How Much Do I Qualify For?
If you are ready to purchase a new home, one of the first things you want to do know is how much am I qualified to borrow. Lenders have restrictions on the amount of money that a lender can borrow that are based on the borrower’s income and current debt.
GDSR: Gross Debt Service Ratio and TDSR: Total Debt Service Ratio
To determine the amount you are able to borrow a lender will take into account your gross household income, your down payment and your mortgage interest rate. In addition, lenders will also consider your existing assets and liabilities. The rules governing these two factors – Gross Debt Service Ratio (GDSR) and Total Debt Service Ratio (TDSR) — are overseen by Canada Mortgage and Housing Corporation (CMHC). CMHC 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.
GDSR states that your monthly housing costs should not exceed 32% of your gross
monthly household income. Housing costs include monthly mortgage payments, taxes
and heating expenses, and, if applicable, any association fees.
The second rule is the Total Debt Service Ratio which states your entire monthly debt load should not be any more than 40% of your gross monthly income. This debt includes your house payments, car payments, personal loans as well as credit cards and other unsecured debts.
Ratesheet.ca has proved a How Much Do I Qualify For calculator to help you figure out how much you can borrow in advance of talking to a lender. Fill in the entry fields and click on the payment schedule button to see a complete amortization schedule of your mortgage payments.
Your gross annual income. For married couples this is your total combined gross annual income. Please note that if you enter a purchase price or total monthly payment the calculator will determine the gross annual income required to qualify for the purchase. This calculated amount may be higher or lower than your actual income.
The price of the home you wish to purchase. This is the actual price you pay, not including any closing costs. If you enter an annual income or a total monthly payment, the purchase price will be calculated based on these amounts.
Total monthly payment
Total monthly payment that you can qualify for. This is the total of principal, interest, taxes and heat paid each month. If you enter a purchase price or annual income, the total monthly payment will be calculated based on these amounts.
Cash on hand
Cash you have for the down payment and all closing costs. You can purchase a home with as little as 5% down payment with mortgage loan insurance. An ideal down payment is between 10 – 20% of the purchase price of the home.
The current interest rate you can receive on your mortgage.
Amortization in years
The number of years over which you will repay this mortgage.
Annual property taxes
The annual property tax paid on the home you are purchasing.
Total monthly payment for your home’s heating bill. CMHC and Genworth currently only require heat costs to be incorporated into the monthly costs, however, there are other monthly costs associated with properly running a house such as hydro, water, telephone, cable, etc. You may wish to add these costs into the “Heat” category in order to properly calculate your monthly payment.
Monthly car payment(s)
Total monthly payment for your car loan(s) or lease(s).
Credit card payments
Total monthly minimum payments for your credit cards.
Other loan payments
Any other installment loan payments, such as student loans or unsecured loans.
Monthly fee charged for your condominium that you expect to incur with the ownership of this home. Please note that condominiums are referred to as “strata” in the Province of British Columbia. We add 50% of your condominium fee to your Gross Debt Service (GDS) when calculating the maximum mortgage that you can qualify for.
Other closing costs
Estimate of all other closing costs for this loan. This should include filing fees, appraiser fees and any other miscellaneous fees payable.
Shown as “Total monthly payment.” This is the total amount you qualify for per month. This amount is the total of “Principal, Interest, Tax and Heat” for your home.
Sales Taxes – HST and GST
Many new homes have the purchase price with HST and/or GST included. If this is the case for your home purchase, the checkbox to include HST/GST should be left unchecked since the HST or GST will be included in the purchase price. When we calculate HST or GST, it is based on the provincial rate times purchase price, minus any HST/GST rebate.
Rates and rebates can be found in the table below:
- Provincial GST/HST Rates as of July 1, 2010
- British Columbia HST at 12% Federal HST Rebate*, additional HST rebate of 5% of purchase prices up to a maximum of $20,000.
- Ontario HST at 13% Federal HST Rebate*, additional HST rebate of 5% of purchase prices up to a maximum of $24,000.
- Nova Scotia HST at 15% Federal HST Rebate*, limited first time home buyers rebate of 1.5% of purchase price up to a maximum of $1,500. This limited rebate is not included in the calculator.
- New Brunswick HST at 13% Federal HST Rebate*, no additional rebate
- Newfoundland and Labrador HST at 13% Federal HST Rebate*, no additional rebate
- Territories and other provinces in Canada GST at 5% Federal GST Rebate*
*A Federal GST/HST rebate is available on any purchase subject to HST or GST and is calculated as follows: For homes under $350,000, the rebate amounts to 36% of GST, up to a maximum rebate of $6,300. For homes between $350,000 and $450,000, the maximum rebate of $6,300 declines to zero on a proportional basis. All homes selling for more than $450,000 receive no GST rebate. For provinces with HST, the calculation is the same but applies to the Federal 5% portion of the HST, which results in the same rebate uniformly applied across all provinces.
It is important to be aware that there may be additional taxes on new home purchases depending on the province where the purchase is made. These additional taxes are not included in this analysis. For more information, please visit:http://www.cra-arc.gc.ca/E/pub/gp/rc4028/rc4028-e.html#P103_1775.
Mortgage Insurance Required?
Check this box if you wish to calculate the amount of mortgage insurance payable. For additional information regarding mortgage insurance please read the definition below.
Mortgage Loan Insurance Premium (non-refundable)
Mortgage insurance makes it possible for homebuyers to purchase a home using a lower down payment. The Canadian Bank Act prohibits most federally regulated lending institutions from providing mortgages without mortgage loan insurance for amounts that exceed 80% of the value of the home or purchases with less than 20% down payment. The Canadian Mortgage and Housing Corporation (CMHC) and Genworth Financial are two companies that offer Mortgage Loan insurance. For more information please visit their websites at www.chmc.ca and www.genworth.ca.
CMHC and Genworth Financial’s current Mortgage Loan insurance Premium Rates*:
|(% of property value)||Rate (as a % of loan)|
|Up to and including 65% (over 35% down payment)||0.5%|
|Up to and including 75% (25% to 34.99% down payment)||0.65%|
|Up to and including 80% (20% to 24.99% down payment)||1.00%|
|Up to and including 85% (15% to 19.99% down payment)||1.75%|
|Up to and including 90% (10% to 14.99% down payment)||2.00%|
|Up to and including 95% (5% to 9.99% down payment)||2.75%|
|Up to and including 95% Flex Down or Cash Back Equity Owner-Occupancy Program** (5% to 9.99% down payment)||2.90%|
*An additional 0.2% is added to all mortgages with amortizations of 26 to 30 years. An additional .4% is added to all mortgages with amortizations of 31 to 35 years.
This calculator assumes that your mortgage insurance premium can be financed by your mortgage, which can greatly reduce the amount of upfront money that is required to purchase a home.
This calculator does not include Genworth’s Top-up Premiums or Blended Amortization for refinancing.
Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.