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Find Out How Much Mortgage You Can Afford

Estimate your mortgage affordability and move one step closer to your dream home.

Figuring out mortgage affordability

If you’re looking to purchase a new home, understanding how much you can afford is the first step to becoming a homeowner. Mortgage affordability refers to the amount of money you’re able to borrow, given your gross household income, monthly obligations and down payment. The Mortgage Affordability Calculator can help you estimate the amount of mortgage you’re eligible for.

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Using our mortgage affordability calculator

Mortgage affordability calculators determine how much you can afford to spend on a property based on certain assumptions. Our calculator lets you input your personal income, expenses and mortgage preferences, including the amortization period and mortgage type, to give you a better idea of your budget.

It’s also important to include your province, as it allows the calculator to more accurately estimate potential costs. You can even choose to use the best available interest rate, or enter your own rate. Once you know how much you can afford, you’ll be able to pick the best home within your means.

*Disclaimer:

The Mortgage Affordability Calculator should be used for illustration purposes only. Brokers and lenders take into account other important factors (including your credit history) when underwriting a mortgage. As a result, the actual mortgage amount that you qualify for with a specific lender can be different than what is indicated by this calculator. Also, the debt ratio thresholds that lenders use can vary, so you might not get the same mortgage approval across different lenders. It is important that you consult a mortgage advisor prior to deciding to purchase a property. They can help you obtain a full mortgage pre-approval so you have a better indication of your true mortgage eligibility.

Down payment guide

The purchase price of your potential home determines your down payment amount in the following ways:

Home purchase price Minimum Down payment Home purchase price
$500,000 or less 5% $500,000 or less
$500,000.01 - $999,999.99 5% of the first $500,000, and 10% of any amount over $500,000 $500,000.01 - $999,999.99
$1,000,000 or more 20% $1,000,000 or more

High-ratio mortgage vs. low-ratio mortgage

If you make a down payment of less than 20%, your mortgage application will be considered a high-ratio mortgage. This means you have a high loan-to-value ratio, with over 80% of the property mortgaged, and less than 20% equity.

A home purchase with a 20% down payment or more is referred to as a low-ratio mortgage, which implies a lower risk for the lender. Generally, the more equity you have in your home, the less likely you are to default on the mortgage and the lower the lender’s losses if you do.

Frequently asked questions about mortgage affordability

Here are some of the most commonly asked questions we get when it comes to mortgage affordability.

Can I truly afford a mortgage for my new home?

Buying a house is the biggest purchase you’ll make in your life. The amount of mortgage you can afford depends on what’s called your debt-to-income ratio, which helps you determine how much of your monthly income is needed to cover your debts, including your mortgage, credit card payments, loans etc. According to the Canada Mortgage and Housing Corporation (CMHC), your monthly expenses, including your housing costs, should be less than 42% of your income. This is a crucial factor that mortgage lenders look at when processing your mortgage application.

For example, if your mortgage is $1,000 a month and your expenses are $1,000, your total monthly costs come to $2,000. Now, let's say you have a gross monthly income of $6,000. That puts your debt-to-income ratio at 33% ($2,000 is a third of $6,000). This is a good ratio as it’s under 42%. A ratio over 42% means you’ll have to start paying off some of your debts before you think about purchasing a home.

Another factor that’ll help you decide if you can afford a mortgage is the size of the down payment. Your down payment should be at least 5% of the new property’s value, but ideally more. A higher down payment can lower your monthly mortgage payment and increase your mortgage affordability. For homes that cost more than $1 million, a down payment of 20% is required.

Our mortgage affordability calculator helps you calculate your maximum purchasing price to help you plan ahead and understand your buying power.

Note: Lenders also generally require that your monthly housing expenses alone be less than 39% of your gross monthly income.

What if my total debt service ratio (TDS) is over 42%?

Having a high TDS means that you may have trouble finding a mortgage rate you can afford.

A TDS ratio over 42% means you’ll have to do one or more of the following:

  • Find a cheaper home
  • Start reducing some of your monthly obligations
  • Get a bigger down payment
  • Add more income to the mortgage application, perhaps from a co-signor
  • Extend your amortization
  • Find a lender that allows higher debt ratios.

How can I make buying a home less stressful?

Buying a home is a huge milestone in your life, so it’s best to get expert advice. Once you know what you can afford, consult a good real estate agent to explore suitable homes. Make sure you tell your realtor your budget constraints and do not allow them to show you properties beyond your affordability limit.

Similarly, having a professional mortgage broker can make your mortgage application process smoother. They know the nuances of different lenders’ policies with respect to debt ratios, credit and income requirements. Their services are free and easily accessible, and a broker can negotiate the terms for you. They even handle all the necessary paperwork.

How can I increase my mortgage affordability?

If you can’t afford the mortgage you want, there are ways to increase mortgage affordability.

Here are the ways you can increase your mortgage affordability:

  • Finding a cheaper home – A lower purchase price improves affordability and reduces financial stress. Finance stress shortens your lifespan, so don’t get in over your head and be house rich and cash poor. Find a home that comfortably fits within your lender’s debt ratio limits and your personal family budget, such that you can afford to save at least 5% to 10% of your after-tax income each month.
  • Paying off some obligations – You can improve your mortgage affordability by paying off your existing debt or reducing your other obligations. Doing this lowers your debt ratio, thus allowing you to afford a bigger mortgage payment.
  • Increasing your down payment – A larger down payment lowers your mortgage payment, and hence your debt ratio. Buyers with loan-to-value ratio of 80% or less are also deemed lower risk and therefore don’t need to pay for CMHC insurance.
  • Increasing your income – Increasing income may not be viable for everyone, but if you get a raise or can prove two years of additional part-time income, you can look for a bigger mortgage and a better home. Alternatively, if you can find a co-signer who’s not over-indebted, your combined income may be high enough to qualify you for the mortgage you want.
  • Extend your amortization – A longer amortization reduces your monthly payment and therefore reduces your debt ratios. While this improves your mortgage affordability, it also implies you’ll pay more interest as the mortgage takes longer to amortize (pay off). If you have high-interest debt, a longer amortization can be smart in that it lets you pay down that costly debt quicker.
  • Find a more flexible lender – Instead of the standard 42% to 44% total debt service limits, some lenders permit debt ratios up to 50% or more if you’re a strong enough borrower. But you shouldn’t expect the lowest rates if you go above standard debt-ratio limits. Some non-prime lenders allow TDS ratios above 60%. The problem is, they charge over one to two percentage-point higher rates for that flexibility. Sometimes the rate is far higher than that, depending on how risky a borrower you are.

What are some other mortgage costs I should know about?

Buying a home involves several costs, including various taxes and fees. It’s important to properly estimate these costs to avoid exceeding your budget. Examples of additional costs include land transfer tax, survey fees, default insurance tax, appraisal costs, legal fees and home inspection fees. These are called closing costs. Together they can be anywhere from 1-4% of the purchase price. Lenders often require you to prove you have at least 1.5% of the purchase price in available cash for closing costs. That’s mandatory if you’re getting a high-ratio mortgage.

How can I determine my mortgage payment?

The Mortgage Payment Calculator helps you generate mortgage payment scenarios to see how different homes impact your budget. Before estimating your affordability, compare mortgage rates and see how they affect your payment. Just remember, lenders, base your debt ratios on a “stress-tested” payment. That means they simulate a higher payment based on rates that are at least two percentage points above typical rates. They do this to ensure you can afford higher rates in the future. This simulated payment is then used as a key input in lenders’ debt-ratio formulas.

Check out our Mortgage Guide for more information on how to apply for a mortgage.

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