Knowing How Much You Can Afford

Some calculations to consider:

Knowing how much of your annual household income needs to be budgeted to pay for your mortgage, will enable you to rest easier with the knowledge that you can afford home ownership. In evaluating your mortgage application, the banks will look at your ability to repay the mortgage amount based on your current household income. Two calculations are generally used.

The Gross Debt Service (GDS) Ratio measures how much of your gross monthly household income should go towards the payment of your mortgage, taxes and heating (and condo fees if applicable).

The Total Debt Service (TDS) Ratio measures how much of your gross monthly household income should go towards the payment of your mortgage, taxes and heating plus your outstanding debts.

If you don't meet these minimum requirements, then you may need to think about re-evaluating your options.

Down Payment

Use the "How Much Can I Borrow?" calculator to find out exactly how much home you can afford. Once you have completed your calculation, you can add it to the summary below for easy reference.

The amount of your down payment is important in determining how much of a mortgage you'll require when purchasing a home. It is also important in determining whether or not mortgage insurance will be required. Not only will a down payment of 20% or more save you money on interest, it could also eliminate the need for mortgage loan insurance. If mortgage insurance is required, the premium will be added to the mortgage amount.

Saving Money with a Larger Down Payment

The amount you choose for a down payment on your home really comes down to what you can afford. But as you can see from the chart below *, you can save a significant amount in interest by making a larger down payment at time of purchase.

* The example is based on home purchase of $200,000, with the mortgage amortized over 25 years using ING DIRECT's 5 year fixed rate of 5.84%. Assumes no change in rate.

Clearly, it's in your best interest to save as much as possible for the down payment.

How much can I afford?

Before you start shopping for your new home, it pays to know just how much you can afford. From the calculations in the previous sections, you now have an idea of how much savings you have for a down payment. With this information, combined with your total household income, you can determine how much home you can afford.

Our handy How Much Can I Borrow? calculator, can help you find out how much of a mortgage you could qualify for by answering a few easy questions. Try out different scenarios and find the one that best suits your needs. Once you have the ideal situation for yourself, and using the information from the Affordable Results Summary provided by the calculator, you can print the Summary or enter the results from it in the below table, you'll learn how much home you can afford.

Get Pre-approved Before Shopping

Obtaining a pre-approval should be your first step once you've made a decision to purchase. Home hunting will be much easier knowing exactly how much home you can afford, what down payment you'll need and what your mortgage payments could be.

Once you completed the ING DIRECT unmortgage^® pre-approval application has been approved, we'll guarantee your fixed interest rate for the selected term for up to 120 days from the date you submit your application. So even if interest rates increase during this period, your rate won't. If rates go down and you fund your mortgage with ING DIRECT during this period, you'll receive the lower rate.

A pre-approval doesn't commit you to anything. But it does allow you to shop around and make an offer to purchase with confidence. And, once you've found your dream home, getting an unmortgage with ING DIRECT will be much faster.

^® Registered trademark of ING Bank of Canada