Home buying: GDSR, maximum "home" you can buy, addition costs.

1. Buying a New Home ...
or is renting a
better idea?
Dad's new house by flickr user Patrick Haney

2. Buy or Rent a Home?
When deciding to buy or rent a home, we need to look at
numerous non-financial as well as financial factors.
First of all, the location of the house is generally not a factor. You
can usually find a suitable house to rent or buy in the location of
your choice. Also, the cost of utilities (telephone, hydro, water,
TV) will be the same whether you rent or buy.

3. Buy or Rent a Home?
When LOCATION rent a home, we need to look at
deciding to buy or
numerous non-financial as well as financial factors.
First of all, the location of the house is generally not a factor. You
can usually find a suitable house to rent or buy in the location of
your choice. Also, the cost of utilities (telephone, hydro, water,
TV) will be the same whether you rent or buy.
Happy new ... by flickr user uncommon

4. Buy or Rent a Home?
When LOCATION rent a home, we need to look at
deciding to buy or
numerous non-financial as well as financial factors.
LOCATION
First of all, the location of the house is generally not a factor. You
can usually find a suitable house to rent or buy in the location of
your choice. Also, the cost of utilities (telephone, hydro, water,
TV) will be the same whether you rent or buy.
Happy new ... by flickr user uncommon

5. Buy or Rent a Home?
When LOCATION rent a home, we need to look at
deciding to buy or
numerous non-financial as well as financial factors.
LOCATION
First of all, the location of the house is generally not a factor. You
can usually find a suitable house to rent or buy in the location of
your choice. Also, the cost of utilities (telephone, hydro, water,
LOCATION
TV) will be the same whether you rent or buy.
Happy new ... by flickr user uncommon

6. Some things to keep in mind if you rent are:
1. You need to pay monthly rental payments in advance, and
probably also one month's rent in advance as damage deposit.
You do not, however, need to pay a large down payment and the
various fees required when buying.

7. Some things to keep in mind if you rent are:
1. You need to pay monthly rental payments in advance, and
probably also one month's rent in advance as damage deposit.
You do not, however, need to pay a large down payment and the
various fees required when buying.
2. Renting a home is cheaper in the short term than buying, but
it does not create any assets.

8. Some things to keep in mind if you rent are:
1. You need to pay monthly rental payments in advance, and
probably also one month's rent in advance as damage deposit.
You do not, however, need to pay a large down payment and the
various fees required when buying.
2. Renting a home is cheaper in the short term than buying, but
it does not create any assets.
3. You need to know what is included in the rental payment. For
example, are the utilities (especially water, hydro, heating)
included? Is the home furnished or partly furnished?

9. Some things to keep in mind if you rent are:
1. You need to pay monthly rental payments in advance, and
probably also one month's rent in advance as damage deposit.
You do not, however, need to pay a large down payment and the
various fees required when buying.
2. Renting a home is cheaper in the short term than buying, but
it does not create any assets.
3. You need to know what is included in the rental payment. For
example, are the utilities (especially water, hydro, heating)
included? Is the home furnished or partly furnished?
4. If you buy a house, the value of the house normally
increases with time. If you rent a house, the rental payments will
increase over time, and you do not create any assets.

10. Some non-financial factors to
consider when renting
1. There may be restrictions to your lifestyle if you rent. For
example, you may not be able to have pets in a rented home, or
modify the home to suit your personal needs.

11. Some non-financial factors to
consider when renting
1. There may be restrictions to your lifestyle if you rent. For
example, you may not be able to have pets in a rented home, or
modify the home to suit your personal needs.
2. You are not responsible for repairs, maintenance, or
property taxes. For example, if the hot water tank needs
replacing, the owner is responsible.

12. Some non-financial factors to
consider when renting
1. There may be restrictions to your lifestyle if you rent. For
example, you may not be able to have pets in a rented home, or
modify the home to suit your personal needs.
2. You are not responsible for repairs, maintenance, or
property taxes. For example, if the hot water tank needs
replacing, the owner is responsible.
3. If you need the home for only a short time, it may be better
to rent so that you can avoid the inconvenience and expense of
reselling the home.

13. Some non-financial factors to
consider when renting
1. There may be restrictions to your lifestyle if you rent. For
example, you may not be able to have pets in a rented home, or
modify the home to suit your personal needs.
Now, we will look at the
2. You are not responsible for repairs, maintenance, or
costs associated with
property taxes. For example, if the hot water tank needs
buying and renting a home.
replacing, the owner is responsible.
3. If you need the home for only a short time, it may be better
to rent so that you can avoid the inconvenience and expense of
reselling the home.

