Mortgage Affordability Calculator

Before you start shopping for a home, it's important to understand not just how much mortgage you can qualify for, but how much home you can realistically afford. While lenders use income, debt levels, and housing costs to determine your borrowing limit, affordability is ultimately about finding a home that fits comfortably within your budget and long-term financial goals.

Let’s explore how mortgage affordability is calculated in Canada, what lenders look for when assessing your application, and the steps you can take to increase your purchasing power.

August 2026 Canadian mortgage affordability update

Ratehub.ca’s July 2026 Home Affordability Report found that buying a home became more affordable in 10 of 13 Canadian markets studied. The main factor behind the shift was falling home prices rather than lower borrowing costs. The average five-year fixed mortgage rate among Canada’s Big Five banks edged down slightly, from 4.57% in June to 4.54% in July. That reduced the mortgage stress test rate used in Ratehub.ca’s calculations from 6.57% to 6.54%, but the three-basis-point change was too small to meaningfully impact affordability.

Vancouver experienced the most significant improvement, as the average home price fell by $10,300 in July. As a result, the annual income needed to qualify for the average-priced home decreased by $2,540, from $226,400 in June to $223,860 in July. Monthly mortgage payments also declined by $70, translating to savings of approximately $840 per year. Hamilton posted the second-largest affordability improvement, with the income required falling by $1,850 as its average home price declined by $7,600. Toronto ranked third, with buyers needing $1,680 less in annual income after the average home price fell by $6,200. Monthly mortgage payments declined by $51 in Hamilton and $47 in Toronto.

Only Ottawa, Fredericton and St. John’s became less affordable in July, but the increases in required income were comparatively small. Buyers in Ottawa needed just $20 more in annual income, while the required income increased by $430 in Fredericton and $590 in St. John’s.  Looking ahead, the Bank of Canada’s upcoming September 2 rate announcement will influence the future of variable mortgage rates. Fixed mortgage rates remain tied more closely to Government of Canada bond yields and have not followed the Big Five average lower across the board. The lowest insured five-year fixed mortgage rate is currently 4.09%, 10 basis points higher than the previous month, although shorter-term discounted options remain below 4%, including a two-year fixed rate at 3.89% and a three-year fixed rate at 3.94%.

How to use the mortgage affordability calculator

Step 1: Start by entering your annual income, your co-applicant's income (if applicable), your down payment amount, and the location of your future home. You'll also be asked to select an amortization period.

Step 2: Enter expenses such as property taxes, condo fees, and heating costs, along with any existing debt payments, including credit cards, car loans, and other loans. If you don't know your housing costs, the calculator can estimate them for you.

Step 3: Based on the information you provide, the calculator will estimate the maximum home price you can afford and the total mortgage amount required.

Step 4: Adjust your mortgage rate, amortization period, down payment, and payment frequency to see how they affect your mortgage payment and affordability.

Step 5: The calculator also estimates your required cash to close, including your down payment, mortgage default insurance (if applicable), and closing costs, as well as your ongoing monthly housing expenses.

How much mortgage can I afford?

The amount of mortgage you can afford is the amount you can comfortably borrow and repay while still meeting your other financial goals. When determining how much home you can realistically afford, consider:

• Your monthly take-home income
• Your savings and emergency fund
• Your down payment
• Existing debt payments, such as car loans or student loans
• Ongoing homeownership costs, including property taxes, utilities, insurance, maintenance, and condo fees
• Future financial goals, such as retirement savings, travel, or starting a family

A common mistake is to shop for homes based solely on the maximum amount a lender is willing to approve. Instead, focus on a mortgage payment that leaves room in your budget for both expected expenses and unexpected costs. The mortgage affordability calculator above can help you estimate a home price range that aligns with your financial circumstances.

How lenders determine mortgage affordability

While personal affordability is based on your budget and financial goals, lenders use specific qualification criteria to determine how much you can borrow. Most lenders assess affordability using two debt service ratios:

In addition to these ratios, lenders also consider:

• Income: Employment income, bonuses, commissions, rental income, and other eligible sources of income.
• Down payment: A larger down payment reduces the amount you need to borrow and can increase the amount you may qualify for.
• Credit history and score: Lenders review your credit history to assess how responsibly you've managed debt in the past.
• The mortgage stress test: Most borrowers must qualify at the greater of their contract rate plus 2% or 5.25%, helping ensure they can continue making mortgage payments if interest rates rise.