{"id":24047,"date":"2024-08-29T08:00:00","date_gmt":"2024-08-29T12:00:00","guid":{"rendered":"https:\/\/www.zolo.ca\/blog\/?p=24047"},"modified":"2025-04-10T09:31:15","modified_gmt":"2025-04-10T13:31:15","slug":"how-much-house-can-i-afford","status":"publish","type":"post","link":"https:\/\/www.zolo.ca\/blog\/how-much-house-can-i-afford","title":{"rendered":"How Much House Can I Afford?"},"content":{"rendered":"\n\n\n<p>The housing market in Canada has been tricky to navigate for the last few years. Not only do Canadians have to worry about availability because <a href=\"https:\/\/www.cbc.ca\/news\/business\/housing-up-month-down-year-1.7261672\">there are fewer homes for sale<\/a> than in previous years, but affordability has also become a huge concern. <strong>If you are looking to purchase a home but you\u2019re not sure how much house you can afford, this guide will help set you in the right direction.<\/strong><\/p>\n\n\n\n<section class=\"bg-white border-t border-b border-blacklight my-12 md:my-16 sticky md:relative top-0 md:top-auto z-10 md:z-auto alignwide  wp-block-zolo-block-toc \" aria-hidden=\"true\"><div class=\"wrapper relative max-w-2xl mx-auto md:py-8 flex flex-col flex-shrink-0 max-h-screen md:max-h-none\"><input type=\"checkbox\" id=\"toc-toggle\" class=\"hidden\"\/><label for=\"toc-toggle\" class=\"flex justify-between cursor-pointer md:cursor-auto py-4\"><div class=\"toc-title leading-normal font-medium m-0\">In this article<\/div><svg class=\"w-6 h-6 fill-current text-blue md:hidden transition-transform duration-150 ease-in-out\" viewbox=\"0 0 24 24\"><path d=\"M22 12c0-5.5-4.5-10-10-10S2 6.5 2 12s4.5 10 10 10 10-4.5 10-10zM6.9 10.9l1.4-1.4 3.7 3.7 3.7-3.7 1.4 1.4L12 16l-5.1-5.1z\"><\/path><\/svg><\/label><nav id=\"toc-nav\" class=\"zolo-toc-nav max-h-0 md:max-h-full overflow-y-auto scrollbar-hidden overscroll-none\"><ul class=\"zolo-toc-list my-4\"><li><a class=\"entry-title no-underline hover:underline\" href=\"#how-do-i-estimate-home-affordability?\">How Do I Estimate Home Affordability?<\/a><\/li><li><a class=\"entry-title no-underline hover:underline\" href=\"#determining-how-much-down-payment-do-you-need\">Determining How Much Down Payment Do You Need<\/a><\/li><li><a class=\"entry-title no-underline hover:underline\" href=\"#how-much-monthly-mortgage-can-i-afford?\">How Much Monthly Mortgage Can I Afford?<\/a><\/li><li><a class=\"entry-title no-underline hover:underline\" href=\"#your-down-payment-and-your-mortgage-affordability-is-how-much-house-you-can-afford\">Your Down Payment and Your Mortgage Affordability is How Much House You Can Afford<\/a><\/li><li><a class=\"entry-title no-underline hover:underline\" href=\"#how-to-improve-mortgage-affordability-and-your-maximum-purchase-price\">How to Improve Mortgage Affordability and Your Maximum Purchase Price<\/a><\/li><li><a class=\"entry-title no-underline hover:underline\" href=\"#house-affordability-faqs\">House Affordability FAQs<\/a><\/li><\/ul><\/nav><\/div><\/section>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"<strong&gt;how-do-i-estimate-home-affordability?<\/strong&gt;\"><strong>How Do I Estimate Home Affordability?<\/strong><\/h2>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"662\" loading=\"lazy\" src=\"https:\/\/www.zolo.ca\/blog\/wp-content\/uploads\/2024\/02\/bigstock-Financial-Problems-Recession-232467694-1024x662.jpg\" alt=\"\" class=\"wp-image-23367\"\/><\/figure>\n\n\n\n<p>The first question you might ask yourself when you plan to buy a home is, \u201cHow much house can I afford?\u201d or &#8221; What is my maximum purchase price?\u201d <strong>The maximum price you can afford (sometimes called your budget) is based on two key factors: the size of your mortgage and your down payment.