Ontario First Time Home Buyer? The Importance of a Mortgage Affordability Calculator

Are you getting ready to buy your first home but asking yourself ‘what mortgage can I afford?’ Don’t worry; there are some great resources out there for the Ontario first time home buyer, one of which is crucial: the mortgage affordability calculator. Before setting out to get a mortgage or making an offer on that perfect home, use a mortgage affordability calculator to make sure that you can afford and feel comfortable with the amount that you are spending on a mortgage.

What is a mortgage affordability calculator and how will it answer the question ‘what mortgage can I afford?’ A mortgage affordability calculator is a program that inputs both your monthly income and monthly output and calculates what an affordable monthly mortgage payment would be. By using a mortgage affordability calculator you can quickly determine what a maximum monthly payment would be and then decide how much you would actually be comfortable spending.

What criteria does a mortgage affordability calculator use to determine what mortgage you can afford? The equation is based on a number of factors, both actual and anticipated.

Actual: Actual factors include both input and output. Input refers to your gross monthly household income – or how much money you bring in every month. Subtracted from this is your actual monthly output, which refers to all financial obligations you are required to make on a monthly basis. This includes all debt (credit card, personal loans, etc.), car payments, etc.

Anticipated: Anticipated payments are all of those payments that you will likely have to make once you move into the house. Although you can often get a pretty close estimate, these may fluctuate, but having at least a somewhat accurate figure will let you use the mortgage affordability calculator to get a good idea of what you can afford. These anticipated payments may include insurance, property taxes, condominium fees, heat and hydro fees, etc., and are usually things that cannot be avoided (unlike things like cable or internet which are not included).

The mortgage affordability calculator then looks at your borrowing details – your down payment on a house, your mortgage interest rate, and your mortgage amortization period – and gives you a calculated result. These results will tell you 3 very important things: your maximum house price, your maximum mortgage (your maximum house price minus your down payment) and your maximum monthly mortgage payment.

As an Ontario first time homebuyer, a mortgage affordability calculator is an important tool to take advantage of. It allows you to get a clear picture of what your monthly payments would total as well as how much you will be able to afford once that house is in your possession. Instead of going to see a Mississauga mortgage broker with no idea of how much you are comfortable spending, or no idea about how to determine this figure, prepare yourself for the process and use a mortgage affordability calculator.

For more information about the benefits of a mortgage affordability calculator or other resources if you are an Ontario first time home buyer, please contact Paul Mangion of The Mortgage Centre at 416-204-0156 or visit www.themortgagecentretoronto.com.