Mortgage Affordability Calculator

What the Mortgage Affordability Calculator does

This calculator answers the question most people actually type into a search bar: how much house can I afford? It takes your income, your down payment and your existing debts and works out the maximum purchase price a Canadian lender would let you carry, using the same debt service ratios and stress test an underwriter applies to a real application.

It also tells you which side of the equation is holding you back — your income, or your down payment — because those two limits call for completely different next steps. Most affordability tools stop at a single number; this one tells you why that number is what it is.

• Your maximum purchase price and maximum mortgage amount
• Whether your income or your down payment is the binding constraint
• Your GDS and TDS ratios against the 39% and 44% insured limits
• The stress-test qualifying rate and the payment you must qualify at, next to the payment you would actually pay
• An estimate of the total cash you need on closing day, beyond the down payment itself

The key variables that move the answer — and how lenders treat them

Five inputs decide almost the whole outcome, and each one is treated by an underwriter in a specific, often counterintuitive way.

• Down payment — sets a hard ceiling on price through the tiered minimum down payment rule, independent of your income. It also decides whether default insurance applies, which changes your mortgage amount and your payment.
• Credit card and line of credit balances — lenders ignore your actual payment and instead assume a monthly obligation equal to 3% of the outstanding balance. A $10,000 balance is treated as a $300 monthly debt whether you pay $50 or $1,000 toward it.
• Other monthly debts — car loans, student loans and support payments come straight off your Total Debt Service budget before your mortgage payment is even considered, which is why paying down a car loan can raise your maximum price more than an equivalent raise in salary.
• Interest rate — used to set your actual payment, but qualification runs on the stress-test rate instead: the greater of your contract rate plus two percentage points, or the 5.25% benchmark. This is why the price you qualify for is almost always lower than a naive calculation off your quoted rate.
• Amortization — a longer amortization spreads the qualifying payment thinner, which raises your maximum price. Insured mortgages are capped at 25 years unless you are a first-time buyer or buying new construction.

How this is actually calculated in Canada

The calculator works backward from your income and debts to a maximum payment, then from that payment to a maximum mortgage, then reconciles that against what your down payment alone can support. Monthly gross income is (income1 + income2) ÷ 12, plus any other monthly income. Non-housing monthly obligations are your loan payments plus 3% of credit card and line of credit balances.

The GDS budget is monthly income × 39%. The TDS budget is monthly income × 44%, minus your other obligations. The lower of the two sets your maximum housing payment; subtracting an estimated property tax, heating cost and half of any condo fee leaves the payment available for principal and interest. That payment is then back-solved into a mortgage amount using the stress-test qualifying rate, not your contract rate — P = PMT × (1 − (1 + iq)^−N) ÷ iq, where iq is the periodic qualifying rate.

Because the minimum down payment percentage depends on the purchase price, and the price depends on the mortgage, and the mortgage can include a capitalised insurance premium that itself depends on price, the true maximum price is circular. This calculator resolves it by testing candidate prices directly against both constraints — the ratio limits and the tiered minimum down payment — and reports whichever one runs out first as the binding constraint.

• Monthly income: (income1 + income2) ÷ 12 + other monthly income
• Max housing payment: MIN(income × 39%, income × 44% − other debts)
• Mortgage from payment: P = PMT × (1 − (1 + iq)^−N) ÷ iq, at the qualifying rate
• Final price: MIN(price the income supports, price the down payment supports)

What you get, and how lenders use these numbers to qualify you

Every figure here maps onto a specific line item in an actual mortgage application, which is what separates a real affordability estimate from a rough guess.

• Maximum purchase price — the ceiling a lender would approve today, before a rate hold or a specific lender's overlays are applied. Treat it as a strong estimate, not a guaranteed number.
• GDS and TDS ratios — the exact ratios an underwriter checks your file against, shown here at 39% and 44%, the standard insured limits. Some lenders apply tighter conventional limits, commonly 35% and 42%, on uninsured deals.
• Qualifying payment — the number the stress test actually tests, always higher than the payment you would really make. This is the single most common source of the gap between what a borrower expects to qualify for and what they are actually approved for.
• Limiting factor — tells you which lever to pull. If income is binding, paying down revolving debt or adding a co-applicant moves the number; if down payment is binding, only a larger down payment or a lower price does.
• Cash needed to close — land transfer tax, legal fees and title insurance sit on top of your down payment and have to come from the same pool of funds, which is a common source of last-minute closing stress.

Using your results well

Start with your real numbers, then run the calculation again with $10,000 more down payment and again with your credit card balance at zero. Comparing those three results shows you exactly which lever moves your maximum price the most, and by how much.

What this calculator deliberately does not do is guarantee an approval. It does not know your credit score, your employment history, whether your income is salaried or self-employed, or a specific lender's overlays on top of the standard ratios — all of which a real underwriter weighs. It also assumes a 1% property tax estimate rather than your specific municipality's rate, which can move the answer by a few thousand dollars on a higher-tax city.

• Compare your result with a larger down payment and with your revolving debt paid down
• Treat the maximum price as a ceiling to shop under, not a target to spend up to
• Check the cash-to-close estimate against your actual savings before you start touring homes
• Get a real pre-approval before writing an offer — it confirms this number against your documents
• Remember this figure will move at every renewal as rates and your income change

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