Mortgage Affordability Calculator
July 5th, 2021: Expanded Criteria for CMHC Insurance
The CMHC has announced on July 5th, 2021 that they will be changing their guidelines for determining mortgage affordability. These changes include:
- Qualifying credit scores for mortgage insurance (for mortgages with less than 20% down payment) will decrease to 600 from 680.
- Gross Debt Service (GDS) and Total Debt Service (TDS) ratio limits will increase to 39% (from 35%) and 44% (from 42%) respectively.
How is my affordability calculated?
Here’s a breakdown of each factor impacting your home affordability and the limit it places on your asking price. Your affordability is the minimum of all the values shown.
| Limiting Factor | Purchase Price Limit | |
|---|---|---|
| Minimum Down Payment | $ | 850,000850k |
| TDS Ratio | $ | 00 |
| GDS Ratio | $ | 00 |
| Total Expenses | $ | 1,213,0001.21m |
- Your down payment directly imposes a limit on your maximum asking price.
- Under CMHC regulations, your total debt service (TDS) ratio cannot exceed 44%. The TDS ratio is calculated by dividing your total annual housing-related and debt expenses by your gross annual income. These expenses include:
- Your mortgage payment (both principal and interest)
- Your property tax
- Your heating costs
- Half of your condo fees (if applicable)
- All forms of debt payments
- Under CMHC regulations, your gross debt service (GDS) ratio cannot exceed 39%. The GDS ratio is calculated by dividing your annual housing-related expenses by your gross annual income. These expenses include:
- Your mortgage payment (both principal and interest)
- Your property tax
- Your heating costs
- Half of your condo fees (if applicable)
- Your total monthly expenses cannot exceed your net (after-tax) monthly income.
Stress Testing
Mortgage Stress Test Rates Rising to 5.25%
New Stress Test Rate for Uninsured Mortgages: The higher of 5.25% and your mortgage rate + 2%
New Stress Test Rate for Insured Mortgages: The higher of 5.25% and your mortgage rate + 2%
Affordability calculators need to take into account government stress testing regulations published by the Office of the Superintendent of Financial Institutions (OSFI). You must still be able to afford your mortgage payments if your interest rate increases to the greater of:
- the Bank of Canada five-year benchmark rate of 5.25% (effective June 1st), and
- your current or target interest rate plus 2% (effective June 1st). See our stress-test calculator for more details.
RBC Royal Bank Mortgage Affordability
Before you get a mortgage from RBC, it is important to know how RBC calculates your mortgage affordability. RBC takes into account the following factors:
- Your household income
- Your down payment
- Your monthly debt payments to loans and lines of credit including credit cards, car loans, student loans, and leases.
If your down payment is less than 20%, RBC's mortgage affordability calculator also considers your mortgage insurance premiums. Unlike some other mortgage affordability calculators, RBC's mortgage affordability calculator does not take into account your location for property taxes and utility costs.
RBC calculates your mortgage limit using the current qualification rate and a maximum gross debt service (GDS) ratio of 32% and a maximum total debt service (TDS) ratio of 40%. These ratios are more strict than CMHC regulations, but you may still be able to get a mortgage with RBC even if you exceed these limits.
Another factor in determining your mortgage affordability is your down payment. According to RBC, home buyers must have a minimum 5% down payment for homes worth less than $500K. For homes between $500K and $1M, home buyers must have at least 5% for the first $500K and 10% for the remaining amount. For homes worth more than $1M, home buyers must have a minimum 20% down payment.
The above content is based on on our analysis of RBC's tools and software, and should be used for informational purposes only. WOWA.ca does not represent RBC and cannot guarantee the accuracy of the content. For the most up-to-date and accurate information, please consult with a mortgage broker or your local RBC branch advisor or mortgage specialist. Official calculator available on RBC's website.
Scotiabank Mortgage Affordability
Before you get a mortgage from Scotiabank, it is important to know how Scotiabank calculates your mortgage affordability. Scotiabank takes into account the following factors:
- Your household income
- Your property taxes
- Any applicable condo fees or heating costs
- Your monthly debt payments to loans and lines of credit including credit cards, car loans, student loans, and leases.
Scotiabank's mortgage affordability calculator does not take into account your down payment. Instead, it finds your maximum mortgage limit and calculates your minimum down payment for a home with that amount of mortgage.
Scotiabank calculates your mortgage limit using the current qualification rate and a maximum gross debt service (GDS) ratio of 39% and a maximum total debt service (TDS) ratio of 44%. This means that your mortgage payment, property tax, heating costs, and half of your condo fees (if applicable) cannot take up more than 39% of your gross income. In addition, this amount plus your total debt payments cannot take up more than 44% of your gross income.
