Maximize Your Home Buying Budget Our Mortgage Affordability Calculator

Use this approvU easy-to-use mortgage affordability calculator to determine how much mortgage you can afford with your current income, debt and credit score.

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Overview Of approvU Mortgage Affordability Calculator

This tool will help you learn what house price you can afford and how much your loan and payment will be when you buy a home.

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What Is Mortgage Affordability?

Mortgage affordability refers to how much you can borrow based on your current income, debt, down payment, and credit score.

A mortgage affordability calculator speeds up determining how much of a home you can afford. The approvU home affordability calculator requires your gross income, down payment amount, how much you spend per month on your other debts, and your credit score range to estimate your house-buying power.

How Much Mortgage Can You Afford?

You need a mortgage if you cannot outright finance your house purchase. In short, most Canadians use mortgage loans of varied types to finance the purchase of their house or refinance their existing mortgage.

A mortgage is a loan secured by a real estates asset, such as a house and chattel.

The house you purchase is used as the collateral for the mortgage. Unfortunately, not all who apply will be granted a mortgage loan because of their credit income or asset situations. Therefore, it is essential to be realistic about how much a mortgage you can afford.

That’s where a home affordability calculator comes in.

A mortgage affordability calculator provides a quick snapshot of the house you can afford at your current income, credit score, down payment and debt load. It also indicates the size of the mortgage needed to buy the house and what you should expect to spend monthly in mortgage payments.

How To Use approvU Mortgage Affordability Calculator

Gross Income

This is your pre-tax and pre-deductions employment income. It also can be income from sources like a child tax credit, alimony, and child support. Suppose you are self-employed and use your business income as your primary income; in that case, your gross income is the business’s net revenue.

Debt Payment Expense

Your debt payment value is how much you must pay each minimum for all your debts. For example, let’s say you are required to pay $200 each month for your loan, $75 for your credit card, $450 for your car lease and $350 for your student loan.

Your debt payment expense will be $1,075.

$200 + $75 + $450 + $350 = $1,075

Mortgage lenders use the information in your credit report to validate the minimum required payments for your debts.

Down Payment

The down payment is the next factor that affects how much house you can afford. When buying an owner-occupied property in Canada, you must put down at least 5% of the house value from your accumulated savings, gifts, inheritance, RRSP, insurance payout and more.

The ultimate amount you have to put down for your house purchase will depend on the purchase price and how you intend to use the property. The 5% down payment is only for owner-occupied or second homes priced at $500,000 and less.

Houses priced over $500,000 up to $999,999 require a minimum down payment of 5% of the first $500,000 and 10% of the balance value of the property up to $999,999.

You will need 20% of the property value of a house priced over $ 1 million.

If the house you buy will be a rental property, you must put down a minimum of 20% of the purchase price.

Down payment amount you will need depends on the house price, property type, credit score, and income type.

The approvU affordability calculator uses your down payment amount to calculate your loan-to-value ratio. A loan-to-value ratio is the mortgage loan’s proportion to the house price. It is a risk metric used by mortgage lenders to qualify you.

Credit Score Range

Select your approximate credit score range. You can quickly get your credit score value from your Banking Mobile App or by signing up with a free credit score report provider, such as Borrowell.

See how your credit score affects your mortgage affordability below.

Learn More: How To Check Your Credit Score For Free In Canada

Why Use approvU Mortgage Affordability Calculator?

There are many reasons why it is worth your time to use an affordability calculator when planning to buy a new house.

Instant Calculation

Mortgage affordability requires an analysis of your current financial and credit situations and your qualification (debt-service) ratios. Trying to do this manually could take you forever.

The approvU mortgage affordability calculator is designed to ease this process and get you the result quickly. Simply select and enter the required information in the respective fields to generate your mortgage affordability report.

Simple Interface

Our calculator is easy to use. We keep updating the calculator to provide you with the best user experience. All the values you need to input are clearly labelled with additional helpful tips on what they are.

The simple interface is another reason you don’t have to struggle to figure out your house-buying power with ‘pen-and-paper calculations.

Minimize Calculation Error

Manual calculations are prone to mistakes. This calculator is configured to weed out the possibility of errors. You are sure to get the correct result if you provide the calculator with the correct values.

Figure Out Your Options Easily

With a calculator like this one, you can easily play around with the input values to get the optimal combinations of income type, credit score range, down payment, debt level and income amount to afford the mortgage for your new home. Armed with that information, you are sure to start your house-buying journey on a good note.

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How Is Your Mortgage Affordability Determine
(Debt-Service Ratios)

These are the qualification ratios behind the mortgage affordability calculator. The calculator uses the information you provide to calculate these ratios. The debt-service ratio comprises a front-end ratio called Gross Debt Service ratio (GDS) and a backend ratio called Total Debt Service (TDS) ratio.

Gross Debt Service Ratio

Also called the front-end ratio, GDS is the percentage of your gross household income covering the housing costs: mortgage payment (principal and interest), property tax, heating cost and 50% condo fee (if applicable).

The lower your GDS ratio, the better. To calculate your

The maximum limit for prime mortgages is 39%. Some B-mortgage lenders can go up to 45%.

Total Debt Service Ratio

Also called the backend ratio, TDS is the percentage of your gross household needed to cover all your debt payments (housing costs and personal debts).

In addition to your housing costs (mortgage payment, condo fee, property tax and heating expense), you will also have to consider your other debts – car loan, credit lines, credit card, student loan, and more – to calculate your TDS ratio.

The acceptable maximum TDS ratio for prime or good credit mortgages is 42%, which can go up to 50% for alternative mortgages.

