(Closed) We have debt… house?

posted 6 years ago in Home
Post # 3
3220 posts
Sugar bee
  • Wedding: February 2012

I have no idea about the housing market in Toronto but Fiance and I have more debt than you two, but ours is all student loans.  We make almost 20k less than you do and just bought a home!  Obviously, we’re not out of the woods yet, but I’m working on a graduate degree for another 5 years so my debt won’t totally kick in for a while.  Our monthly payments are a little less than what we would have paid for an apartment, so we thought it was the best decision.  The market is just turning around where we bought and the house was the luckiest find ever– it’s just the right size and with no problems but still room to renovate so we’ll make some money back when we sell later on. 

We considered trying to pay off our loans first but it felt like we were throwing away money into renting when we had such good deals in front of us.  We also figure we won’t be debt-free for decades because if it’s not student loans, it’ll be a car or a mortgage or something else.  That might sound like an immature outlook, but Fiance does finances for a living and I totally trust him with our money.

Post # 4
4275 posts
Honey bee
  • Wedding: April 2012

Also, not a professional, so not sure about lumping everything together. I also do not know your housing market. The cost of living in California is very high, so we got very lucky. Neither of us has a huge amount of debt, but due to income we were stuck with a budget of 250.  Our home was 200 and the monthly payment is $1400 a month. But you might have  to put down a substantial down payment and face high interest.

Post # 5
3471 posts
Sugar bee
  • Wedding: July 2012 - The Gables Inn, Santa Rosa, CA

Honestly– the only answers you’ll get here is speculation.  There’s not enough factors given to really answer your questions. 

For example, you list your debt, but what’s your monthly budget? How much are you paying in rent now? How muhc are you adding to your savings each month? What is your credit history?

The answers to those will be much more telling about your ability to afford a house.  Essentially, you have to look at your MONTHLY budget more than your annual one.  

If you’ve got good credit, your existing debt wont play a huge factor.  

As for what you can afford: What kind of a house are you looking to buy? Look at the average home prices in youra area for what you want (www.zillow.com or http://www.trulia.com are good for this), and use a generic mortgage calculator to see how much that kind of home would cost per month.  How does that amount compare to your current rent? 

As for actually AFFORDING the house, that’s all based on how much you add to your savings each month– you besically need a minimum of $20,000 cash to buy a house– this will show sellers that you are a serious buyer, and you’ll have the money to pay the fees, closing costs, & a down payment.  

As for rolling your debt into the house– forget about it.  Due to recent global economic situations, most lenders are much more strict when it comes to real estate and these practices are almost entirely gone. 

Post # 6
9690 posts
Buzzing Beekeeper
  • Wedding: September 2012

@mrsbruff2b:  I honestly think it sounds doable to purchase a house.  You both make decent money, have job security and relatively little debt.  I say go for it!

Post # 7
2233 posts
Buzzing bee
  • Wedding: September 2012

Assuming your monthly payments on your loans total $400, and a GDS ratio of 30% you can pre-qualify for $400K or around $2000/month mortgage payments.

Depends where you want a house though, there’s huge differences from one end of the city to the next.

Post # 8
4193 posts
Honey bee
  • Wedding: July 2012 - Baltimore Museum of Industry

I used to work in real estate- it’s going to depend on what your monthly payments are for the loans. Ex: Are you paying $200 or $600 a month for your debts?

His consumer debt will be looked upon less favorably than your student loan. It will also depend on how many more payments he has left on his car- if he has 6 months (meaning car could be paid off by the time you settle on a new home) or 3 years left.

Post # 9
11272 posts
Sugar Beekeeper
  • Wedding: April 2012

@mrsbruff2b:  have you gone online to input your numbers into a mortgage calculator or mortgage affordibility chart?  you may get a pretty good idea and not a lot of surprises when you sit down infront of your finance individual.  it’s always great to pay a mortgage instead of rent so do it as soon as it’s feasible.

good luck!!

Post # 11
1949 posts
Buzzing bee
  • Wedding: August 2011

I looked into rolling my student loan into my mortgage, but if you do that themn you can’t claim the interest you pay on it on your income tax. I was told by a professional that it was not in my interestyo roll it together for that reason

Post # 12
699 posts
Busy bee
  • Wedding: September 2011

That depends where you are looking to buy- are you willing to go a fair way out or live in Scarborough?

Based on your debt rates, I will assume you don’t have much of a downpayment.  Know that below 20% you have to pay CMHC mortgage insurance fees, with HST on the fees.  The fees are rolled into the entire mortgage, so even if you were to refinance later with more than 20% down, you will still be paying that original few grand off as it’s in the principle.

Not knowing your roles, I would be a tad wary of job security in government right now.  The federal government just laid off ~2500 people who hold my position.  (Not trying to dissuade, but signing on for a mortgage makes it much harder if anything goes wrong in the future.) 

It will all depend on your payments, lenders will be looking at your gross debt service ratio (GDSR) and they want it to be 40% or lower of your gross household income (before taxes).  I would recommend staying a long way away from the 40% ceiling though (especially the 42% it can be in certain cases).  Aim more for your housing costs to be 20% or so.   A quick pop into a mortgage calculator, estimating $600/month in debt payments and $200 for taxes will let you borrow ~$190K Now – finding a place in the GTA for 200K…..

Basically, it all comes down to where you are willing to live and how much you can save for a downpayment.  I would decide what to do regarding buying based on: what you’re currently paying in rent, how stable you feel your position is, what your exit plan looks like (kids/ability to take a dream job in another city/sickness), the rates and payments on your current debt.

Mortgages are 2-4% right now, rough and dirty.  If your monthly rent is super huge and you feel like it will limit your savings ability going forward, it might make sense to save your pennies for a downpayment.  If the rates on your debt are quite high, it will probably make sense to rapidly pay them down first so that you can better save for a downpayment.

Another random tip, try to make your amortization period as short as possible.  Aim for 15 years, settle for 20.  If you go much past that, a huge, huge amount goes to interest.


….good luck!  there’s a ton of things to learn and decide in this process. 

Post # 14
7311 posts
Busy Beekeeper
  • Wedding: October 2011 - Bed & Breakfast

Your debt to income ratio is 35k/85k. Expressed another way, your debt accounts for 41% of your annual income. If I were you, I would try to lower my debt and save up for a significant downpayment and a 6 month reserve fund before dipping my toes into the market. Then again, we are very conservative with our finances.

Post # 16
10367 posts
Sugar Beekeeper
  • Wedding: September 2010

Toronto has an absolutely ridiculous housing market right now. Our good friends are all buying houses there, and let’s say that it’s….competitive.

Have you looked at housing prices and what that means for a monthly payment? Do you have a substantial down payment? I know that their house is a small (smallllllll) two bedroom a little farther out on the subway in not the greatest condition – they need to gut several rooms – and it’s still $400,000+. I think your income may be a bigger stumbling block than your debt.

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