#Budgeting #Finance #Homeownership #SavingsGoals
Hey everyone! 👋 Can anyone explain to me in a perfect world how much things would cost that I could buy a house and afford everything else? 🏡💸 I’ve tried to cover all aspects of the scenario, but I’m hoping someone could break it down for me.
Here’s a breakdown of my situation:
– $70,000 annual gross income, $47,000 net income after taxes
– No partner, no children, living in southern Ontario
– Saved 20% down payment for a house, with a 25-year amortization period at a 6.89% interest rate
Questions to consider:
– How many times my income should I spend on a house – 5 years income, 10 years income? Gross or net income?
– What percentage of income for monthly fixed expenses related to the house?
– What percentage of income for monthly expenses other than the house?
– How much should I save for long-term investments for retirement in 30 years starting with $0?
– How much should I save for a rainy day fund?
– After expenses, what’s left for everything else (food, gas, fun)?
Possible solution:
– Try to aim for spending no more than 3-4 times your annual gross income on a house
– Allocate around 25-30% of your net income for monthly fixed expenses
– Aim for 15-20% of your net income for monthly expenses other than the house
– Save at least 15% of your net income for long-term savings and investments
– Have a rainy day fund with at least 3-6 months of living expenses
– After all expenses and savings, set aside around 20-25% for everyday living expenses
Hope this breakdown helps you navigate the journey to homeownership and financial stability! 💪💰 Let’s chat about it!
Good luck. I think a good amount of us are completely fucked.
If you’re single and making six figures, without some very savvy spending, you’re fucked.
Again, good luck people.
20% to taxes, 20% to housing, 20% to other living expenses, 20% to savings, 20% to hobbies/kids/saving for a down payment/paying off student loans.
I’m more like 60% to taxes which screws everything else up. Once I factor in my income tax (35%), property tax, HST, carbon tax, excise tax, gas tax, and the corporate tax I pay as a customer, more than half my stuff is gone.
Use this tool to find out his much you’re allowed to borrow:
https://itools-ioutils.fcac-acfc.gc.ca/MQ-HQ/MQ-EAPH-eng.aspx
Generally, about 4x your income.
Budgeting rules of thumb to avoid poverty are you should have no less than 20% of your income go to savings and no more than 33% of your income go to housing. Also have a 3-6 month worth of expenses in an emergency fund.
3 years ago La Presse made breakdown of how much you had to earn in MTL to purchase a home. It’s interesting Combien faut-il gagner pour acheter une maison ? : https://lp.ca/uK4x6r?sharing=true
Back then to buy a home at median price (it has gone up of course since the good old days of 2021) and you had a 20% down payment you had to have a couple earning each at least 106k per year so they wouldn’t spend more than 33% on their mortgage payment.
Keep in mind it’s QC so we do get taxes a bit more than in the ROC and interest rates were lower back then.
Mortgage rates are better than that. I was always told to get fixed rate from my parents as at least you can budget it for 5 years. Variable your thrown in the fire of the economy. 2-3x your income would be a safe spot. I always prefer to “overbudget” myself to give wiggle room for inflation. Your utilities will depend on usage and how big your home is. Always base this off your take home pay. Your gross income means nothing as you are always taxed. Live in your means, create a budget based off your current living situation. You know the sq/ft of the building you live in and what your utilities are. This may give you a rough estimate on how much it may cost. Give a buffer for winter months as heating is higher. Keep all other expensive that are discretionary low. If you can avoid having a car payment with a reliable car that is good. Shop around for insurances and best cell phone rates. I also always budget in for your savings, if you are a first time home buyer look into the “first time home buyers plan” (using rrsp’s as a downpayment which you have to pay back or pay tax on it), as well as the “First home savings account” (tax deductible when putting money in, tax free when pulled out for a downpayment on a home). Percentages will all be personal preferences. If you are a single person you may decide to rent out a room to help with the mortgage, but do not rely on this to pay your mortgage. Instead use that income as a way to pay your mortgage off faster. Some mortgages come with options to do lump sums or additional payments which will help you become mortgage free faster. Hope this may help
There is no such thing as a perfect world, so why base an analysis on that assumption? That discussion leads to nothing that will help you.
The answer is simply to increase your HHI, there is no other answer.
In a perfect world everything is free and you never have to work unless you choose to.
If you are looking for real world numbers, maybe rephrase your question.
I make this much, my raises will be under inflation since that at around 7% now. And I can tell you now, the mortgage payments are going to be around $1200-1500 a month depending on price. You’re going to need to factor in property taxes, strata fees if townhouse or condo, hydro, gas, monthly bills. I am left with maybe 3-400 a month to save after all the bills and misc. purchases etc. You are banking that you’re investing in yourself instead of someone else’s mortgage. And the potential for the property to go up in value.
The answer is simple: in a perfect world you should have a partner. A lone wolf dies when the Winter comes but a pack lives.
> I make $70,000 per year gross. Let’s assume that I will never have more money than this per year.
I think this is a poor assumption. People get raises. It may not be every year and it may be just for inflationary but people grow their income throughout their career. However, the debt doesn’t grow it only shrinks.
It is very often the hardest to afford your home the day you sign the mortgage.
Buy something with a basement rental unit and rent it out. The rental income will help with mortgage approval and keep bills low enough for you to afford it.
You will be eligible for a mortgage at roughly 3.5 to 4 x your gross income (so in this case 70 x 4 =280k PLUS the value of your downpayment)…
For savings, a good guide is 15% of gross income (including any pension and/or RRSP matches from work).
As for the rest, those numbers are up to you.. cars are expensive and living somewhere with decent transit is a lot cheaper , do you want/need a sniny new phone every 2 years or is a cheap old phone with little to no data ok for example
3-4x your gross income for a house. Also, rates are 4.7% on a 5yr fixed right now