Another factor in determining your mortgage affordability is your down payment. According to Scotiabank, home buyers must have a minimum 5% down payment for homes worth less than $500K. For homes between $500K and $1M, home buyers must have at least 5% for the first $500K and 10% for the remaining amount. For homes worth more than $1M, home buyers must have a minimum 20% down payment.
The above content is based on on our analysis of Scotiabank's tools and software, and should be used for informational purposes only. WOWA.ca does not represent Scotiabank and cannot guarantee the accuracy of the content. For the most up-to-date and accurate information, please consult with a mortgage broker or your local Scotiabank branch advisor or mortgage specialist. Official calculator available on Scotiabank's website.
TD Bank Mortgage Affordability
Before you get a mortgage from TD Bank, it is important to know how TD calculates your mortgage affordability. TD takes into account the following factors:
- The location of your future home
- Whether your future home is a detached home or condo
- Your household income
- Your down payment
- Your monthly bills and expenses including groceries, transportation, shopping, and insurance.
- Your monthly debt payments to loans and lines of credit including credit cards, car loans, student loans, and leases.
Your location and property type are used to provide estimates for your potential property taxes, utilities, and condo fees.
TD calculates your mortgage limit using the current qualification rate and a maximum gross debt service (GDS) ratio of 39% and a maximum total debt service (TDS) ratio of 44%. This means that your mortgage payment, property tax, heating costs, and half of your condo fees (if applicable) cannot take up more than 39% of your gross income. In addition, this amount plus your total debt payments cannot take up more than 44% of your gross income.
Another factor in determining your mortgage affordability is your down payment. According to TD, home buyers must have a minimum 5% down payment for homes worth less than $500K. For homes between $500K and $1M, home buyers must have at least 5% for the first $500K and 10% for the remaining amount. For homes worth more than $1M, home buyers must have a minimum 20% down payment.
The above content is based on on our analysis of TD's tools and software, and should be used for informational purposes only. WOWA.ca does not represent TD and cannot guarantee the accuracy of the content. For the most up-to-date and accurate information, please consult with a mortgage broker or your local TD branch advisor or mortgage specialist. Official calculator available on TD's website.
BMO Bank of Montreal Mortgage Affordability
Before you get a mortgage from BMO, it is important to know how BMO calculates your mortgage affordability. BMO takes into account the following factors:
- Your household income
- Your property taxes
- Your heating costs
- Any applicable condo fees or maintenance costs
- Your monthly debt payments to loans and lines of credit including credit cards, car loans, student loans, and leases.
BMO includes the cost of mortgage insurance in your mortgage affordability calculation. This allows you to borrow more (up to 95% of your future home's value) with a smaller down payment.
BMO calculates your mortgage limit using the current qualification rate and a maximum gross debt service (GDS) ratio of 39% and a maximum total debt service (TDS) ratio of 44%. This means that your mortgage payment, property tax, heating costs, and half of your condo fees (if applicable) cannot take up more than 39% of your gross income. In addition, this amount plus your total debt payments cannot take up more than 44% of your gross income.
Another factor in determining your mortgage affordability is your down payment. According to BMO, home buyers must have a minimum 5% down payment for homes worth less than $500K. For homes between $500K and $1M, home buyers must have at least 5% for the first $500K and 10% for the remaining amount. For homes worth more than $1M, home buyers must have a minimum 20% down payment.
The above content is based on on our analysis of BMO's tools and software, and should be used for informational purposes only. WOWA.ca does not represent BMO and cannot guarantee the accuracy of the content. For the most up-to-date and accurate information, please consult with a mortgage broker or your local BMO branch advisor or mortgage specialist. Official calculator available on BMO's website.
CIBC Mortgage Affordability
Before you get a mortgage from CIBC, it is important to know how CIBC calculates your mortgage affordability. CIBC takes into account the following factors:
- Your household income
- Your down payment
- Your property taxes
- Your heating costs
- Any applicable condo fees
- Your monthly debt payments to loans and lines of credit including credit cards, car loans, student loans, and leases.
CIBC includes the cost of mortgage insurance in your mortgage affordability calculation. This allows you to borrow more (up to 95% of your future home's value) with a smaller down payment.
