- GDSR: Gross Debt Service Ratio and TDSR: Total Debt Service Ratio
- The most important amounts to consider are your gross household income, your down payment and the mortgage interest rate. Lenders will also consider your assets and liabilities. Your own lifestyle and debt comfort zone also come into play. To help you see how much you can afford, there are two simple rules that lenders use to determine how much of a mortgage you qualify for. These rules are governed by Canada Mortgage and Housing Corporation (CMHC) which is Canada's national housing agency and Canada's premier provider of mortgage loan insurance, mortgage-backed securities, housing policy and programs, and housing research.
The first rule is that your monthly housing costs should not exceed a maximum gross debt to service ratio (GDSR). Housing costs include monthly mortgage payments, taxes and heating expenses. If applicable, this sum should also include half of monthly condominium fees.
Secondly, your entire monthly debt load should exceed a maximum total debt to service ratio (TDSR). This includes housing costs, and other debts such as car payments, personal loans, and credit card payments. Maximum monthly payment is calculated by taking the lower of these two calculations:
- Monthly Income X GDSR = monthly PITH
- Monthly Income X TDSR - Other loan payments = monthly PITH
- Monthly income
- Total monthly income from all sources. All income should be entered before taxes.
- Monthly housing expenses
- Your monthly housing expenses from the housing expenses worksheet. The items entered as housing expenses make up the taxes and insurance portion of your monthly PITH payment.
- Monthly liabilities
- Your monthly liabilities from the liabilities worksheet. Your monthly liabilities are used to calculate your maximum PITH.
- Monthly housing payment
- This is your total principal, interest, taxes, heat and 50% of your condo fee (PITH).
- Maximum principal and interest (PI)
- This is your maximum monthly principal and interest payment. It is calculated by subtracting your monthly taxes and insurance from your monthly PITH payment. This calculator uses your maximum PI payment to determine the mortgage amount that you could qualify for.
- Start interest rates at
- The current interest rate you could receive on your mortgage. This is used as the starting point for displaying a range of interest rates and the resulting mortgage amount.
- Amortization in years
- The number of years over which you will repay this loan. The most common mortgage amortization is 25 years.
- Condo fees
- Condo fees, if any, for the home purchase. Only 50% of this fee is included in your monthly housing expenses when figuring your maximum mortgage.