<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"1024\" loading=\"lazy\" src=\"https:\/\/www.zolo.ca\/blog\/wp-content\/uploads\/2024\/08\/158672-Zolo-How-Much-House-Can-I-Afford_B_Superside_D1-1024x1024.png\" alt=\"\" class=\"wp-image-24080\"\/><\/figure>\n\n\n\n<p>Your income usually determines the size of your mortgage. In contrast, the size of your down payment depends on how much money you\u2019ve saved and whether you can get money from sources like family or inheritance.<\/p>\n\n\n\n<p>For example, let\u2019s say you\u2019ve saved $50,000 for your home down payment, and your parents are chipping in an additional $25,000 as a gift. That gives you a total down payment size of $75,000.<\/p>\n\n\n\n<section class=\"wp-block-zolo-related flex items-center py-6 leading-tight border-t border-b border-blacklight undefined\"><p class=\"font-serif pr-6 md:pr-12 mr-6 md:flex-shrink-0 border-r border-blacklight\">Related content<\/p><p class=\"related-link w-full my-0\"><a href=\"https:\/\/www.zolo.ca\/blog\/how-do-mortgage-payments-work\">How Does a Mortgage Work?<\/a><\/p><\/section>\n\n\n\n<p>In addition, based on your income, your lender has agreed to lend you $400,000. Your total home affordability, or your budget, is:<\/p>\n\n\n\n<p>$75,000 (down payment) + $400,000 (mortgage) = $475,000<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"determining-<strong&gt;how-much-down-payment-do-you-need<\/strong&gt;\">Determining <strong>How Much Down Payment Do You Need<\/strong><\/h2>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"683\" loading=\"lazy\" src=\"https:\/\/www.zolo.ca\/blog\/wp-content\/uploads\/2024\/02\/bigstock-Young-Couple-Reviewing-Invoice-249209005-1024x683.jpg\" alt=\"\" class=\"wp-image-23368\"\/><\/figure>\n\n\n\n<p id=\"<strong&gt;how-much-down-payment-do-i-need?<\/strong&gt;\">In Canada, there are <a href=\"https:\/\/www.canada.ca\/en\/financial-consumer-agency\/services\/mortgages\/down-payment.html\">requirements<\/a> for how much you need to have as a minimum down payment, depending on the home&#8217;s purchase price.<\/p>\n\n\n\n<p>If the home is $500,000 or less, you need a minimum down payment of 5%.&nbsp;<\/p>\n\n\n\n<p>However, if the home is between $500,000 and $1,499,999, you will need a down payment of at least 5% up to $500,000 and 10% of the remaining difference.\u00a0<\/p>\n\n\n\n<p>Lastly, if the home is $1,500,000 or more, you need a minimum down payment of 20%.\u00a0<\/p>\n\n\n\n<div id=\"footable_parent_23423\"\n         class=\" footable_parent ninja_table_wrapper loading_ninja_table wp_table_data_press_parent semantic_ui colored_table\">\n                <table data-ninja_table_instance=\"ninja_table_instance_0\" data-footable_id=\"23423\" data-filter-delay=\"1000\" aria-label=\"Minimum Down Payments in Canada\"            id=\"footable_23423\"\n           data-unique_identifier=\"ninja_table_unique_id_3216594448_23423\"\n           class=\" foo-table ninja_footable foo_table_23423 ninja_table_unique_id_3216594448_23423 ui table  nt_type_legacy_table selectable hide_horizonal_borders hide_vertical_borders striped compact vertical_centered ninja_custom_color inverted footable-paging-right ninja_table_search_disabled ninja_table_pro\">\n                <colgroup>\n                            <col class=\"ninja_column_0 \">\n                            <col class=\"ninja_column_1 \">\n                    <\/colgroup>\n        <thead>\n<tr class=\"footable-header\">\n                                        <th scope=\"col\"  class=\"ninja_column_0 ninja_clmn_nm_purchase_pirce \">Purchase Price<\/th><th scope=\"col\"  class=\"ninja_column_1 ninja_clmn_nm_minimum_down_payment_required \">Minimum down payment required<\/th><\/tr>\n<\/thead>\n<tbody>\n\n        <tr data-row_id=\"17060\" class=\"ninja_table_row_0 nt_row_id_17060\">\n            <td>Up to $500,000<\/td><td>5%<\/td>        <\/tr>\n            <tr data-row_id=\"17061\" class=\"ninja_table_row_1 nt_row_id_17061\">\n            <td>Between $500,000 and $1,499,999<\/td><td>5% on the first $500,000 of the purchase price, 10% on the portion of the purchase price above $500,000<\/td>        <\/tr>\n            <tr data-row_id=\"17062\" class=\"ninja_table_row_2 nt_row_id_17062\">\n            <td>$1,500,000 and up<\/td><td>20%<\/td>        <\/tr>\n    <\/tbody><!