Calculate Debt Service Ratios |
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Aim at
consuming no more than about 32% of your gross monthly (pre tax) income
for housing payments (including heat, property taxes and, if
applicable, 50% of condominium fees if you are thinking of a "condo").
This amount is referred to by mortgage lenders as the Gross Debt
Service Ratio (GDS). Do this calculation to find out how much you can
put towards housing payments.
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Total Debt Service RatioYou
may have other monthly financial obligations such as car and credit
card
payments, property taxes, other loans, etc. The relationship between
these
all monthly debts plus your mortgage, and your gross monthly income is
called Total Debt Service Ratio (TDS). The general rule is that these
total
monthly payments should not exceed 40% of your income.
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Formula for calculating the TDS ratio is: MORTGAGE
PAYMENT + TAXES + HEATING + ALL OTHER DEBTS X 100
If your GDS and TDS ratios are very close to maximum, you will need to carefully consider how all your living expenses can be met before making a commitment. Use this worksheet as tool to calculate and analyze your financial situation and use this information as a guideline in establishing an appropriate price range for your new home. |
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