Understanding and Using the Mortgage Affordability Calculator

Understanding and Using the Mortgage Affordability Calculator

Before you search through property listings, try using our Mortgage Affordability Calculator to figure out your mortgage affordability.

What is affordability and how does it relate to getting a mortgage?

When we talk about affordability in real estate, it refers to examining and calculating everyday costs you currently take on. Affordability determines how much you can offer to make in monthly mortgage payments without financial strain.


Your lender takes a few, yet important factors in mind to decide how much you’ll get as a loan.


Factors your lender considers are:


  • Your annual income (and the income of your co-applicant, if necessary)
  • Any debt payments you make (student loans, lines of credit, auto loans, credit cards, etc.)  
  • Your down payment
  • Utilities, such as heating costs
  • Property taxes
  • Condo fees   

Your annual income and debt payments are the two most important factors (besides your down payment) your lender considers.  To assess your eligibility, your lender calculates two types of debt service ratios to estimate your mortgage affordability.

How affordability is calculated

Gross Debt Service Ratio


The Gross Debt Service ratio is calculated by your lender adding up all of your monthly housing costs (including property taxes and heating expenses) and dividing the resulting amount by your annual income. The Gross Debt Service ratio is expressed by a percentage.  The CMHC recommends a Gross Debt Service ratio remains below 32% of your gross monthly income for affordability.


Total Debt Service Ratio


The Total Debt Service ratio is calculated by adding your monthly housing costs to any other debt you have. This can include credit card payments, car payments, and student loan repayments. Your total debts are divided by your annual income, which is also a percentage. For this ratio, the CMHC suggests a TDS ratio of no more than 40%.    


So how do I use the Mortgage Affordability Calculator?

To use the calculator effectively, you should have a few vital details organised. Your calculations will reflect your personal financial situation accurately.


Information that you’ll need upfront includes:


  • Your gross annual income(s)
  • Monthly living costs (heating, property tax and condo fees)
  • Monthly debt payments
  • How much you intend to offer as a down payment

Once you have this information available, inputting it into the calculator is a fairly straightforward process.


To illustrate how easy the calculator is to use, let’s run through a scenario together.

Cindy and Pierre

Cindy and Pierre want to buy a two-bedroom condo in the Toronto area. They estimate that they can afford a mortgage so long as it’s not over $475,000. To figure out if they can qualify for one, they use the Mortgage Affordability calculator. They start by entering their annual incomes before taxes.


Pierre is the primary applicant and adds Cindy’s income to increase their funding.


After entering their incomes, they input their monthly expenses into the calculator.



Cindy and Pierre then tally how much they spend on credit card payments and other forms of debt. Neither Cindy nor Pierre own a car, so they leave that section blank.


Cindy and Pierre saved $20,000 and were provided $20,000 from their parents to make a down payment. The condo they want to buy costs just over $410,000. They can afford to add $10,000 more to their deposit if needed.  They choose a fixed-rate mortgage at 25 years amortization.


Since their down payment is less than 25% of the potential mortgage, their lender conducts a CMHC stress test. The stress test calculates their mortgage at the government’s rate of 4.64%.


Cindy is curious to know how far their money will go. She inputs their deposit amount ($40,000) to see if they can still afford the mortgage.


She gets the following results:



Pierre talks to Cindy about adding extra savings along with $5,000 from a line of credit. Doing this now makes their 10% down payment worth $55,000 (or 13%).


 They enter the new down payment amount into the affordability calculator and see:  



Adding $15,000 to their down payment increases their affordability and gives them more purchasing power.


Like Cindy and Pierre, you may want to consider many down payment plans. These plans should be within and comfortably outside your budget. Doing so gives you greater flexibility and freedom to purchase a more or less expensive home.

Why is how much I offer as a down payment considered in an affordability calculator?

The down payment you make changes how much of a mortgage loan you’ll have to take.  Making a higher down payment means not paying several thousands of dollars in interest. If you put down more than 25%, then you won’t have to pay for default insurance.


What are some limitations of using the Affordability Calculator?

While the Affordability Calculator is helpful, it does come with some limits.


Getting a loan to buy your home depends on your credit score, property location, zoning of the property, and the status of your condo corporation (if applicable).


Setting an appointment with a mortgage broker or financial adviser is highly recommended for getting the bigger picture.


Photo credit: cafecredit via Visual Hunt / CC BY  


Use the Affordability Calculator Now! 



A Maryland native and Toronto-area transplant/graduate of the University of Toronto, Christine is a content writer at Loanerr. When not writing articles, she's an avid swimmer, cat lover, violinist in a indie band, and a humble food aficionada.