14. quot;How Much Can I Afford to Pay for a Home?quot;
Banks and other lending institutions have developed a formula that
allows you to calculate the maximum price of a home you can afford.
This formula is known as the Gross Debt Service Ratio, or GDSR.
According to this formula, anyone buying a home should spend no
more than 32% of gross income on household or accommodation
expenses, including mortgage payments, property taxes, heating
and condo/strata fees. The formula may be written as:
Find your maximum mortgage
amount and monthly payment

15. Lucy Brown wants to buy a condo, but does not know how much money she
should spend based on her income. She earns $44 000 per year, and has saved
$9000 for a down payment. The property taxes for the condo she likes are
$1500 per year, and the heating costs average $90 per month. The condo/strata
fees are $180 per month. The bank will give her a 25-year mortgage at an
interest rate of 7.5%. What is the maximum price she can afford for a condo,
based on spending no more than 32% of her gross income on household and
accommodation expenses?

16. N=
I%=
PV=
PMT=
FV=
P/Y=
C/Y=
PMT: END BEGIN

17. Lucy Brown wants to buy a condo, but does not know how much money she
should spend based on her income. She earns $44 000 per year, and has saved
$9000 for a down payment. The property taxes for the condo she likes are
$1500 per year, and the heating costs average $90 per month. The condo/strata
fees are $180 per month. The bank will give her a 25-year mortgage at an
interest rate of 7.5%. What is the maximum price she can afford for a condo,
based on spending no more than 32% of her gross income on household and
accommodation expenses?

18. Lucy Brown wants to buy a condo, but does not know how much money she
should spend based on her income. She earns $44 000 per year, and has saved
$9000 for a down payment. The property taxes for the condo she likes are
$1500 per year, and the heating costs average $90 per month. The condo/strata
fees are $180 per month. The bank will give her a 25-year mortgage at an
interest rate of 7.5%. What is the maximum price she can afford for a condo,
based on spending no more than 32% of her gross income on household and
accommodation expenses?
N=
I%=
PV=
PMT=
FV=
P/Y=
C/Y=
PMT: END BEGIN

19. HOMEWORK
Thomas plans to attend university for the next three years, and
needs a laptop computer priced at $2850.00 plus PST and GST
@ 7% each. The company that sells the computer will finance it
at 7.25% over three years (36 monthly payments). He is also able
to lease the computer for 36 months at $107.93 per month.
1. What is the total cost over a 3 year term of buying the
computer, including all finance charges? PMT = $100.69,
Total Cost = $3624.84
2. What is the total cost of leasing the computer?
Total Lease = $3885.48
3. The lease does not require a down payment, and the computer
has no residual value at the end of the lease. What is the interest
rate charged on the lease? Interest = $636.48
4. How much more expensive is leasing than buying? Suggest
some reasons Thomas might have for leasing even though it is
more expensive. Leasing is $260.64 more expensive.
e.g. Repairs responsibility of Lessor.

20. Additional Costs When Purchasing a Home
1. Appraisal fees

21. Additional Costs When Purchasing a Home
1. Appraisal fees
2. Inspection costs

22. Additional Costs When Purchasing a Home
1. Appraisal fees
2. Inspection costs
3. Property survey

23. Additional Costs When Purchasing a Home
1. Appraisal fees
2. Inspection costs
3. Property survey
4. Insurance costs for
high ratio mortgages

24. Additional Costs When Purchasing a Home
1. Appraisal fees
2. Inspection costs
3. Property survey
4. Insurance costs for
high ratio mortgages
5. Home insurance

25. Additional Costs When Purchasing a Home
1. Appraisal fees
2. Inspection costs
3. Property survey
4. Insurance costs for
high ratio mortgages
5. Home insurance
6. Land transfer tax

26. Additional Costs When Purchasing a Home
1. Appraisal fees
2. Inspection costs
3. Property survey
4. Insurance costs for
high ratio mortgages
5. Home insurance
6. Land transfer tax
7. Interest adjustments

27. Additional Costs When Purchasing a Home
1. Appraisal fees 8. Prepaid property
taxes and utilities
2. Inspection costs
3. Property survey
4. Insurance costs for
high ratio mortgages
5. Home insurance
6. Land transfer tax
7. Interest adjustments