Another factor in determining your mortgage affordability is your down payment. According to CIBC, home buyers must have a minimum 5% down payment for homes worth less than $500K. For homes between $500K and $1M, home buyers must have at least 5% for the first $500K and 10% for the remaining amount. For homes worth more than $1M, home buyers must have a minimum 20% down payment.
The above content is based on on our analysis of CIBC's tools and software, and should be used for informational purposes only. WOWA.ca does not represent CIBC and cannot guarantee the accuracy of the content. For the most up-to-date and accurate information, please consult with a mortgage broker or your local CIBC branch advisor or mortgage specialist. Official calculator available on CIBC's website.
Mortgage Down payment and Affordability
Your mortgage down payment can impact your mortgage affordability. A larger down payment can reduce your mortgage borrowing, lowering your interest costs and CMHC mortgage insurance premiums. A smaller down payment could lead to higher interest costs, more expensive mortgage insurance and potentially even disqualify you from an insured mortgage if your debt servicing ratios are too high.
Recent changes to CMHC regulations has made it harder to get an insured mortgage, making your down payment even more important. With a down payment of 20% or more, you can have a conventional mortgage without mortgage insurance and skip both the fees and requirements of CMHC mortgage insurance.
How to Increase Your Mortgage Affordability
There are a number of ways that borrowers can increase their mortgage affordability and lower their costs over the lifetime of their mortgage:
- Save up a larger down payment: A larger down payment can lower your mortgage borrowing and lead to smaller payments and less interest over the lifetime of your mortgage. You can also save on CMHC mortgage insurance and skip on mortgage insurance premiums altogether if you have a down payment of 20% or more.
- Increase your credit score: If you have a low credit score, increasing your credit score could help your eligibility for mortgage insurance and better terms on your mortgage. Lenders are more willing to lend more to a borrower who has proven their ability to pay bills on time compared to one who has not.
- Shop around for rates: A lower mortgage interest rate can lower your regular mortgage payments, letting you handle a larger mortgage with your income. It can also save you tens of thousands over the course of your mortgage. Be sure to shop around for the best mortgage rates.
- Check out different lenders: Different lenders will have different standards for lending and offer different terms and conditions on their mortgages. Some offer additional features like RBC's Double-Up program. Going over your options with a mortgage broker can help you get the most from your mortgage.
- Increase your amortization: If you increase your amortization, you can reduce your regular payments and borrow more by spreading out the mortgage over a longer period of time. Doing so may increase your total mortgage interest cost, however, and decrease your choice of mortgage rates and lenders. Before committing to a decision, check how different amortizations will affect your mortgage and your monthly payments.
- Consider a Joint Mortgage: Combining your income with a spouse, friend, or anyone else will help you qualify for a mortgage. The higher joint income will have an easier time meeting debt service ratio requirements. This is known as a joint mortgage. However, if one partner begins missing payments, the other partner will be required to pay the difference or lose the home altogether.
CMHC Insurance
An insured mortgage lets you buy a home with a down payment of less than 20%, giving you more options and flexibility in choosing the right home. In addition, lenders usually offer the lowest mortgage rates to insured mortgages as their risk is covered by your mortgage insurance.
The Canada Mortgage and Housing Corporation (CMHC) is a crown corporation that insures most mortgages in Canada. They charge an upfront fee or premium for mortgage insurance based on the amount of down payment you have or the loan-to-value (LTV) of the mortgage. They offer insurance for mortgages with an LTV of up to 95%. The premium will be added onto your mortgage and amortized over its length. You may have to pay sales taxes on the insurance premium.
Down payment Impact on CMHC Mortgage Insurance Premiums for a $500K Home
CMHC Backs Down From COVID-19 Changes to Insurance Criteria
On July 5, 2021, the Canada Mortgage and Housing Corporation (CMHC) announced that it was reversing changes previously implemented in mid-2020:
- The Gross Debt Servicing (GDS) ratio limit was reset to 39% (previously 35%)
- The Total Debt Servicing (TDS) ratio limit was reset to 44% (previously 42%)
- At least one of the borrowers of the mortgage must have a credit score of at least 600 (previously 680)
Impact of New CMHC Rules on Borrowers
Gross/Total Debt Service (GDS/TDS) Ratios
The higher debt service ratio requirements will allow more borrowers to participate with higher leverage and take out larger mortgages relative to their income. Debt service ratios measure how much of your income will be spent on paying the mortgage, bills associated with your home and payments on other debt.
Credit Scores
The lower credit score requirement of 600 (previously 680) will allow borrowers who have missed bill payments or have a limited credit history to participate in the CMHC insurance program and be eligible for a downpayment as low as 5%.