Several ways to calculate a mortgage in Canada

The question of purchasing real estate is a pressing one for every Canadian and immigrant. One effective way to buy a home is to take out a mortgage. To understand how much you can expect to pay, use the methods outlined in this article.

The easiest way: to use a calculator

To quickly calculate your mortgage loan amount, you can use the special calculator on the Canadian Mortgage and Housing Corporation (CMHC) website. It is an official and constantly updated source of information.

Step 1

First, you need to calculate how much your monthly mortgage payment will be. To do this, you must enter into the calculator the price of the proposed home, the amount of the down payment, the interest rate, the depreciation period, and the frequency of payments.

You must first enter the value of the property, the down payment, and the depreciation period (how long the house has been in use):

Then the interest rate and payment frequency are entered:

The system automatically calculates the amount of regular payment:

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Step 2

Then you must enter the amount of annual family income (before taxes), the monthly mortgage payment (the amount from step 1), monthly expenses, taxes, and other fees, if any. This is needed to calculate the so-called gross debt service ratio (GDS), which cannot exceed 39%.

In addition, if there are other credit obligations, they must also be entered in the appropriate fields of the calculator. This is necessary to calculate the total debt service ratio (TDS), which cannot exceed 44%.

Field for entering the annual income:

Enter monthly payment, heating costs, property taxes:

Entry of expenses on credit cards and other loans:

Step 3

If no error message has been received at this stage, you can afford such a mortgage. If there is an error, you need to lower your monthly payment. You can do this by increasing your down payment, choosing a less expensive home, and reducing other payments.

The way is a little more complicated: calculate everything yourself

The second way to find out how much mortgage you can afford is to calculate your GDS and TDS manually. To do this, you need to use a certain sequence of steps:

• Gross Debt Service Ratio (GDS): (Mortgage payment property tax heating costs 50% of property payment) / annual income.
• Total debt service ratio (TDS): (Property expenses) Interest on credit card car payments Car expenses) / Annual income

A little about the down payment

If the home you're considering is worth less than $500,000, the minimum down payment is 5% of the price. If you intend to buy a home between $500,000 and $1 million, you will pay 10%. If the home you're looking at is worth more than $1 million, the minimum down payment will be 20% of the price.

A few tips for those who have decided on a mortgage

• Use the services of mortgage brokers — they will help you choose the bank with the best conditions
• Pay attention to the reviews and reputation of the broker you turn to
• Try to take out a mortgage loan below the maximum you can afford to protect yourself from unforeseen circumstances.