Buying a home usually means taking out a mortgage. This is a way to borrow money to buy a home while using that home as collateral for the loan.
The amount of the mortgage you can afford depends on your income, the down payment, current mortgage rates, and the amortization period you choose. Most lenders want borrowers to keep a gross-debt-service-to-income ratio of 40 per cent or less, coupled with a housing-cost-to-income ratio of 32 per cent or less.
You may be able to purchase a home with a down payment as small as 5 per cent, thanks to CMHC’s Insurance program. First-time home buyers may also be eligible to withdraw up to $25,000 tax-free from an RRSP to use as a down payment. The funds must be repaid within fifteen years. Lenders can provide you with a preapproved mortgage that shows approximately what mortgage loan you can afford.