Mortgage Affordability Calculator
Estimate home affordability, monthly payments, and borrowing power in Canada with The Local Broker
This Page’s Content Was Last Updated: February 5, 2025
Estimate How Much Mortgage You Can Afford
How is my affordability calculated?
Here’s a breakdown of each factor impacting your home affordability and the limit it places on your purchase price. Your affordability is the minimum of all the values shown.
Limiting Factor
Purchase Price Limit
Minimum Down Payment
$900,000
TDS Ratio
$699,374
Stress Tested TDS
$588,032
GDS Ratio
$631,054
Stress Tested GDS
$531,703
Bank
$1,255,187
- Your down payment directly imposes a limit on your maximum purchase price.
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Under CMHC regulations, your total debt service (TDS) ratio cannot exceed 44%. The TDS ratio is calculated by dividing your total housing-related and debt expenses by your gross annual income. These expenses include:
- Your mortgage payment (both principal and interest)
- Your property tax
- Your heating costs
- Half of your condo fees (if applicable)
- Your Home Repair and Maintenance Cost
- All forms of debt payments
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Under CMHC regulations, your gross debt service (GDS) ratio cannot exceed 39%. The GDS ratio is calculated by dividing your annual housing-related expenses by your gross annual income. These expenses include:
- Your mortgage payment (both principal and interest)
- Your property tax
- Your heating costs
- Your Home Repair and Maintenance Cost
- Half of your condo fees (if applicable)
- Your total monthly expenses cannot exceed your net (after-tax) monthly income.
Stress Testing
Mortgage Stress Test Rates as of December 09, 2024
- Stress Test Rate: The higher of 5.25% and your mortgage rate + 2%
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The lowest stress test rate for insured mortgages (e.g. down-payment<20%) is: 6.14%= 4.14% (Get This Rate) + 2%
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The lowest stress test rate for uninsured mortgages (e.g. down-payment≥20%) is: 6.14%= 4.14% (Get This Rate) + 2%
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The lowest stress test rate for uninsurable mortgages (e.g. home prices ≥$1M or refinances) is: 6.29%= 4.29% (Get This Rate) + 2%
Affordability calculators need to take into account government stress testing regulations published by the Office of the Superintendent of Financial Institutions (OSFI). You must still be able to afford your mortgage payments if your interest rate increases to the greater of:
- A floor of 5.25%, and your mortgage interest rate plus a margin of 2%.
Mortgage Down payment and Affordability
Your mortgage down payment directly impacts your home affordability. A larger down payment can reduce your mortgage borrowing, lowering your interest costs and CMHC mortgage insurance premiums . A smaller down payment could lead to higher interest costs, more expensive mortgage insurance and potentially even disqualify you from an insured mortgage if your debt servicing ratios are too high.
With a down payment of 20% or more, you can have a conventional mortgage without mortgage insurance and skip both the fees and requirements of CMHC mortgage insurance.
How to Increase Your Mortgage Affordability
There are a number of ways that borrowers can increase their mortgage affordability and lower their costs over the lifetime of their mortgage:
- Save up a larger down payment: A larger down payment can lower your mortgage borrowing and lead to smaller payments and less interest over the lifetime of your mortgage. You can also save on CMHC mortgage insurance and skip on mortgage insurance premiums altogether if you have a down payment of 20% or more.
- Increase your credit score: If you have a low credit score, increasing your credit score could help your eligibility for mortgage insurance and better terms on your mortgage. Lenders are willing to lend more to a borrower who has proven their ability to pay bills on time compared to one who has not.
- Shop around for rates: A lower mortgage interest rate can lower your regular mortgage payments, letting you handle a larger mortgage with your income. It can also save you tens of thousands over the course of your mortgage. Be sure to shop around for the best mortgage rates.
- Check out different lenders: Different lenders will have different standards for lending and offer different terms and conditions on their mortgages. Some offer additional features like RBC's Double-Up program. Going over your options with a mortgage broker can help you get the most from your mortgage.
- Increase your amortization: If you increase your amortization, you can reduce your regular payments and borrow more by spreading out the mortgage over a longer period of time. Doing so may increase your total mortgage interest cost, however, and decrease your choice of mortgage rates and lenders. Before committing to a decision, check how different amortizations will affect your mortgage and your monthly payments.
- Consider a Joint Mortgage: Combining your income with a spouse, friend, or anyone else will help you qualify for a mortgage. The higher joint income will have an easier time meeting debt service ratio requirements. This is known as a joint mortgage. However, if one partner begins missing payments, the other partner will be required to pay the difference or lose the home altogether.
CMHC Insurance
An insured mortgage lets you buy a home with a down payment of less than 20%, giving you more options and flexibility in choosing the right home. In addition, lenders usually offer the lowest mortgage rates to insured mortgages as their risk is covered by your mortgage insurance.
The Canada Mortgage and Housing Corporation (CMHC) is a crown corporation that insures most mortgages in Canada. They charge an upfront fee or premium for mortgage insurance based on the amount of down payment you have or the loan-to-value (LTV) of the mortgage. They offer insurance for mortgages with an LTV of up to 95%. The premium will be added onto your mortgage and amortized over its length. In some provinces, you have to pay sales taxes on the insurance premium.
Down payment Impact on CMHC Mortgage Insurance Premiums for a $500K Home
CMHC Backs Down From COVID-19 Changes to Insurance Criteria
On July 5, 2021, the Canada Mortgage and Housing Corporation (CMHC) announced that it was reversing changes previously implemented in mid-2020:
- The Gross Debt Servicing (GDS) ratio limit was reset to 39% (previously 35%)
- The Total Debt Servicing (TDS) ratio limit was reset to 44% (previously 42%)
- At least one of the borrowers of the mortgage must have a credit score of at least 600 (previously 680)
Impact of New CMHC Rules on Borrowers
Gross/Total Debt Service (GDS/TDS) Ratios
The higher debt service ratio requirements will allow more borrowers to participate with higher leverage and take out larger mortgages relative to their income. Debt service ratios measure how much of your income will be spent on paying the mortgage, bills associated with your home and payments on other debt.
Credit Scores
The lower credit score requirement of 600 (previously 680) will allow borrowers who have missed bill payments or have a limited credit history to participate in the CMHC insurance program and be eligible for a downpayment as low as 5%.