HDS
Homeownership Debt Service
The only way The Wealthy Homeowner™ decides how much home they really can afford to own!
Mortgage + Taxes + Utilities + Insurance + RMR Budget
After Tax Income
After Tax Income
Comparing how a The Wealthy Homeowner™ sees a $400,000 home carrying a $200,000 mortgage versus everyone else.
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HDS
Mortgage:$11,352 Property Taxes: $1,800 Natural Gas/Heating Oil: $1,200 Electricity: $1200 Water/Waste: $600 Home Insurance: $1000 RMR Budget: $6,400 Qualifying Expenses: $23,552 After Tax Income: $34,973 $23,552 / $34,973 = 67% Ontario = 67% Quebec = 71% Alberta = 69% British Columbia = 67% |
GDS
Mortgage: $11,352 Property Taxes: $1,800 Natural Gas/Heating Oil: $1,200 Qualifying Expenses:$14,352 Before Tax Income: $41,000 $14,352 / $41,000 = 35% Ontario = 35% Quebec = 35% Alberta = 35% British Columbia = 35% |
The Wealthy Homeowner™ understands that lenders seek to earn the highest profits for their shareholders by attempting to control the mortgage client. This control is generated by funding the "over-purchased home". In this case the home buyer was left with $952 per month to live on or less than $250 per week for groceries, clothing, entertainment, internet, car, life and auto insurance, cable, telephone, cell phone and savings. Since it is impossible for all these other costs to be paid with the remaining $952 a month, homeowners are forced to make compromises that only damage their chance for achieving their financial dream.
Inevitably what happens is the entire RMR Budget, savings plans and lifestyle choices are eventually added to higher and higher debt, which the lender will happily fully accommodate by using your home as collateral and gaining a stronger hold on your life. The last 25 years of home purchases based on GDS ratios alone have created extreme consequences for homeowners and the greater Canadian economy alike. The highest debt ratio in history, 75 year old homeowners forced to work and unable to retire without selling the family home, homes in need of serious repairs that go unaddressed, at the same time as home prices continue to soar. Survey after survey, study after study about the state of retirement in Canada have recently shown just how devastating lending practices tied to GDS have been.
The Wealthy Homeowner™ is guided by holding their HDS ratio to under 55% which in this case would require a before tax
income 27% higher (@ $52,000) than what the banks are currently recommending. The $52,000 earner would be able to fully fund their homeownership costs and still live a great life without incurring more and more debt.
Attention Financial Advisors: We encourage you to inform and guide your clients homeownership decisions using our HDS ratio. An accurate HDS requires a complete review of the home under consideration in order to establish a RMR Budget and Schedule that is reliable. The Wealthy Homeowner™ has developed a methodology and forms to allow the highest level of accuracy and lowest level or risk for the homeowner. Contact us for details and how your clients can become The Wealthy Homeowner™.