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Rob Carrick
Rob CarrickPersonal Finance Columnist

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As a high school economics teacher, Matthew Jaekel was careful when buying a home last summer to figure out what he and his partner could realistically afford.

Aspiring home buyers, school is now in session. Even in today’s way overheated housing market, you have to keep affordability uppermost in your mind. Every buyer needs to know how much they can spend on a house and still have enough money left after the mortgage is paid to save for the future and cover other costs.

As part of their house search, Mr. Jaekel and his partner went looking for online affordability calculators. In an e-mail, he told me they looked at bank websites, mortgage rate websites and the Real Life Ratio calculator I developed for Globe and Mail readers buying a house. “Yours was the best,” he said in his e-mail. “However, everyone’s situation is different. There are so many other variables to be considered.”

In search of a personalized view on affordability, Mr. Jaekel built a spreadsheet that he agreed to share. “It may help others understand what they can ‘afford’ when they are starting their own property purchase adventure.”

The spreadsheet is simple to use – start by adding a monthly mortgage amount based the cost of houses you’re looking at, your down payment and the mortgage rate you have secured. The Ratehub.ca mortgage payment calculator is handy for computing mortgage payments.

Next, add your monthly income to the spreadsheet and then the monthly costs that apply to you. There’s an opportunity to look at your budget using “low-end costs,” where you try reducing your living expenses, and “high-end costs,” where you spend like you did before you bought a home. The spreadsheet comes loaded with some sample numbers added by Mr. Jaekel.

You’ll know if you’re in a good position to buy a home if your income covers the mortgage and other costs. If there’s a shortfall, the spreadsheet helps you figure out ways to cut back so you can bring things into balance. Home prices being what they are these days, there’s also a risk this spreadsheet forces a rethink of your home buying plans.

The biggest of all home buying traps is ending up with a property that doesn’t leave you room for saving, for vacations, for recreation and more. There’s more to life than owing a house. Make sure you have the money for it.

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Rob’s personal finance reading list

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“Virtually any interest rate increase at all … will leave you paying more at renewal, all else equal,” this important article says. “Many don’t realize that.”

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Ensuring customers get their money back for flights cancelled in the pandemic is part of a federal government aid package for the airlines. Here’s a rundown on who qualifies for the refunds and how to get one.

The rich renter

Personal finance writer Lesley-Anne Scorgie on how people who rent can build wealth that compares to a home owner’s growing equity. It can be done. Now for some national rental data documenting how much rental costs have fallen in many cities over the past 12 months. Recent data does show rents climbing back in some locations.

Money questions you were afraid to ask

A blogger provides a public service by tackling some basic but important money questions. I admire people who ask so-called dumb questions. They get answers.

Ask Rob

Q: I have federal taxes due on April 30th. Is it better to use my RRSP or line of credit to pay for it?

A: It’s better to take on some low interest rate debt via the line of credit than remove money from your retirement savings and forego long-term investment gains. A line of credit might cost you 2.95 per cent these days, while long-term average annual investment gains in your RRSP could be nearly twice that. Repaying the line of credit debt is a top short-term financial goal.

Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.

Today’s financial tool

Tips from the federal Consumer Agency of Canada on how much buyers need for a home down payment.

The money-free zone

I really like my colleague Elizabeth Renzetti’s column on getting the AstraZeneca vaccine. It resonated because my wife and I got this vaccine ourselves recently at a drugstore in Ottawa. All good – we just felt a bit tired the next day (though I didn’t miss my planned run the next day).

ICYMI

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