The lower your TDS ratio, the better

Mortgage Affordability Qualifying Rate

The minimum qualifying rate is either the stress test rate of 5.25% or the rate offered by your lender plus 2% – whichever is higher.

So, if a lender offers you a rate of 3.48%, your qualifying rate will be 5.48%, which is the provided rate (3.48%) plus 2%.

However, if you’re offered a rate of 2.29% for your mortgage application, your qualifying rate will be 5.25%, which is the stress test rate.

Note that the higher rate is used in either scenario to qualify you for a mortgage. In the first scenario, your offered rate of 3.48% plus the 2% margin rate is higher than the stress test rate of 5.25%

And with the second scenario, the stress test rate of 5.25% is higher than your offered (2.29%) plus the margin rate of 2%.

How Does Income Affect Your Mortgage Affordability?

How you generate the income used to pay the mortgage affects how much of a down payment you will need towards purchasing your house and the loan type you can qualify for.

Lenders are required to validate that you have sufficient money to pay the mortgage. They are also required by law to validate where the funds used to pay down the mortgage will come from.

You can get your income from employment, disability, or pension. These sets of income sources are called fully-verifiable incomes. You can buy a house with a low down payment of 5% of the house price.

It is easy to validate these incomes with a copy of your employment letter, pay stub, income tax filing documents, and Notice of Assessment. The other income sources cannot be validated with these documents.

This set of income falls under the non-verifiable income category. Within this income, you will need a minimum of 20% to buy a house.

How Does Credit Score Affect Your Mortgage Affordability?

Your credit score will determine the type of mortgage you can qualify for, the approximate interest rate you will get, the minimum required down payment and where you should go for that mortgage type.

680 And Above Credit Score Range

High Gross Debt Ratio and Total Debt Ratio of 39% and 44%, respectively. These higher debt-to-income ratios will allow you to qualify for a higher mortgage amount.
Low down payment of 5% for properties priced less than $500,000, 10% of the value of the house more than $500,000 to $999,999, and 20% of the purchase price for homes priced at more than $1 million

600 to 679 Credit Score Range

You will qualify for Low GDS and TDS ratios of 35% and 42%
Low down payment of 5% for properties priced less than $500,000, 10% of the value of the house more than $500,000 to $999,999, and 20% of the purchase price for homes priced at more than $1 million

500 to 599 Credit Score Range

Bad credit mortgage credit score range
You qualify for high GDS and TDS ratios of 45% and 50%, respectively, making it easy to qualify for a mortgage with a credit score in this range.
A high down payment is required to buy a house with a credit score in this range. You need a minimum of 20% of the purchase price as a down payment to buy a home with a bad credit score.

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How Does The Property Usage Affect Your Mortgage Affordability?

How you intend to use the property is another variable to determine your minimum down payment amount and, ultimately, your mortgage affordability.

If you intend to rent the new house, you will need to put down at least 20% of the purchase price, regardless of which lender you choose to go with, your income type, and your credit score range.

But if you intend to use the property as your principal residence, your minimum down payment will depend on your credit score range as outlined above.

How To Increase Your Mortgage Affordability

Remember that GDS and TDS ratios are guidelines and not written-in-stone rules. A lender will look at other aspects of your file to substantiate your high affordability ratios (debt service ratios).

Below are a few things you can do to bring down your ratios:

Pay-Off Debts: If you choose to pay off some of your debts, those amounts will be excluded from your TDS calculation, which will help reduce your TDS ratio.
Reduce Your Loan Amount: This option will help if your GDS ratio is also out of line. Everything being equal, reducing the requested loan amount will help reduce the required monthly mortgage payment. If you buy a new home, you will have to increase your down payment to reduce your loan amount.
Go For Lower-Priced Homes: Another option is to purchase a lower-priced house.
Consider Alternative Mortgage: Alternative mortgages accept a TDS ratio of up to 50% and a GDS ratio of up to 45%. An alternative mortgage is a better option if you get declined for a mortgage by your bank because either your TDS or GDS ratio is outside their acceptable guideline range.
Increase your Income: Increasing your income will help reduce your GDS and TDS ratios. That may mean adding a co-application of a cosigner with low debt obligations to the mortgage request to help boost your income.

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Maximize Your Home Buying Budget Our Mortgage Affordability Calculator

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Overview Of approvU Mortgage Affordability Calculator

Shop Across 25+ Lenders For Your Best Mortgage Deals

What Is Mortgage Affordability?

How Much Mortgage Can You Afford?

How To Use approvU Mortgage Affordability Calculator

Gross Income

Debt Payment Expense

Down Payment

Credit Score Range

Why Use approvU Mortgage Affordability Calculator?

Instant Calculation

Simple Interface

Minimize Calculation Error

Figure Out Your Options Easily

Shop Across 25+ Lenders For Your Best Mortgage Deals

How Is Your Mortgage Affordability Determine (Debt-Service Ratios)

Gross Debt Service Ratio

Total Debt Service Ratio

Mortgage Affordability Qualifying Rate

How Does Income Affect Your Mortgage Affordability?

How Does Credit Score Affect Your Mortgage Affordability?

680 And Above Credit Score Range

600 to 679 Credit Score Range

500 to 599 Credit Score Range

Shop Across 25+ Lenders For Your Best Mortgage Deals

How Does The Property Usage Affect Your Mortgage Affordability?

How To Increase Your Mortgage Affordability

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Get A Mortgage With approvU

How Is Your Mortgage Affordability Determine
(Debt-Service Ratios)