Canadian Mortgage Affordability Calculator

This calculator estimates the maximum home purchase price you might be able to afford based on your income, debts, down payment, and chosen mortgage details (interest rate, amortization). It also calculates your estimated monthly mortgage payment and determines if mortgage default insurance (like CMHC) might be required.

It uses standard Canadian mortgage qualification rules, including the mortgage stress test (qualifying rate) and debt service ratios (GDS and TDS), to provide a realistic estimate.

The mortgage stress test ensures borrowers can still afford their mortgage payments if interest rates rise. Lenders must qualify borrowers using a "qualifying rate," which is the higher of:

• Your contract mortgage interest rate + 2%, OR
• The Bank of Canada's benchmark rate (currently 5.25%).

This calculator automatically determines and applies the correct qualifying rate (shown in the 'Qualification Details') to calculate your affordability based on these government regulations.

GDS (Gross Debt Service) and TDS (Total Debt Service) ratios are percentages used by lenders to assess your ability to manage mortgage payments and other debts relative to your income.

• GDS Ratio: The percentage of your gross monthly income needed to cover housing costs (mortgage principal & interest using the qualifying rate, property taxes, heating, and 50% of condo fees if applicable).
• TDS Ratio: The percentage of your gross monthly income needed to cover housing costs (GDS) plus all other monthly debt payments (like credit cards, car loans, lines of credit, etc.).

Generally, for mortgages with less than 20% down (high-ratio), lenders typically require GDS below 39% and TDS below 44%. For conventional mortgages (20%+ down), limits might be slightly higher, but this calculator uses the standard 39%/44% thresholds for a conservative estimate, unless the downpayment ratio triggers higher allowable ratios as per the internal logic.

Mortgage default insurance, often referred to as CMHC insurance (though offered by other providers like Sagen or Canada Guaranty too), protects the lender if you default on your mortgage payments. It's typically required in Canada if your down payment is less than 20% of the home's purchase price (a high-ratio mortgage).

The premium is calculated as a percentage of the loan amount and usually added to your mortgage principal. This calculator estimates the CMHC premium if your down payment is below 20% and the purchase price is under $1 million (insurance isn't available for homes $1M+).

The minimum down payment required depends on the purchase price:

• Up to $500,000: Minimum 5% down payment.
• $500,001 to $999,999: Minimum 5% on the first $500,000, plus 10% on the portion above $500,000.
• $1,000,000 or more: Minimum 20% down payment (mortgage insurance is not available).

This calculator determines the minimum required down payment for the calculated maximum purchase price. If your entered down payment is less than the required minimum for a certain price, it will limit the affordability accordingly and may show suggestions.

Several factors influence affordability. Consider these options:

• Increase Your Down Payment: A larger down payment reduces the loan amount and may help you avoid CMHC insurance costs.
• Reduce Your Debts: Paying down high-interest debts like credit cards or car loans lowers your TDS ratio, freeing up room for mortgage payments.
• Increase Your Income: Higher income directly improves your borrowing capacity. Consider income from co-applicants.
• Choose a Longer Amortization Period: Spreading payments over more years (e.g., 30 vs. 25) lowers the monthly payment, but increases total interest paid. Note that 30-35 year amortizations often require a 20%+ down payment.
• Lower Property-Related Costs: While often fixed, lower property taxes or choosing a property without condo fees can help marginally.
• Improve Your Credit Score: While not directly used in this calculator's affordability calculation, a better credit score generally leads to better interest rates from lenders, impacting your actual payments.

Use the calculator's sliders to experiment with different scenarios and see how changes impact your estimated affordability.

No. This calculator provides an estimate based on the information you provide and standard lending guidelines. It's a valuable tool for planning but is not a formal mortgage pre-approval or guarantee of financing.

Lenders consider many other factors, including your credit history, employment stability, the property itself, and their specific underwriting criteria. Always consult with a mortgage professional or lender for a formal assessment and pre-approval.

They are calculated differently and serve distinct purposes:

• Monthly Payment: This is the estimated actual payment you would make each month based on the final mortgage amount, your chosen contract interest rate, and the amortization period. This reflects your real-world cost.
• Qualifying Payment: This is the hypothetical monthly payment calculated using the qualifying rate (stress test rate). Lenders use this higher payment amount to calculate your GDS and TDS ratios to ensure you can afford the mortgage even if rates increase. It's used for qualification purposes, not your actual payment amount.