The average detached home price in the GTA is $1.17M as of May 2024. How much income would it take to afford such a home? With a down payment of $235,000 at an interest rate of 5.25% over a 25-year amortization period it would take ~$200K in household income to afford.
Many want to know how much mortgage they can afford to assist in purchasing a house while remaining financially secure. How much mortgage you can afford is based on your income and debt. You can see the impact that debt has on how much mortgage you can afford by changing the inputs above.
The down payment that you are able to make impacts your home affordability. You are required to make the minimum down payment when purchasing a home which is 5% in Canada. If you make a down payment of less than 20% you will be considered a high-ratio borrower and need to take out mortgage default insurnace. This is an additional cost that can be paid upfront upon closing or included in the cost of your mortgage.
| Purchase Price | Minimum Down Payment Required |
|---|---|
| Less than $500,000 | 5% of purchase price |
| $500,000 to $999,999 | 5% of the purchase price for the first $500,000; 10% for the portion above $500,000 |
| $1 million or more | 20% of the purchase price |
There are two primary ratios that are used by lenders as well as in the calculation above. The first is the Gross Debt Service Ratio (GDS) with the second being the Total Debt Service Ratio (TDS). These ratios are designed to account for how much mortgage you can afford when taking into consideratino the cost of the mortgage, your current debt as well as household income.
The Gross Debt Service Ratio looks at monthly housing costs in comparison to your gross household income. For the purposes of this calculation the GDS ratio is set at 35% which means that total monthly housing costs should not exceed 35% of your gross household income.
GDS Ratio = [Mortgage payments + Home expenses] / Annual Incom
The Total Debt Service Ratio looks at your total debt in comparison to your gross household income. For the purpose of this calculation the TDS ratio is set at 42%. This means that total debt should not exceed 42% of your household income.
TDS Ratio = [Mortgage payments + Home expenses + other debt obligations] / Annual Income
The CMHC corporation has set the maximum GDS ratio at 39% and TDS ratio at 44%.
Many of the main factors that impact mortgage affordability are the main inputs in the mortgage affordability calculator above. These include the size of your downpayment, your household income, current debt obligations as well as the mortgage rate you are approved for. Through changing the value of one input while holding the others constant you will be able to see the impact of the input on mortgage affordability.
These calculations are based on an interest rate of 6% and a 25-year amortization period. More detailed estimates can be provided by using the mortgage affordability calculator above.
You would be able to afford a mortgage around $320,000 making $70,000.
You would be able to afford a mortgage around $365,000 making $80,000.
You would be able to afford a mortgage around $410,000 making $90,000.
You would be able to afford a mortgage around $455,000 making $100,000.
You should make $110,000 or more a year to afford a $500,000 home purchase. This is based on a minimum down payment of $25,000 with a 25-year amortization period and 6% interest rate with other monthly debt payments of $750.
You should make $135,000 or more a year to afford a $650,000 home purchase. This is based on a minimum down payment of $40,000 with a 25-year amortization period and 6% interest rate with other monthly debt payments of $750.
You should make $165,000 or more a year to afford a $800,000 home purchase. This is based on a minimum down payment of $55,000 with a 25-year amortization period and 6% interest rate with other monthly debt payments of $750.