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How Much House Can You Afford?

Canada Mortgage and Housing Corporation (CMHC) offers some basic rules to determine what you can afford.

There are 2 basic rules to follow:

  1. Monthly “housing costs” (mortgage payments, property taxes and heating expenses) should not be more than 32% of your gross monthly income
  2. Your entire monthly debt load (housing costs + other loans) should not be more than 40% of your gross monthly income.

The easiest way to find out what you can afford is to walk into your preferred financial institution and have them do the calculations for you. Your agent can help you with a list of mortgage providers. If, however, you would like to get a basic idea of what you can afford, CMHC offers a basic calculator you can use – below.

Mortgage Affordability Calculator

 
Mortgage Calculator by ratehub.ca


For a residential property, if you do not have a minimum of 20% as a down payment, you will need mortgage loan insurance from CMHC. The calculator will automatically add this for you if necessary.

It is a very good idea to get pre-approved for a mortgage before you start house shopping. Your Realtor® will strongly suggest this. There is nothing more disappointing than to fall in love with a home and then discover that it is beyond your means.

Bottom line, your lender decides what you can borrow but YOU must decide what you can afford. In the long run, your own peace of mind and security is what matters most.