"Can I afford to buy?" I'll help you do the math.

Before venturing out to seek a pre-approval for a mortgage, many of us just want a general idea of whether or not what the real estate we’re hoping to  purchase is even in the REALM of possibility. But the number crunching process can be a bit overwhelming sometimes, and there are many different costs and considerations to factor in.

When I started the journey of becoming a realtor, it was really important to me to help my clients become comfortable with the numbers. Setting clear expectations about what you can afford (and to what magnitude you are willing to max out that budget) is so important to nail down before you start visiting properties. I love numbers so for me it’s totally enjoyable to fire up a spreadsheet and start the crunching process! I always build a custom financial profile for any potential client who wants one.

What goes into the math? Well, there are quite a few expenses in the buying/selling/investing process that need to be accounted for and calculated properly. Here are is a rough overview of what needs to be factored in: 

Buying (non-investment property*)

1) Annual costs of ownership

• Mortgage cost, including your stress test calculation

• Property Taxes

• Property Insurance

• Condo fees (if applicable)

• Heat/Hydro/Water etc. (if applicable)

2) Closing costs

• Land Transfer Tax

• Government credits and other programs to help first time buyers (one-time RRSP withdrawal, First Time Home Buyer Incentive Program, land transfer tax rebate, etc.)

• Lawyer’s fees

• Development fees (if buying a new build)

• New furniture or renovations you may want right away in your new home

*If the property is for investment purposes, there is more to be done in the calculations, including the analysis required to estimate the income you will generate on the property and factoring in that only 50% of this income will be considered by most lenders as income when approving your mortgage maximum. 

Selling

• Renovation costs (if you decide that it makes sense to invest in these to generate a better ROI)

• Real Estate commissions

• Staging, Photography, Marketing, Documentation (IE status certificate if applicable)

• Moving expenses

• Lawyer’s fees

• Mortgage break fees (if applicable)

• Capital Gains Tax (if applicable IE investment property/not your principal residence)

Below is one example of my calculator.

I know it’s crazy out there right now, but there are always opportunities with good planning and research. If you’re curious about your math, let me know and we’ll work through it together. I’m happy to build one for you anytime! Even if it's well in advance of when you're going to be financially ready to start the search process.  And don’t worry - I’m not professing to be an official financial advisor… I’ll refer you to a great mortgage broker who can officially advise you and put the wheels in motion for all of your financing needs!

-Steve

An example of a spreadsheet I put together with a client, we will typically adjust the figures as we go to ensure we’re within parameters as variables change.