Budgeting for home ownership

A home may be one of the biggest purchases you’ll ever make. And while you may be focused on saving for your down payment, there are other expenses to think about when it comes to owning a home. Knowing your costs up front can help you create a budget that works for you today and tomorrow.

A mortgage pre-approval can help you understand both how much your mortgage payments might be, and how much you might qualify for.

Think about all your expenses

As you budget for owning a home, you’ll want to factor in both the one-time and ongoing costs you will need to cover. To help assess your cash flow use the Budget Calculator.

Ongoing costs include:

Your monthly mortgage payment is one of the main costs that come with owning a home. Other regular costs may include:

• Property taxes
• Home insurance
• Mortgage insurance
• Home utilities: Heat, water, electricity
• Other utilities: Phone, cable, internet
• Home maintenance: Cleaning, repairs
• Property maintenance: Gardening, lawn care

One-time costs include:

Beyond the purchase price of your home, you may have other expenses to cover, which can sometimes be large. These may include:

• Appliances
• Furniture
• Window coverings
• Outdoor equipment: lawn mower, snow blower

Unexpected costs

Owning a home can come with surprises, such as a leaky roof or a burst pipe. It’s important to set aside a “rainy day” fund to cover expenses you didn’t plan for.

Future costs and income

As you create your budget, think about any changes your income and expenses may face down the road. Ask yourself:

• How long do I plan to live in the house?
• Do I think my income will change?
• Will I be taking time off work to have a child?
• Will we be buying a second car?

So, can you afford to buy a home?

Mortgage lenders want to protect you, so they use two different ratios to check that you will be able to carry a mortgage.

The Gross Debt Service (GDS) Ratio calculates how your income compares to your mortgage expenses.

Rule of thumb: Most lenders say that no more of 30% - 32% of your gross annual income should go to home-related expenses.

The Total Debt Service (TDS) Ratio looks at how your income compares to any and all debt you might have.

Rule of thumb: Most lenders say that your total debt payments should not be more than 37% - 40% of your gross annual income.

An RBC mortgage specialist can help you identify and budget for all the costs that come with owning a home.

The information in this publication is offered to help guide our clients and is believed to be factual and current, however its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subject matter discussed. This publication is not intended to give specific mortgage, financial, investment, tax, legal, accounting or other advice, and should not be taken that way. Readers should speak with their own professional advisor before taking action.

Personal lending products and residential mortgages are offered by Royal Bank of Canada and are subject to its standard lending criteria. Some conditions apply.