Mortgage Availability Calculator Canada

Mortgage Availability Formula:

\[ \text{Max Loan} = \frac{\text{Gross Annual Income} \times \text{GDS Ratio Limit}}{12 \times \text{Monthly Interest Rate} \times (1 + \text{Monthly Interest Rate})^{\text{Amortization Period}}} \times \left(1 - (1 + \text{Monthly Interest Rate})^{-\text{Amortization Period}}\right) \]

Gross Annual Income:

CAD

GDS Ratio Limit:

Annual Interest Rate:

Amortization Period:

years

Maximum Loan Available:

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1. What is Mortgage Availability?

Mortgage availability refers to the maximum loan amount a borrower can qualify for based on their income, debt levels, and current interest rates. In Canada, lenders typically use the Gross Debt Service (GDS) ratio to determine affordability.

2. How Does the Calculator Work?

The calculator uses the standard mortgage qualification formula:

Where:

\( \text{Gross Annual Income} \) — Your pre-tax yearly income
\( \text{GDS Ratio Limit} \) — Typically 32% in Canada (39% with TDS)
\( \text{Monthly Interest Rate} \) — Annual rate divided by 12
\( \text{Amortization Period} \) — Loan repayment period in years

Explanation: The formula calculates the maximum loan amount that keeps your housing costs within the GDS ratio limit.

3. Importance of GDS Ratio

Details: The Gross Debt Service ratio is a key metric Canadian lenders use to assess mortgage affordability. It represents the percentage of your gross income needed to cover housing costs (mortgage payments, property taxes, heating, and 50% of condo fees if applicable).

4. Using the Calculator

Tips: Enter your gross annual income before taxes, the GDS ratio (default is 32%), current interest rate, and desired amortization period (maximum 25 years for insured mortgages).

5. Frequently Asked Questions (FAQ)

Q1: What is the standard GDS ratio in Canada?
A: Most Canadian lenders use 32% as the GDS limit, though some may go up to 39% when considering Total Debt Service (TDS) ratio.

Q2: Does this include property taxes and insurance?
A: The GDS ratio includes these costs, but this calculator provides the maximum mortgage amount before those expenses.

Q3: What's the maximum amortization period in Canada?
A: For insured mortgages, the maximum is 25 years. For uninsured mortgages, some lenders offer up to 30 years.

Q4: How does the stress test affect my qualification?
A: Since 2018, Canadian borrowers must qualify at the higher of the contract rate + 2% or 5.25%.

Q5: What other factors affect mortgage approval?
A: Lenders also consider credit score, employment history, down payment amount, and other debt obligations.