How this calculator works
Canadian lenders test two ratios against gross household income. The gross debt service ratio caps the cost of the home, mortgage payment plus property tax plus heating plus half of any condo fees, at 32% of monthly income, and the total debt service ratio caps that cost plus every other debt payment at 40%. This page uses those conventional guidelines, which are the ones most lenders work to and the ones that keep a file comfortably inside every insurer's limit. CMHC's own maximums for an insured mortgage are higher, at 39% and 44%. The payment the ratios allow is then priced at the qualifying rate, which is the greater of your expected contract rate plus 2% and the OSFI floor of 5.25%, over the amortization you choose. The largest mortgage is the present value of that payment. Half of a condo fee, the CMHC insurance premium added to the loan, closing costs, the down payment and any lender's own tighter limits are not modelled.
Formula
Qualifying rate = max(contract rate + 2%, 5.25%). Housing costs = property tax / 12 + heating. GDS payment = 0.32 x monthly income - housing costs. TDS payment = 0.40 x monthly income - housing costs - other debt payments. Payment = max(0, the smaller of the two). Mortgage = payment x (1 - (1 + r)^-n) / r, where r is the qualifying rate divided by 12 and n is the amortization in months.
Worked example
A household earning $120,000 with $4,000 of property tax, $150 of heating and $500 of other debt can put $2,716.67 a month toward housing under the 32% ratio: $3,200 less $333.33 of tax and $150 of heating. The 40% ratio allows $3,016.67 after the other debts, so the smaller figure applies. At a 5% contract rate the qualifying rate is 7%, and over 25 years $2,716.67 a month supports a $384,372.75 mortgage.
Frequently asked questions
Is 32% and 40% the rule?
They are the conventional guidelines most Canadian lenders apply. A mortgage that needs CMHC insurance can qualify at up to 39% gross and 44% total debt service, so this page is deliberately conservative.
What is the stress test rate?
The rate lenders must use to qualify you, which is the greater of the contract rate plus 2% and the OSFI floor of 5.25%. You pay the contract rate; the higher rate is only used to test whether you can afford it.
What counts as other debt?
Car loans and leases, credit card and line of credit payments, student loans and support payments. Lenders often count 3% of a credit card balance rather than the minimum payment.
Does the down payment change this?
No. This is the largest loan the ratios support, which is the purchase price minus the down payment. Closing costs and the CMHC premium, which is usually added to the loan, are not included.