jamesbe

Good points. 

When I bought my first home I did exactly that. I figured out how much I could stash away keeping the same lifestyle. I opened an ing account a "pretended" to pay the mortgage and taxes every month. After a year I was satisfied with my results and I had savings for the downpayment as a bonus!


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## DavidJD

That behaviour is correct. Does it hurt to pretend to pay your homewoner-related expenses at that level? What would that tell you? The saving part that people (you) do is better when it is budgeted for that end result - downpayment, and based on an amount of anticipated, real costs.

Anyone who does this will not need to solicit advice from the forum, they will have the most accurate amount figured out with each (painful) month of saving.


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## Cal

Article relates moreso to Canadains ability to carry debt:

http://www.moneyville.ca/article/918156--new-debt-warning-as-bankruptcies-stay-high


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## MoneyGal

Sometimes, when I read those articles, I feel as though I am living on a different planet.


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## Four Pillars

briant said:


> I'm trying to figure out how much of a house I can afford. I've used calculators from the major banks and they're telling me that I can afford a $580,000 house!  They obviously want me to borrow more, but I'm not falling for that.
> 
> I've read rules that say: housing costs should not exceed 32% of your gross household income. Housing costs include mortgage payments, property tax, and utilities.
> 
> My questions are
> 
> 1. What as a percentage of gross household income do you spend on housing costs?
> 
> 2. Are their any other costs involved in home ownership that I should estimate in this calculation?
> 
> 3. Is 32% even realistic? Should it be based on net (after-tax) income?
> 
> PS: Let's leave Total Debt Service ratio out of this discussion, as I don't have any current debts.
> 
> Thanks!


Not sure if this thread is still relevant, but I thought I'd post my actual 2010 numbers for various housing/car costs, since I just added them up. This is for a detached 3-bedroom house near downtown TO. 

Note - I might have the car/house insurance numbers mixed up. 

property tax $3,440
car insurance $1,122 
house insurance $1,051 
phone - bell $747 
Enbridge gas $795 
electricity - Hydro $1,662 
Water	(city of TO) $738

My only surprise is the water - for some reason, I keep thinking it's free.


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## jamesbe

Wow you electricity seems high compared to your gas.

Our gas was $1000 last year and electricity about $800. We use gas for everything (stove/dryer/hot water /


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## the-royal-mail

I love what jamesbe said about pretending to pay the high costs of home ownership. Terrific concept. 

For my part, I do it in excel. My budget is usually 6 months into the future, so when I'm contemplating an additional expense, be it a house, car, trip, anything more than a few hundred dollars, I plot into the spreadsheet and see what that does to my cashflow. I can play around with numbers and find my own comfort level this way.

For the time being I am in save mode and am trying to establish my 3 tiers. This is taking a very long time but I should have reached my goals if everything goes well until the end of the year. There are no guarantees. Then I can start to squirrel away for something else that may arise suddenly, such as a home purchase/downpayment.

It's a different approach but accomplishes the same goal as jamesbe identified above.


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## Four Pillars

jamesbe said:


> Wow you electricity seems high compared to your gas.
> 
> Our gas was $1000 last year and electricity about $800. We use gas for everything (stove/dryer/hot water /


It's hard to compare 2 different households straight up.

Our dryer is electric and it is going constantly. AC is also a big factor during the summer. My wife and kids are at home during the day as well.

Another factor is the timing of readings - it's possible that some usage gets billed in the wrong year. This should even out over time, but might influence the one year numbers.


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