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Calculate Monthly Home Loan Payments on Canada Mortgages & GDS/TDS Loan Qualification Requirements

Canadian Mortgage Calculator

This calculator was designed specifically for conventional Canadian mortgages, with semi-annual interest compounding. The results also show the minimum required income for the home buyer. In the calculator you can enter your income and debts then we will automatically calculate the following:

  • monthly loan payments
  • down payment requirement
  • CMHC insurance requirements
  • monthly housing expense
  • monthly debt service costs
  • monthly housing + debt costs
  • GDS required income
  • TDS required income
  • GDS ratio
  • TDS ratio
  • max loan amount based on GDS
  • max loan amount based on TDS
  • max home price based on GDS
  • max home price based on TDS
  • total interest expense
Home Price Amount
Home Purchase Price: ($)
Down Payment: ($)
Loan Amount: ($)
Loan Terms Amount
Loan Term (Years): (Yrs)
Interest Rate: (%)
Homeownership Costs Amount
Annual Homeowners Insurance:
Monthly Heating Expense: ($)
Monthly Condo Fees: ($)
Income Amount
Your Income:
Spouse Income:
GDS & TDS Limits Limit
Gross Debt Service Ratio (GDS) Limit: %
Total Debt Service Ratio (TDS) Limit: %
Monthly Debt Payments Amount
Student Loans: ($)
Vehicle Payments: ($)
Personal Loans: ($)
Credit Cards: ($)
Other Monthly Debt Payments: ($)

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The Appeal of Canada

Despite keeping a low profile on the global stage, Canada is a wealthy country full of opportunities. It has the ninth highest GDP growth in the world and scores highly on the Human Development Index for quality of life, government regulation, civil rights and economic freedom. The country is home to some beautiful attractions, from the Rocky Mountains in the West to Niagara Falls in the East, as well as iconic cities like Toronto, Vancouver and Montreal.

All this is to say, Canada is an attractive destination for investors looking to purchase a vacation home or a rental property.

Moraine Lake.

Canadian Cities

Toronto & Vancouver

Toronto and Vancouver have a global pull, attracting immigrants from across the world, which serves to keep real estate and rental prices high.

Ontario, the province containing Toronto, attracts nearly 200,000 immigrants per year - many of whom are attracted to the provincial capital due to its status as a major financial, artistic and cultural hub. Its nearest challenger is British Columbia, at over 66,000 per year.

Vancouver in BC is a beautiful city surrounded by mountains with an unusually mild climate for Canada. However its geography means there's a lack of space for new developments, which has served to keep real estate prices on the high end.

In both cities property commonly sells for well over CA$1million, so you need deep pockets if you want to buy there.

Quebec

Canada's French-speaking province tends to be less steep than the rest.

While Montreal isn't cheap, with prices averaging at just over CA$500,000, it's far more affordable than Toronto and Vancouver - while containing a vibrant arts culture of its own.

Cheaper still is Quebec City, known for its stone buildings and narrow streets dating back to 1608.

Some of the smaller Quebec cities are among the most reasonable in the whole of Canada, as a 2024 study from nest.ca ranked Thetford Mines, Rivière-du-Loup, Sainte-Marie, Montmagny, Saint-Georges and Rimouski amongst the top 10 most affordable cities in the country.

Alberta

Alberta is attracting new residents from across Canada, as the city offers some of the most affordable real estate in Canada, as well as two medium-sized cities in Edmonton and Calgary.

If you're attracted to Canada's mountains, Alberta is an affordable alternative to British Columbia. For many, the appeal of Alberta depends on whether you can handle the winters, as temperatures can drop to lows of -30C to -40C.

Known as Canada's Texas, the province's economy is traditionally based on natural resources like oil, which means its prospects tend to fluctuate with oil prices

Ontario

Toronto isn't the only option in Ontario. Kingston is one attractive spot for retirees owing to its safe and community-focused status, while it's a two-to-three-hour commute to Ottawa, Toronto, and Montreal.

