- The right time depends on your finances, not on the market.
- Two figures to know: your comfortable monthly budget and your borrowing capacity.
- Lenders look at your income, your debts and your down payment, in that order.
Is it the right time for you?
The question comes up all the time: "is this the right time to buy?" The honest answer is that nobody can predict rates or prices. Not me, not the banks.
What you can predict is your own finances. A stable job, debts under control, a down payment that is building up and the intention to stay a few years in the same place: that is what makes a good time. The rest is noise.
A useful reference: CMHC suggests thinking long term. A property gains value over years, not months. If you expect to move within two years, the buying and selling costs may eat the gain.
Your monthly budget, the real one
Start with what you pay today to house yourself, then add what an owner pays and a tenant never sees: municipal and school taxes, home insurance, heating, maintenance. The amount that stays comfortable once everything is counted is your real budget.
Lenders use two ratios. The first compares your housing costs (mortgage, taxes, heating) to your gross income. The second adds all your other debts: car, cards, student loans. For an insured loan, CMHC sets these ratios at a maximum of about 39% and 44% of gross income. Those are ceilings, not targets. Many households are more comfortable well below.
Your borrowing capacity
Your borrowing capacity is the maximum amount a lender will advance you. It depends on your income, your debts, your credit file and your down payment. It also goes through a stress test: you must be able to absorb a higher rate than the one in your contract, to prove you would hold up if rates rose.
CMHC's calculator gives a first order of magnitude in a few minutes. The precise figure comes from the pre-approval, at step 3. Between the two, the best reflex is simple: reduce the debts that weigh most in the ratio, and avoid any new credit before the purchase.
Frequently asked questions
Should I wait for rates to drop before buying?
Nobody knows when or by how much rates will move. What you control is your preparation: reduced debts, a growing down payment, a pre-approval in hand. A well-prepared purchase holds up in any market.
The right time is when your finances are ready. Two figures to get before the first visit: your comfortable monthly budget and your borrowing capacity.
- List your net income and all your monthly debts.
- Calculate what your housing costs you today, all included.
- Run your situation through CMHC's borrowing capacity calculator.
- Check your credit file and correct any error.
Sources : CMHC, Homebuying step by step (financial readiness) · OACIQ, Buyer's guide (establishing your budget)
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