How much house can I afford?
The highest price that still passes the debt service ratios a lender applies, tested at the qualifying rate rather than the rate you were quoted. Every threshold is editable and explained.
Everyone who will be on the mortgage, added together. The ratios are gross by definition.
Car loans, cards, student loans, support. Not rent, and not this mortgage.
Your quoted rate. The qualifying rate is worked out from it.
The costs and limits this uses, all editable
Varies enormously by municipality. Your city publishes its rate.
Lenders use their own estimate here. There is no published figure.
Half of this counts in both ratios.
CMHC's maximum is 39%. Individual lenders may allow less.
CMHC's maximum is 44%.
Estimated maximum price
$651,114
a mortgage of $566,545 and housing costs of about $4,533 a month.
Your other debt payments are what stop it going higher. Clearing them would raise this figure more than saving a larger down payment would.
Gross debt service38.9%
Housing costs against gross income. The marker is the 39% limit.
Total debt service44.0%
Housing plus every other debt payment. The marker is the 44% limit.
- Maximum price
- $651,114
- Mortgage
- $566,545
- Monthly payment
- $3,894.99
- Qualifying rate
- 6.79%
| Mortgage payment at the qualifying rate | $3,894.99 |
|---|---|
| Property tax | $488.34 |
| Heating | $150.00 |
| Total housing cost | $4,533.33 |
At this price the down payment is under twenty per cent, so the mortgage is insured and a premium of $15,431 is added to the loan.
The payment above is worked out at the qualifying rate of 6.79%, not at the rate you entered. That is what a lender tests you against, so it is the payment that decides the maximum price rather than the one you would actually make.
You could look at homes around $651,114. Whether that buys what you want depends entirely on where you look.
The two ratios a lender applies
Gross debt service is your housing costs against your gross income: the mortgage payment, the property tax, the heating, and half of any condominium fee. The insured maximum is 39%. Total debt service adds every other debt payment you make, and its maximum is 44%. Whichever binds first is the one that sets your price, and the calculator says which one it was.
Half the condo fee is not an arbitrary split. It is a rule of thumb about how much of a typical fee covers things a house owner would pay for separately, and it counts in both ratios rather than only the second.
The qualifying rate, which is not your rate
A lender does not test you at the rate you were quoted. It tests you at the greater of that rate plus two points and 5.25%, and the maximum price above is worked out at that qualifying rate. At 4.79% you are being tested at 6.79%, and the difference is worth roughly a hundred thousand dollars of purchase price on a typical income.
Why there is no formula for this
The answer is solved rather than derived, because the insurance premium steps with the loan-to-value ratio, the minimum down payment steps with the price, and the premium then feeds back into the loan and so into the payment and so into the ratio it is being tested against. Every one of those is a discontinuity, so the calculator narrows in on the highest price that passes rather than computing one directly.
What stops the number going higher
This is the useful half of the answer and most calculators leave it out. Being limited by your down payment and being limited by your car loan lead to completely different next steps, and a bare maximum price tells you neither. The result above names which constraint bound first.
This is not an approval
A lender underwrites a person rather than a ratio. Your credit history, how long you have been employed, whether your income is salaried or variable, and the property itself all matter, and none of them are here. A pre-approval from a lender is the only figure that means anything, and it is free to get. Use this to know roughly where to look, then get one. The can I afford it calculator asks the different and more useful question of whether the payment fits your month.
What this assumes
- The published maximum ratios
- 39% and 44% are CMHC's insured maximums. Individual lenders often apply lower limits, and a strong application is sometimes taken above them. Both are editable above.
- A property tax rate you supply
- Rates vary enormously between municipalities, and this site does not carry them. Your city publishes its rate, usually as a percentage of assessed value.
- A heating estimate
- Lenders use their own figure here and there is no published rule. The default is a placeholder: replace it with what you actually pay or expect to.
- Nothing about your credit
- The ratios say what your income supports. They say nothing about whether a lender will lend to you.
Sources
- Calculating GDS / TDS · Canada Mortgage and Housing Corporation · checked
- CMHC Purchase: mortgage loan insurance for homeownership · Canada Mortgage and Housing Corporation · checked
- How much you need for a down payment · Financial Consumer Agency of Canada · checked
- Mortgage loan insurance premiums · Canada Mortgage and Housing Corporation · checked
- CMHC Purchase: mortgage loan insurance for homeownership · Canada Mortgage and Housing Corporation · checked
The rules behind this calculator were last checked on .