November, 2009
The first rule of affordability is that on a monthly basis you should not pay more than 32% of your gross household income on housing costs or P.I.T.H. (principal and interest, taxes, and heating expenses). These costs will also contain half of your monthly condominium fees and the entirety of any applicable leasehold tenure. Lenders will add up and determine the percentage of income your home will cost you, and form a ratio called GDS ratio (or Gross Debt Service ratio).
The second rule of affordability factors in how much your entire monthly debt takes up in your income. This is called your TDS or Total Debt Service ratio, and includes everything from credit payments to car loans and housing costs. This ratio should not take up more than 40% of your monthly income.
These ratios will let any lender know how much you can afford. Your lifestyle and home can be more affordable through keeping your debt ratios below the maximums listed above.
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