How much property can you afford?
Setting a purchase ceiling, a monthly ceiling, a cash reserve, and stress testing.
Set three ceilings before viewing: a maximum purchase price, a maximum monthly housing outflow (mortgage plus taxes, fees, insurance, and repairs), and a minimum cash reserve you keep after closing — then stress-test the monthly figure at higher rates.
Key points
- Set a purchase-price ceiling, a monthly-outflow ceiling, and a post-closing cash floor.
- Monthly outflow is more than the mortgage: add tax, management, reserve, insurance, parking, and repairs.
- Stress-test the payment at the offered rate plus 1, 2, and 3 points.
- Do not borrow the lender’s maximum — it leaves no margin.
The three ceilings
Before you view anything, set three ceilings. The maximum purchase price caps what you shop for. The maximum monthly housing outflow is the real affordability test, and it is more than the mortgage — it includes fixed-asset and city-planning tax, condominium management and repair-reserve fees, insurance, parking, utilities, and owner-funded repairs (a house shifts roof, exterior, and structural costs onto you directly). The minimum cash reserve is what you will still hold after closing, so you are not left with no buffer for fees, repairs, or emergencies.
Stress-test the payment
Run the monthly payment at the offered rate plus 1, 2, and 3 points, because a variable loan you can afford only at the initial rate is a loan you cannot safely afford. Flag the plan if stressed housing costs exceed a prudent share of net income (a common guide is around 35%), if total debt service exceeds the lender’s rules, or if the mortgage extends materially beyond your expected working income. The lender’s maximum is an underwriting ceiling, not a household recommendation — decide on your own stressed budget.
Key points to carry away: Set a purchase-price ceiling, a monthly-outflow ceiling, and a post-closing cash floor; Monthly outflow is more than the mortgage: add tax, management, reserve, insurance, parking, and repairs; Stress-test the payment at the offered rate plus 1, 2, and 3 points; Do not borrow the lender’s maximum — it leaves no margin. Use the linked guides and calculators for the full decision, and confirm anything material with the lender, a licensed broker, a judicial scrivener, or a tax accountant before you act.
Who this is for
- Buyers setting a realistic budget
- Households stress-testing affordability
What this is not
- A guaranteed approval amount
- A variable loan affordable only at the initial rate is not affordable; stress-test before you shop.
Frequently asked questions
Should I borrow the maximum approved?
Usually not; approval is an underwriting ceiling, not a household financial recommendation.
What is debt-to-income?
Annual scheduled debt repayments divided by qualifying annual income; it counts all your debts, not just the mortgage.