Our mortgage affordability calculator

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Buying a house is a major life decision, and there are many factors to consider as you decide which one to choose. We imagine that one of the biggest factors for you is the mortgage! The size of your mortgage determines what houses are in your price range. 

What mortgage can you afford, and how do you go about calculating your borrowing capacity? We are here to help answer your questions about mortgage affordability and help you feel more prepared as you take this exciting next step.

How much money can I borrow on a mortgage?

The amount of money that you can borrow with a mortgage depends on your income and your outstanding debt. Lenders will look at a few factors before offering you a mortgage. They will verify that your housing costs (e.g. mortgage payments and property taxes) are under 39% of your monthly income. They will also check your other existing debt (like car loans or credit card payments) to confirm that your total debt payments are under 44% of your monthly income.  

The best way to know how much you can borrow for your mortgage is to use a mortgage calculator like the one at the top of this page. 

This will take into account your financial details such as your household income, down payment, debt payments, monthly utilities, and property taxes. It will give you valuable information about how much mortgage you can afford, and it’s the perfect next step to advance your home buying process. 

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What factors affect how much I can borrow?

Banks and lenders check a few different elements to determine how much you can borrow for your mortgage. These factors affect how much of a mortgage you can afford:

  • Annual gross income
  • Down payment size
  • Monthly living expenses and utilities
  • Credit rating
  • Personal debts
  • Property tax
  • Mortgage interest rate

So this means that the combination of these factors determines the size of the mortgage you can afford. The lender will take them all into account when calculating your mortgage loan.

What is a mortgage affordability calculator?

A mortgage affordability calculator is a tool that gives you an estimate of the total mortgage amount you can potentially borrow. We recommend using HelloSafe’s mortgage affordability calculator! It helps you determine how much of a mortgage loan you can manage. The calculator uses a 2.70% common mortgage interest rate and is based on a 25-year amortization period. Use our fast and accurate mortgage affordability calculator now.

How does a mortgage affordability calculator work?

A mortgage affordability calculator takes into account your personal financial situation and gives you the amount of the mortgage loan you can potentially borrow. 

In the mortgage affordability calculator, enter these numbers: 

  • Your annual gross household income
  • Monthly debt payments
  • Monthly costs/utilities
  • Property tax
  • Your down payment amount

And voilà! You will receive your total mortgage estimate! Don’t skip this important step which helps you determine your borrowing capacity.

Why should I calculate mortgage affordability?

Calculating mortgage affordability saves you time! Rather than searching for houses that are outside of your price range, you can devote your time and energy to finding the best home within your budget. 

Knowing what mortgage you can afford empowers you to make more informed choices. It helps you determine what financial resources you need as you move forward. 

Using our mortgage affordability calculator tool also prevents you from having to crunch the numbers on your own. You’re very welcome!

What is pre-qualification on a mortgage?

Mortgage pre-qualification is a loan estimate that you receive from your lender. Getting prequalified is a short process that can often be completed online with a bank, and they may give you the results on the same day. Pre-qualification helps set your home buying price range.

When requesting mortgage pre-qualification, you will most likely be asked to provide personal financial information regarding:

  • Income 
  • Bank accounts
  • Credit history
  • Down payment amount
  • Desired mortgage amount

Tip: Our mortgage affordability calculator can help you get a ballpark of the mortgage you may qualify got before you make a request to a mortgage lender.

What is a mortgage pre-approval?

Getting a mortgage pre-approval from a bank means that your lender has examined your financial situation and has offered you a specific mortgage amount. A pre-approval is not a contractual commitment from a bank. However, receiving the preapproval offer reflects positively on your creditworthiness and your financial resources to purchase a home. 

Receiving mortgage preapproval can take several days. You apply for a mortgage, and then the bank checks your financial information including your credit. If they preapprove your application, they will send you a letter with the mortgage offer.

You may be asked to give the lender information regarding:

  • Recent pay stubs
  • Credit history
  • Bank statements
  • Down payment amount
  • Desired mortgage amount
  • Recent tax returns

If your mortgage is preapproved, you’re poised to make an offer on that lovely house you’ve been wanting.

How large of a down payment will I need to purchase a home?

The size of the down payment is an important factor in home buying. It can affect the total mortgage amount and the duration of the mortgage loan. Usually, the minimum you offer for the down payment is 5% of the total property value. The table below gives you an idea of the required down payments based on the home values:

Value of the homeMinimum down payment required (5%)Down payment to avoid mortgage default Insurance (20%)
$50,000$2,500$10,000
$100,000$5,000$20,000
$200,000$10,000$40,000
$300,000$15,000$60,000
$500,000$25,000$100,000
$700,000$35,000$140,000
$1,000,000$50,000$200,000
Down payment required by the price of the home

Keep in mind – the larger the down payment the better! It means borrowing less and can lower the mortgage interest rates.

What is a mortgage stress test?

A mortgage stress test verifies that you are able to pay off your mortgage at the “minimum qualifying rate.” This rate is usually higher than the rate you receive in your mortgage contract. The banks will conduct the “test” using a 5.25% interest rate or your negotiated interest rate plus 2%.

Stress testing your mortgage determines your home affordability. All Canadian home buyers who obtain their mortgage from a federally-regulated bank are required to pass a mortgage stress test (even if you are exempt from paying mortgage loan insurance). 

How can I afford a more expensive home?

Homebuying isn’t always clear-cut. Even if you think a certain home is out of your price range, it may still be possible to afford it. There are multiple ways you can grow your purchasing capacity. 

If you hope to buy a more expensive home, here are our recommendations:

  • Find a way to increase or augment your monthly income.
  • Cut back on monthly expenses.
  • Offer a larger down payment. This lowers your total mortgage amount and may qualify you for lower interest rates and lower fees.
  • Opt for a lower mortgage rate. This will lower your monthly payments. Check with different banks and consider using a mortgage broker to help you with the rate negotiations.
  • Talk to your bank about refinancing your mortgage to lower the monthly interest rates.
  • Ask your lender about establishing a longer repayment period. If they lengthen the amortization period, this can lower your monthly mortgage payments. However, be prepared to pay more interest because of the lengthened life of the loan.

These are a few tips from our team to help you navigate your mortgage questions. Make sure to take the next step in the borrowing process and use our helpful mortgage affordability calculator. 

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