19 December 2010 ~ 3 Comments

How much rent can I afford?

When you are looking for a place to rent in Canada, you don’t want to pay more than 30% of your gross income on rent and other shelter expenses.  This is backed by Canada Mortgage and Housing Corporation, they suggest that “as a general rule your monthly shelter expenses – including rent, electricity, heat, water and municipal services – should be less than 30 per cent of before-tax household income. (The cost of property insurance, parking, cable, telephone service, and internet connection are not included in this calculation).”

Taking a real example, if you make $3,000 a month then you shouldn’t be paying no more than $900/month on your shelter expenses. This can be tough in some of the cities across Canada where the average monthly rents are more than $1,000/month.

The highest average monthly rents were in Vancouver ($1,195), Toronto ($1,123), Calgary ($1,069), Ottawa-Gatineau (Ontario part, $1,048), Victoria ($1,024), and Edmonton ($1,015). These six cities in Canada were the highest averages and will stretch your budget.

Practically speaking, it may not be possible to achieve this limit depending on your income or the city you live in. Your upper threshold should be no more than a third (33.3 per cent) of your net income on rent. If you want to have more money available for other expenses, try to find an apartment for rent that’s closer to 25 per cent of your net income.

If you live with a partner and both of you are working, you will have more disposable income to allocate and won’t necessarily be bound by this guideline.

Up Front Costs

Besides your monthly rental payments, you will need to provide the first and last month’s rent when you apply to rent the apartment. You’ll also have to lay out any expenses associated with moving, such as hiring a moving company, or renting a moving van yourself. Be prepared to include these expenses in your budget.

What is Included in the Rent?

When viewing apartments, be sure to note whether utilities, such as heat, water, hydro, cable television and internet connection are included in the rent. Heat and water are often included, but as apartment owners are moving toward individual hydro metering, you should consider yourself fortunate to find an apartment where hydro is still included.

Don’t forget to estimate the cost of extras such as laundry and parking, since these are generally not included in rent. It’s also a good idea to carry Renter’s Insurance to protect yourself against liability and loss or damage to your property in case of fire, flood or other situation. Many landlords require that you have Renter’s Insurance in order to sign the lease. I strongly advise you do so. It will only cost a couple of hundred dollars a year and the peace of mind is well worth it.

Once you have a solid understanding of what your basic expenses will be, you can draw up a simple budget. It will help you to see how much money you really have, where it is going, and what your limitations are.

If you find that living alone will stretch your finances too much, consider lowering your rent payments significantly by living with a roommate. If this is your first time renting, you’ll enjoy the sense of freedom and independence that you’ll gain from doing so. At the same time, it will also be a good experience in learning to live within your means.

Renting in Edmonton or trying to find Vancouver apartment rentals will definitely push your budget. Cities like renting in Saskatoon or houses for rent in Winnipeg should be more affordable.

3 Responses to “How much rent can I afford?”

  1. mano.sonia20 22 May 2011 at 1:20 am Permalink

    its a great article, in canada people does not need to pay rent more then his 30 percent income, The highest average monthly rents were in Vancouver ($1,195), Toronto ($1,123),

  2. Richard Myers 31 May 2011 at 1:11 pm Permalink

    Thank you for the great information.

    Apartment Rentals Toronto

  3. renters insurance 24 September 2011 at 5:58 pm Permalink

    Thanks for your article. One other thing is individual states have their own laws which affect property owners, which makes it quite difficult for the the legislature to come up with a brand new set of guidelines concerning foreclosure on house owners. The problem is that a state has own laws which may have interaction in an undesirable manner in regards to foreclosure guidelines.

    One thing I’ve noticed is that often there are plenty of misguided beliefs regarding the finance institutions intentions any time talking about home foreclosure. One fable in particular is the fact the bank desires your house. The financial institution wants your dollars, not the home. They want the amount of money they lent you having interest. Staying away from the bank will undoubtedly draw a foreclosed realization. Thanks for your posting.

    Thanks for sharing your ideas with this blog. Likewise, a fairy tale regarding the banking institutions intentions any time talking about property foreclosures is that the traditional bank will not have my installments. There is a specific amount of time that the bank will need payments every now and then. If you are too deep in the hole, they’re going to commonly demand that you pay the actual payment entirely. However, i am not saying that they will have any sort of payments at all. If you and the standard bank can find a way to work a thing out, the actual foreclosure approach may halt. However, if you continue to neglect payments within the new system, the foreclosure process can pick up where it was left off.

    I really believe that a foreclosures can have a significant effect on the debtor’s life. Mortgage foreclosures can have a Several to 10 years negative relation to a client’s credit report. A new borrower who has applied for home financing or virtually any loans even, knows that your worse credit rating can be, the more challenging it is to obtain a decent mortgage loan. In addition, it could possibly affect the borrower’s capacity to find a really good place to let or hire, if that gets to be the alternative homes solution. Good blog post.

    Based on my research, after a the foreclosure home is sold at an auction, it is common for any borrower in order to still have the remaining balance on the loan. There are many lenders who try and have all rates and liens paid off by the subsequent buyer. Even so, depending on certain programs, rules, and state regulations there may be a few loans which aren’t easily resolved through the shift of personal loans. Therefore, the duty still rests on the consumer that has received his or her property foreclosed on. Many thanks sharing your notions on this weblog.

Leave a Reply