Mortgage Affordability Calculator
When searching for a new home, the first step is to figure out how much you can afford. Ratehub.ca takes the most important factors like your income and expenses and determines the maximum purchase price that you can qualify for with our mortgage affordability calculator.
WATCH: 2025 mortgage rule changes for homebuyers
WATCH: How to take advantage of future lower rates
Frequently Asked Questions
How do I calculate my affordability?
What is the minimum down payment I can make?
What is mortgage default insurance?
How much mortgage can I afford?
When I use the calculator, why does the Land Transfer Tax (LTT) line item change if I toggle to the First-Time Home Buyer option?
What is the Estoppel certificate fee?
How much mortgage can I get with a $70,000 salary?
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Guide to mortgage affordability
Jamie David, Sr. Director of Marketing and Mortgages
Why calculate mortgage affordability?
When you're looking to buy a home, it's handy to know how much you can afford. Being able to calculate an estimate of how much you're able to borrow is an important part of setting your budget.
“How much house can I afford?” is a common question when starting the property hunt; you also need to determine if you have enough cash resources to purchase a home. The cash required is derived from the down payment put towards the purchase price, as well as the closing costs that must be incurred to complete the purchase. We can help you estimate these closing costs with the Cash Needed tab under the mortgage affordability calculator above.
Taken together, understanding how large a mortgage you can afford to borrow and the cash requirements involved will help you determine what kind of home you should be searching for.
Market factors influencing affordability
Rates have trended lower in the early months of 2025, largely due to the heightened economic uncertainty caused by new U.S. tariffs on Canadian goods and Canada’s retaliatory measures. These tariffs, and potential resulting job losses, could tip the economy into a recession. In response, investors have flocked to safer assets, driving down bond yields in the 2.5-2.6% range and by extension, fixed mortgage rates.
The Bank of Canada has also cut its overnight lending rate multiple times to bolster the economy, which has further lowered variable mortgage rates. While this creates an opportunity for more affordable monthly payments, it also increases the risk of job losses and wage stagnation in a more volatile housing market. Should the economy slip into stagflation, where prices rise even as growth slows, the central bank could find itself compelled to hike rates sooner rather than later.
March 2025 Canadian mortgage affordability update
In February 2025, Canada saw a notable improvement in housing affordability as dropping mortgage rates helped ease the financial burden for home buyers. According to Ratehub.ca’s latest Affordability Report, eight out of 13 major markets experienced better affordability conditions compared to the previous month.
This turnaround was largely driven by lower borrowing costs following the Bank of Canada’s sixth rate cut on January 29, which reduced variable mortgage rates (its seventh cut, on March 12, is not captured in this data). Fixed rates also dipped as bond yields fell amid concerns over U.S. tariffs. With an average five-year fixed mortgage rate falling from 4.7% in January to 4.55% in February — and the corresponding stress test rate decreasing by the same amount — buyers saw relief in the monthly mortgage payments even as some cities recorded higher home prices.
Among the cities surveyed, Hamilton led the improvement with the required income to purchase an average home dropping by $3,450, largely due to a significant price decline that also trimmed monthly payments by $100. Toronto, despite an uptick in its average home price, still managed to lower the qualifying income by $2,090 and reduce monthly payments by $64. Meanwhile, Vancouver, while grappling with a $10,700 increase in home prices, experienced a modest improvement in affordability with a $1,000 reduction in required income.
Despite ongoing uncertainty spurred by U.S. tariff fears — which have already contributed to a 10% decline in national home sales — the easing of mortgage rates has provided some relief for homebuyers. Looking ahead, while further rate cuts could potentially improve affordability even more, the economic outlook remains uncertain as inflation trends and tariff developments continue to unfold.
Read more- Dropping mortgage rates made it easier to buy a home in February
What is mortgage affordability?
Mortgage affordability refers to how much you’re able to borrow based on your current income, debt and living expenses. It’s essentially your purchasing power when buying a home. The higher your mortgage affordability, the more expensive a home you can afford to purchase.
The term ‘affordability’ is also used to describe overall housing affordability, which has more to do with the cost of living in a particular city. If the cost of housing relative to the average income in a city is high, it will be seen as a less affordable place to live. The two terms are related, but it’s important to understand the difference.
There are many factors that will affect the maximum mortgage you can afford to borrow, including the household income of the applicants purchasing the home, the personal monthly expenses of those applicants (car payments, credit expenses, etc.) and the expenses associated with owning a home (property taxes, condo fees and heating costs, etc.).
How much can I afford?
How much you can afford to spend on a home in Canada is primarily determined by how much you can borrow from a mortgage provider. That is, unless you have enough cash to purchase a property outright, which is unlikely. Use the mortgage affordability calculator above to figure out how much you can afford to borrow based on your current situation.
How to use the mortgage affordability calculator
To use our mortgage affordability calculator, simply enter your and your co-applicant’s income (if applicable), as well as your living costs and debt payments. The calculator can estimate your living expenses if you don’t know them.
With these numbers, you’ll be able to calculate how much you can afford to borrow. You can also change your amortization period and mortgage rate to see how that would affect your mortgage affordability and your monthly payments.