28. Additional Costs When Purchasing a Home
1. Appraisal fees 8. Prepaid property
taxes and utilities
2. Inspection costs 9. Legal fees
3. Property survey
4. Insurance costs for
high ratio mortgages
5. Home insurance
6. Land transfer tax
7. Interest adjustments

29. Additional Costs When Purchasing a Home
1. Appraisal fees 8. Prepaid property
taxes and utilities
2. Inspection costs 9. Legal fees
3. Property survey 10. Sales tax (GST
on new homes)
4. Insurance costs for
high ratio mortgages
5. Home insurance
6. Land transfer tax
7. Interest adjustments

30. Additional Costs When Purchasing a Home
1. Appraisal fees 8. Prepaid property
taxes and utilities
2. Inspection costs 9. Legal fees
3. Property survey 10. Sales tax (GST
on new homes)
4. Insurance costs for
high ratio mortgages 11. Moving expenses
5. Home insurance
6. Land transfer tax
7. Interest adjustments

31. Additional Costs When Purchasing a Home
1. Appraisal fees 8. Prepaid property
taxes and utilities
2. Inspection costs 9. Legal fees
3. Property survey 10. Sales tax (GST
on new homes)
4. Insurance costs for
high ratio mortgages 11. Moving expenses
5. Home insurance 12. Service charges
6. Land transfer tax
7. Interest adjustments

32. Additional Costs When Purchasing a Home
1. Appraisal fees 8. Prepaid property
taxes and utilities
2. Inspection costs 9. Legal fees
3. Property survey 10. Sales tax (GST
on new homes)
4. Insurance costs for
high ratio mortgages 11. Moving expenses
5. Home insurance 12. Service charges
13. Immediate repairs
6. Land transfer tax
7. Interest adjustments

33. Additional Costs When Purchasing a Home
1. Appraisal fees 8. Prepaid property
taxes and utilities
2. Inspection costs 9. Legal fees
3. Property survey 10. Sales tax (GST
on new homes)
4. Insurance costs for
high ratio mortgages 11. Moving expenses
5. Home insurance 12. Service charges
13. Immediate repairs
6. Land transfer tax
14. Appliances
7. Interest adjustments

34. Additional Costs When Purchasing a Home
1. Appraisal fees 8. Prepaid property
taxes and utilities
2. Inspection costs 9. Legal fees
3. Property survey 10. Sales tax (GST
on new homes)
4. Insurance costs for
high ratio mortgages 11. Moving expenses
5. Home insurance 12. Service charges
13. Immediate repairs
6. Land transfer tax
14. Appliances
7. Interest adjustments
15. Decorating cost

35. Additional Costs When Purchasing a Home
1. Appraisal fees 8. Prepaid property
taxes and utilities
2. Inspection costs 9. Legal fees
3. Property survey
10. Sales tax (GST
on new homes)
4. Insurance costs for
high ratio mortgages 11. Moving expenses
5. Home insurance 12. Service charges
13. Immediate repairs
6. Land transfer tax
14. Appliances
7. Interest adjustments
15. Decorating cost

36. The Dirksons Additional Costs to Purchase Their Home
HOMEWORK
The Dirksons live in Brandon and bought a house in Portage.
They had the home appraised and paid $125.00 to have it done.
The bank required a survey, and the cost of the survay was
$300.00. the price of the home was $135 000.00, and since their
down payment of $20 000.00 was less than 25% of the total
price, they had to buy “High Ratio Mortgage Insurance” at a cost
of 1.25% of the mortgage. The home insurance premium was
$475.00 but they recieved a $150.00 rebate from the policy they
had on their home in Brandon. The property taxes for the year
had been paid by the previous owner, and so they owed 7
months of the total tax bill of $2 125.00. A dry-walling bill of
$650.00 was split equally between themselves and the former
owner. The Dirksons bought a used washer and dryer for
$920.00. Moving expenses were $320.00 and legal fees that
included the land transfer costs were $965.00.

37. A group of rural students is planning to go to university. One of the members of
the group suggests that they purchase an older home rather than rent an apartment.
After a careful analysis of their finances, the group decides that their gross
monthly income would be around $3000.00. Monthly property taxes are estimated
to be $125.00. Heating bills are estimated to be $150.00. The group can arrange a
mortgage at a rate of 9%. The three members of the group are able to come up with
a down payment of $8000.00. Determine the maximum affordable purchase price
that can be considered if they take out a 25-year mortgage.
HOMEWORK