How Much House Can I Afford?

Mortgage affordability is based on how much of your income would be needed to cover your housing costs and other monthly debts.

Lenders use debt-service calculations to compare those expenses with your qualifying income. The result depends on your complete financial picture, not just your salary.

Lenders begin with the income they can reasonably use for your application. This may include salary, hourly income, pension income, or other stable sources of income.

Bonus, overtime, commission, contract, and self-employed income may also be considered. Lenders will often want to see a history of variable income before using it in the qualification.

Monthly debt payments reduce the amount of income available for housing costs. These payments may include car loans, credit cards, lines of credit, student loans, personal loans, and other ongoing obligations.

This is one reason two people earning the same income may qualify for very different mortgage amounts. One may have no debt, while the other may already have several large monthly payments.

A larger down payment reduces the amount you need to borrow. It can also affect whether mortgage default insurance is required and which mortgage options may be available.

Your down payment does not replace the need to qualify for the mortgage, but it can make a meaningful difference to the mortgage amount and monthly payment.

You can estimate the minimum down payment for a purchase price using the Down Payment Calculator.

Your mortgage payment is influenced by the interest rate, but lenders may also require you to qualify using a higher rate under Canada's mortgage stress test.

This means the payment used to determine whether you qualify may be higher than the payment you would actually make at your mortgage rate.

Affordability calculations include more than your mortgage payment. Lenders also account for property taxes and an estimate of heating costs.

If you are purchasing a strata property, lenders may also include a portion of the monthly condo or strata fee in the calculation.

Higher property taxes or condo fees can reduce the mortgage amount you qualify for, even when the purchase price appears to fit within your budget.

Your credit history can affect which lenders and mortgage products are available to you. Different lenders may also treat certain types of income and debt differently.

That is why an online affordability estimate should be treated as a starting point rather than a final approval.

A lender's maximum approval tells you what may fit within its qualification rules. It does not tell you what monthly payment will feel comfortable in your everyday life.

You may also want room in your budget for savings, childcare, travel, home maintenance, renovations, hobbies, or future changes in income.

A thoughtful home-buying budget considers both numbers: what you may qualify for and what you actually want to spend each month.