--ninja_tobody_rendering_done-->\n    <\/table>\n    \n    \n    \n<\/div>\n\n\n\n\n<p>For example, if you planned to purchase a home for $650,000, you would need a down payment of 5% on the first $500,000 = $25,000 and&nbsp; 10% on the remaining $150,000 = $15,000 for a total minimum down payment size of $40,000.<\/p>\n\n\n\n<section class=\"wp-block-zolo-related flex items-center py-6 leading-tight border-t border-b border-blacklight undefined\"><p class=\"font-serif pr-6 md:pr-12 mr-6 md:flex-shrink-0 border-r border-blacklight\">Related content<\/p><p class=\"related-link w-full my-0\"><a href=\"https:\/\/www.zolo.ca\/blog\/tax-free-first-home-savings-account\">First Home Savings Account (FHSA) Guide\u00a0<\/a><\/p><\/section>\n\n\n\n<p>Remember, no matter the purchase price, if your down payment is less than 20% of the price of your home, you will need to buy <a href=\"https:\/\/www.cmhc-schl.gc.ca\/professionals\/industry-innovation-and-leadership\/industry-expertise\/resources-for-mortgage-professionals\/mortgage-loan-insurance-and-premiums\">mortgage default insurance<\/a>, sometimes called CMHC insurance. This insurance protects the lender if you default on your mortgage (it doesn\u2019t protect you!) and can be added to your mortgage payments or included as a lump sum. The cost varies and will be calculated when you apply for a mortgage based on your home\u2019s purchase price and down payment size.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"<strong&gt;how-much-monthly-mortgage-can-i-afford<\/strong&gt;?\"><strong>How Much Monthly Mortgage Can I Afford<\/strong>?<\/h2>\n\n\n\n<p>The second part of the \u201chow much house can I afford\u201d question is the size of the mortgage you can afford. How much mortgage you can afford (often called your mortgage affordability) depends on your income, debts, and estimated housing costs.<\/p>\n\n\n\n<p>These factors are considered by lenders using two formulas: your gross debt service ratio (GDS) and your total debt service ratio (TDS).<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-gross-debt-service-ratio\"><strong>Gross Debt Service Ratio<\/strong><\/h3>\n\n\n\n<p>Lenders use the gross debt service ratio (GDS) formula to ensure you can comfortably afford your monthly house costs based on your income.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" width=\"1025\" height=\"891\" loading=\"lazy\" src=\"https:\/\/www.zolo.ca\/blog\/wp-content\/uploads\/2023\/10\/133610-Zolo_How-Much-Mortgage-Can-I-Afford_Visual-2_Superside_V1-100.jpg\" alt=\"\" class=\"wp-image-23162\"\/><\/figure>\n\n\n\n<p>GDS takes your total monthly housing costs as a percentage of your gross monthly income. The percentage cannot exceed 39%. Your <a href=\"https:\/\/www.zolo.ca\/blog\/costs-of-owning-a-home\">monthly housing costs<\/a> will include:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Mortgage payments<\/li><li>Property taxes<\/li><li>Heating costs<\/li><li>Condo fees (if applicable)<\/li><\/ul>\n\n\n\n<p>For example, let\u2019s assume you earn $100,000 per year or $8,333 per month. Using the GDS, the maximum housing costs you can afford while maintaining a safe 39% ratio is $3,250 in housing costs. Your monthly housing costs might look like this:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Mortgage payments: $2,750<\/li><li>Property taxes: $300<\/li><li>Heating costs: $200<\/li><\/ul>\n\n\n\n<p>Your monthly housing costs would consist of your mortgage payments ($2,750), property taxes ($300), and heating costs ($200), totalling $3,250, which is 39% of your gross monthly income.