How to estimate affordability
There is a rule of thumb about how much you can afford, based on the calculations your mortgage provider will make. Your lender will use two debt ratios when determining whether you can afford a mortgage. These ratios are called the Gross Debt Service (GDS) ratio and Total Debt Service (TDS) ratio. They take into account your income, monthly housing costs and overall debt load.
The first affordability guideline, as set out by the Canada Mortgage and Housing Corporation (CMHC), is that your monthly housing costs – mortgage principal and interest, taxes and heating expenses (P.I.T.H.) - should not preferably not exceed 32% of your gross household monthly income, up to a maximum of 39%. For condominiums, P.I.T.H. also includes half of your monthly condominium fees.
The second requires that your total debt load (which includes housing costs), totals no more than between 40% - 44% of your gross household income. In addition to housing costs, your total monthly debt load would include credit card interest, car payments and other loan expenses. The sum of your total monthly debt load as a percentage of your gross household income is your TDS ratio.
Maximum limits
While the general preferred guidelines for GDS and TDS are 32% and 40% respectively, most borrowers with good credit and steady income are allowed to qualify at the upper end of the debt-ratio thresholds.
The maximum GDS limit used by most lenders to qualify borrowers is 39% and the maximum TDS limit is 44%. Our mortgage calculator uses these maximum limits to estimate affordability.
On July 1st, 2020, the CMHC implemented new GDS and TDS limits for mortgages that it insured, with the new GDS limit for CMHC-insured mortgages becoming 35% and the new TDS limit for CMHC-insured mortgages becoming 42%. However, on July 5, 2021, these updated requirements for insured mortgages were reversed, and the GDS and TDS limits reverted to 39% and 44%, respectively.
Stay on top of your debt ratios: check out Ratehub.ca's credit card interest calculator
The CMHC changes had fairly minimal impact on borrowers, as Sagen and Canada Guaranty, the two other mortgage insurance providers in Canada, did not change their maximum limits. Consequently, mortgage lenders continued to use the old maximum GDS/TDS limits of 39/44 available through these other insurers. The main result of CMHC's temporary change in requirements was a major loss in market share, which is why the more stringent requirements were reversed in June 2021.
Down payment
Your down payment is a benchmark used to determine your maximum affordability. Ignoring income and debt levels, you can determine how much you can afford to spend using a simple calculation.
If your down payment is $25,000 or less, you can find your maximum purchase price using this formula:
Down Payment ÷ 5% = Maximum Affordability
If your down payment is $25,001 or more, you can find your maximum purchase price using this formula:
Down Payment Amount - $25,000) ÷ 10% + $500,000 = Maximum Affordability
For example, let's say you have saved $50,000 for your down payment. The maximum home price you could afford would be:
($50,000 - $25,000) ÷ 10% + $500,000 = $750,000
Any mortgage with less than a 20% down payment is known as a high-ratio mortgage, and requires you to purchase mortgage default insurance, often referred to as CMHC insurance (though, as noted above, mortgage default insurance is also provided by Sagen and Canada Guaranty).
Cash requirement
In addition to your down payment and mortgage default insurance, you should set aside 1.5% - 4% of your home's selling price to cover closing costs, which are payable on closing day. Many home buyers forget to account for closing costs in their cash requirements.
Other mortgage qualification factors
In addition to your debt service ratios, down payment and cash for closing costs, mortgage lenders will also consider your credit history and your income when qualifying you for a mortgage. All of these factors are equally important. For example, even if you have good credit, a sizeable down payment and no debts, but an unstable income, you might have difficulty getting approved for a mortgage.
Keep in mind that the mortgage affordability calculator can only provide an estimate of how much you'll be approved for, and assumes you’re an ideal candidate for a mortgage. To get the most accurate picture of what you qualify for, speak to a mortgage broker about getting a mortgage pre-approval.
How to increase your mortgage affordability
If you want to increase how much you can borrow, thus increasing how much you can afford to spend on a home, there are few steps you can take.
1. Save a larger down payment: The larger your down payment, the less interest you’ll be charged over the life of your loan. A larger down payment also saves you money on the cost of mortgage default insurance.
2. Get a better mortgage rate: Shop around for the best mortgage rate you can find, and consider using a mortgage broker to negotiate on your behalf. A lower mortgage rate will result in lower monthly payments, increasing how much you can afford. It will also save you thousands of dollars over the life of your mortgage.
3. Increase your amortization period: The longer you take to pay off your loan, the lower your monthly payments will be, making your mortgage more affordable. However, this will result in you paying more interest over time.
These are just a few ways you can increase the amount you can afford to spend on a home, by increasing your mortgage affordability. However, the best advice will be personal to you. Find a licensed mortgage broker near you to have a free, no-obligation conversation that’s tailored to your needs and free of charge.
4. Take advantage of the proposed GST exemption: In March 2025, Prime Minister Mark Carney’s government introduced a plan to remove the 5% GST for first-time home buyers who purchase newly constructed or substantially renovated homes priced up to $1 million. The Conservative Party has also floated a similar proposal that would extend the exemption to homes valued up to $1.3 million, without limiting eligibility to first-time buyers. The exact scope of this policy will depend on the outcome of the federal election on April 28, 2025.