Any way you look at it, buying a home is an investment. A lifestyle investment because you’re deciding on the neighbourhood you’ll live in, the school your kids will go to, and even the park where you’ll walk your dog. An emotional investment because this will be the home in which you’ll experience the everyday joys and challenges of family life. And, of course, buying a home is a financial investment – usually the largest financial commitment any Canadian family will ever make – and you hope that it’s an investment that will pay off sometime down the road when you decide to sell your home.

So buying a home raises a lot of questions – and the key question is always: How much home can you really afford? And that is a tricky question for any homebuyer because there are no easy answers. Standard mortgage loan guidelines use a Total Debt Service Ratio (TDS ratio) and Gross Debt Service Ratio (GDS ratio) that lenders use to determine their eligibility for a loan. The ratios allow the lender to calculate a mortgage in relation to overall income and personal financial obligations – but they don’t tell you the mortgage amount you can realistically afford. So here are three tips for determining how much house you can actually afford.

Assess your mortgage in relation to your overall, long-term financial plan. Work with your financial advisor and mortgage specialist to assess your income and financial commitments and establish a reasonable mortgage payment for you. Look at how your earning power may change over time, how much you’ll need to save for retirement, and your current lifestyle and spending levels.

With your financial commitments and goals mapped out, consider any trade-offs you’re willing to make. Maybe a smaller house that offers more flexibility in terms of your lifestyle and spending. Or perhaps putting your family on a tighter budget so you can afford a bigger home.

Be an active mortgage manager, at least annually. Your financial picture may change over time, and today’s mortgages come with a number of options that allow you some flexibility to save a great deal of money. These include re-amortizing, increasing your payments, making lump sum payments, or even ‘blending or extending’ your mortgage to take advantage of low long term rates.

Your home should always be where your

heart is – but too much home at too high a price can strain not only your heart but every other aspect of your family’s life. Your professional advisor can help you determine how much house you can afford based on your overall financial picture, including your individual goals and resources.

This column, written and published by Investors Group Financial Services Inc. (in Québec – a Financial Services Firm), presents general information only and is not a solicitation to buy or sell any investments. Contact your own advisor for specific advice about your circumstances. For more information on this topic please contact your Investors Group Consultant, David L. Brown,

CFP, CPCA, Senior

Financial Consultant

Ph: 250-315-0241

Fax: 250-315-0251