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-total-debt-service-ratio\"><strong>Total Debt Service Ratio<\/strong><\/h3>\n\n\n\n<p>While your GDS ratio is a good place to start when determining how much monthly mortgage payment you can afford, you\u2019ll also need to consider whether you can afford your mortgage in addition to your monthly debt payments. In this case, a calculation called your total debt service ratio comes into play.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" width=\"1025\" height=\"891\" loading=\"lazy\" src=\"https:\/\/www.zolo.ca\/blog\/wp-content\/uploads\/2023\/10\/133610-Zolo_How-Much-Mortgage-Can-I-Afford_Visual-2_Superside_V1_1-100.jpg\" alt=\"\" class=\"wp-image-23163\"\/><\/figure>\n\n\n\n<p>TDS takes your monthly housing costs and minimum debt payments as a percentage of your gross income. Your debt payments could include:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Car payments<\/li><li>Student loan payments<\/li><li>Line of credit minimum payments<\/li><li>Credit card minimum payments<\/li><\/ul>\n\n\n\n<p>Your TDS ratio cannot exceed 44% of your gross monthly income.<\/p>\n\n\n\n<p>For example, assume you earn $100,000 per year or $8,333 per month. your monthly housing costs add up to $3,250, as in the example above, but you also have a car loan for $415 monthly. Your total expenses would be:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Mortgage payments: $2,750<\/li><li>Property taxes: $300<\/li><li>Heating costs: $200<\/li><li>Car loan: $415<\/li><\/ul>\n\n\n\n<p>Your total costs would total $3,665, which is about 44% of your gross monthly income.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"<strong&gt;your-down-payment-and-your-mortgage-affordability-is-how-much-house-you-can-afford<\/strong&gt;\"><strong>Your Down Payment and Your Mortgage Affordability is How Much House You Can Afford<\/strong><\/h2>\n\n\n\n<p>We mentioned above that you can determine how much house you can afford by combining your down payment amount with your maximum mortgage size. You can use a mortgage affordability calculator to determine your maximum mortgage size, and that calculator will use the same GDS and TDS ratios we mentioned above.&nbsp;<\/p>\n\n\n\n<section class=\"wp-block-zolo-related flex items-center py-6 leading-tight border-t border-b border-blacklight undefined\"><p class=\"font-serif pr-6 md:pr-12 mr-6 md:flex-shrink-0 border-r border-blacklight\">Related content<\/p><p class=\"related-link w-full my-0\"><a href=\"https:\/\/www.zolo.ca\/blog\/after-mortgage-approval\">What Happens After Mortgage Approval?<\/a><\/p><\/section>\n\n\n\n<p>Once you add your maximum mortgage size to your down payment amount, you\u2019ll know definitively how much house you can afford.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"<strong&gt;how-to-improve-mortgage-affordability-and-your-maximum-purchase-price<\/strong&gt;\"><strong>How to Improve Mortgage Affordability and Your Maximum Purchase Price<\/strong><\/h2>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"710\" loading=\"lazy\" src=\"https:\/\/www.zolo.ca\/blog\/wp-content\/uploads\/2024\/01\/bigstock-Real-estate-agent-showing-mode-274432192-1024x710.jpg\" alt=\"\" class=\"wp-image-23350\"\/><\/figure>\n\n\n\n<p>The cost of homes and rising interest rates make it increasingly difficult for many Canadians to afford a home. However, if you want to improve your mortgage affordability and increase your maximum purchase price, you can take a few steps.<\/p>\n\n\n\n<ol class=\"wp-block-list\"><li><strong>Increase your income<\/strong>\u2014The most obvious answer is to get more money. Of course, this is often easier said than done, but it might be worth talking with your current employer. Maybe it\u2019s time to ask for a raise or promotion that will come with a pay increase. Perhaps you can ask for more hours at your current job or pick up a second one.