Home and Mortgage Affordability Guidelines

The Canada Housing and Mortgage Corporation (CMHC) provide two basic guidelines to help Canadians determine the maximum percentage of income that should go toward paying mortgage and other household debt.  Lenders generally use these same guidelines to help determine who they will lend to and the maximum mortgage amount they qualify for.

Total Debt Service (TDS)

Your maximum monthly debt load, also known as your total debt service (TDS), should not exceed 40 percent of your gross monthly income. In other words, the combined amount you pay in housing costs, car loans, personal loans and credit card debt shouldn't be more than 40 percent of your pre-tax income.

To determine what lenders will consider your maximum allowable debt, multiply your gross annual salary by 0.40 and then divide by 12.

So, for example, if you have a gross annual household income of $90,000, your maximum allowable monthly debt load (TDS) would be $3,000 ($90,000 x .4 = $36000 divided by 12 = $3000)

Gross Debt Service (GDS)

In addition to your TDS, you also need to consider your housing expenses. Your maximum monthly home-related expenses-or gross debt service (GDS) should not exceed 32 percent of your gross monthly household income.

Home related expenses, which include your monthly mortgage payment, property taxes, insurance payments and heating costs, should not exceed 32 percent of your monthly pre-tax income.

To determine what lenders will consider your maximum allowable housing expenses, multiply your gross annual income by 0.32 and then divide by 12.

Using the same gross annual household income of $90,000, your maximum GDS would be $2,400 ($90,000 x .32 =$28800 divided by 12 = $2400)

Pre-Approved Mortgages...Plan For Success

While home buyers can use the TDS and GDS guidelines to give themselves a good idea of where they presently stand in terms of home or mortgage affordability, they must also look at the bigger picture.  

A couple planning on having kids or where one partner may be planning on a career change will need to consider what kind of payment they can afford to make with only one salary for a year or longer.  

If one or both of the partner’s income is derived from commissions, bonuses etc they will want to consider variances in pay from month to month and year to year.

Before you sign up for the maximum mortgage you qualify for talk to a professional Mortgage Broker.  They can help you sift through the different mortgage products available to you from a variety of sources and help you find the one that matches your present comfort level and your ability to deal with possible family, work and lifestyle changes.

“Helping you find a mortgage...and peace of mind”

Domenic Mirabelli
Mortgage Agent
Lic. #M10000364

(Cell)  416.303.4480

domenic.mirabelli@migroup..ca
www.thescooponmortgages.blogspot.com