The Three-Part House Affordability Test
Check cash, carrying costs, and move-in costs before buying
- Difficulty
- Easy
- Time to result
- ~weeks to results
- Steps
- 5
- Confidence
- 98%
Singh divides home affordability into three tests: the down payment, the monthly payment, and moving costs. He recommends at least a 20% down payment so the buyer enters with equity, while acknowledging that this is difficult. Monthly affordability is then tested inside the 75% spending portion of his 75-15-10 plan, not against the maximum a bank will lend. Finally, the buyer adds costs that are easy to omit, including movers, furniture, upgrades, and work needed after taking possession. A purchase passes only when all three parts are affordable without abandoning minimum saving and investing. This deliberately conservative rule reflects Singh's view; it is not a claim that every lower-deposit mortgage is unsuitable.
Origin
Extracted from The Diary of a CEO
Core principles
- 01Loan approval is not affordability
- 02A buyer needs cash beyond the transaction
- 03Monthly housing must coexist with saving and investing
How to run it
- 1
Fund the down payment
Use Singh's benchmark of at least 20% of the price.
Pro tip Keep it distinct from emergency savings.
Watch out This is Singh's benchmark, not a universal requirement.
- 2
Price the move
Estimate movers, furniture, upgrades, and immediate work.
Pro tip Inspect the actual property first.
- 3
Calculate monthly ownership
Combine the mortgage with expected recurring housing costs.
Watch out The transcript gives no universal expense estimate.
- 4
Apply the spending ceiling
Confirm housing and all other spending remain within 75% of income.
Pro tip Model the whole household budget.
- 5
Protect future allocations
Proceed only if investing and saving can continue.
Watch out A lender's approval does not complete this test.
In the wild
Singh says his rule requires at least $100,000 down on a $500,000 home. The buyer must separately fund moving costs and show that all monthly spending still fits the allowance.
→ The full cash requirement is visible before relying on mortgage approval.
Common mistakes
Ignoring move-in costs
Furniture, movers, and upgrades can consume cash assumed to be available.
Using the bank's maximum
Underwriting does not protect the buyer's saving and investing goals.
Is it for you?
Best for
It is best for prospective owner-occupiers testing whether a specific purchase fits their finances.
Not ideal for
It is not ideal as universal mortgage advice because local lending, tax, and housing conditions differ.
From the transcript
“There's three parts to affording a house”
“You have to afford the down payment”
“you have to afford the monthly payments”
From the episode
The Savings Expert: Are You Under 45? You Probably Aren’t Getting A Pension! Do Not Buy A House! This Is Probably Why You’re Broke! - Jaspreet Singh