1. What is the Mortgage Affordability Calculator?

The Mortgage Affordability Calculator estimates how much mortgage you can afford in Canada based on your income and existing debts. It uses the standard formula recommended by many Canadian financial institutions.

2. How Does the Calculator Work?

The calculator uses the affordability formula:

Where:

• \( Income \) — Your annual income in Canadian dollars
• \( Debts \) — Your total annual debt payments in Canadian dollars

Explanation: Most Canadian lenders use a gross debt service (GDS) ratio of 32% and total debt service (TDS) ratio of 40%, which roughly translates to this simplified formula.

3. Importance of Affordability Calculation

Details: Calculating your mortgage affordability helps you understand your home buying power, set realistic expectations, and avoid financial stress.

4. Using the Calculator

Tips: Enter your total annual income and annual debt payments in Canadian dollars. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Is this formula used by all Canadian lenders?
A: While most lenders use similar principles, each may have slightly different criteria. This provides a general estimate.

Q2: What counts as "debts" in this calculation?
A: Include all recurring debt payments like car loans, credit cards, student loans, and other personal loans.

Q3: Does this include the down payment?
A: No, this calculates the mortgage amount you may qualify for. You'll need additional funds for the down payment.

Q4: What if I have variable income?
A: Lenders typically use a 2-year average for variable income earners like self-employed individuals.

Q5: How accurate is this calculator?
A: It provides a good estimate, but actual approval amounts may vary based on credit score, property taxes, heating costs, and other factors.