&nbsp;<\/li><li><strong>Decrease your debt <\/strong>&#8211; As mentioned in this article, your TDS will significantly determine how much of a house you can afford. Having as low a TDS as possible is best to maximize affordability and mortgage loan approval. If your TDS is high, consider paying off some of your debts before shopping for a home.<\/li><li><strong>Increase the size of your down payment<\/strong> &#8211; the larger your down payment, the more home you can afford, or, the smaller your required mortgage and corresponding monthly mortgage payment. Therefore, if you want to increase your home purchase budget, increasing the size of your down payment will help.<\/li><li><strong>Improve your credit<\/strong> &#8211; Your credit score and credit history play a large role in determining mortgage affordability. As a result, a higher credit score will give you access to better mortgage rates, increasing your affordability.&nbsp;<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"house-affordability-<strong&gt;faq<\/strong&gt;s\">House Affordability <strong>FAQ<\/strong>s<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"<strong&gt;how-much-mortgage-can-i-get-with-a-$70,000-salary-in-canada?<\/strong&gt;\"><strong>How much mortgage can I get with a $70,000 salary in Canada?<\/strong><\/h3>\n\n\n\n<p>Using a mortgage calculator, assuming a 20% down payment and zero debt, you should <a href=\"https:\/\/www.zolo.ca\/blog\/mortgage-qualification\">qualify for a mortgage<\/a> of $280,344 for a total home value of $338,208.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"how-much-do-you-have-to-make-a-year-to-afford-a-$400,000-house-in-canada?\">How much do you have to make a year to afford a $400,000 house in Canada?<\/h3>\n\n\n\n<p>Using a mortgage calculator, if you have an annual salary of $80,000 and can put down 20% with zero debt, you could likely afford a $400,000 house.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"what-income-do-you-need-for-a-$500,000-mortgage-in-canada?\">What income do you need for a $500,000 mortgage in Canada?<\/h3>\n\n\n\n<p>Using a mortgage calculator, if you have an annual salary of $125,000 and put down $150,000 as a down payment with zero debt, then you would likely qualify for a $500,000 mortgage loan.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"how-much-mortgage-can-i-get-with-a-$60,000-salary?\">How much mortgage can I get with a $60,000 salary?<\/h3>\n\n\n\n<p>Using a mortgage calculator and assuming you have enough for a 20% down payment and zero debt, then you should be able to get a mortgage of $239,689 for a house price of $299,689.&nbsp;<\/p>\n\n\n\n<p><em>Note: Mortgage calculator estimates used Ottawa as the city of residence. Values will differ by city.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Your maximum purchase price depends on your down payment and the size of your mortgage<\/p>\n","protected":false},"author":95,"featured_media":24048,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[47],"tags":[],"guide":[],"class_list":["post-24047","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-buying"],"acf":[],"zolo_excerpt":"","_links":{"self":[{"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/posts\/24047","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/users\/95"}],"replies":[{"embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/comments?post=24047"}],"version-history":[{"count":9,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/posts\/24047\/revisions"}],"predecessor-version":[{"id":24674,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/posts\/24047\/revisions\/24674"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/media\/24048"}],"wp:attachment":[{"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/media?parent=24047"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/categories?post=24047"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/tags?post=24047"},{"taxonomy":"guide","embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/guide?post=24047"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}