Ottawa, Canada's capital city, is known for its architecture and museums, while it sits a stone's throw from Quebec.

Ontario's northern regions have their own identity. In the north west of the province sits Thunder Bay, sitting on Lake Superior, which is a post-industrial city which acts as a gateway to some of the wildest landscapes in the country.

The Prairies

Winnipeg in Manitoba has over 700,000 residents and nearly 800,000 in the metro area, while it's diversified economy with a strong reliance on the rail system. Property is affordable in the city, while a major attraction is the Canadian Museum for Human Rights.

In the neighboring province of Saskatchewan you'll find Saskatoon, known for its strong community spirit and picturesque bridges.
In both cities it's common to buy property for under CA$400,000.

Maritimes and Newfoundland

Provinces like New Brunswick, Prince Edward Island and Nova Scotia tend to be affordable, though their job markets aren't the strongest.

New Brunswick's capital, the urban city of St John, shouldn't be confused with the seaport city of St. John's in Newfoundland.

Buying With a Mortgage in Canada

In Canada the minimum down payment depends on the purchase price, as you can see in the following table:

Home Value Minimum Down Payment
$0 to $499,999 5% of home value
$500,000 to $999,999 5% of first $500,000 & 10% for any amount above that
$1,000,000+ 20% of the home's sale price

Any mortgage with a term beyond 25 years cannot be insured. Therefore, longer duration loans require a 20% down payment.

Even if you're not buying expensive property, it's generally better to stump up a bigger down payment if you have it, as that will lower the size of the loan you're paying off, while you gain access to cheaper mortgage rates.

An over inflated market?

Canadian housing has been a strong performing market in recent years. Since the start of 2005 prices have risen by 142% even after taking inflation into account. This compares to an increase of just 26% in the US over the same period. Canada's real estate was less affected by the global financial crisis than its neighbour across the border.

In 2022 Toronto was said to be at ‘high risk' of being in a housing bubble, though one year the level of risk was downplayed by the same report. With this backdrop, it's likely there could be a flatlining of prices for the time being.

Foreign buyer ban

The Canadian government has looked to put a break on rapid house price growth, as it has banned foreign buyers from buying property until 2027.

The move was designed to slow down activity in Canada's prime markets of Toronto and Vancouver, though it's likely to only make a small difference in curbing demand.

Canadian Permanent Residents can still buy property, as can temporary residents like international students, so the markets are still open to the majority of buyers with some stake in Canada. The only ones pushed out are new absentee landlords.

Bank of Canada interest rate

The Canadian market is likely to be cooler in the next few years due to a higher national interest rate, which generally filters through to the cost of mortgage rates.

Canada's policy interest rate - determined by the Bank of Canada - has stood at 5.0% since July 2023, having risen from 0.25% during the pandemic.

The higher interest rate is designed to curb inflation, but it's bad news for mortgage holders, as the cost of loans have risen significantly. For new applicants this means it's far harder to pass lenders' affordability requirements.

Mandatory Mortgage Insurance Coverage

In Canada you have to buy mortgage default insurance if you have a downpayment under 20%. The insurance is designed to encourage lenders to lend to those with a smaller deposit, because it protects lending institutions if the borrower doesn't pay.

Canadians can technically cancel the insurance once they have more than 20% equity in a property, but seeing as lenders offer higher rates for uninsured mortgages it's rarely worth it.

These conditions mean that the Canadian mortgage market is more insured than the US, as around half of borrowers have some form of mortgage insurance, compared to 30% of US homebuyers.

In the US it's far more common to cancel private mortgage insurance once the loan value drops below 80% of the home value.

Make Sure You Can Afford Your Loan Payments!

Another reason so many homeowners carry mortgage insurance is that they are fully responsible for the loan, even if they default. Even if homes are foreclosed, lenders may still come after borrowers for their assets or even to garnish their wages to satisfy the debt. CMHC mortgage insurance is required for all loans with less than 20% downpayment. Loans which require insurance can only be insured for up to a 25-year amortization schedule.

Down Payment CMHC Mortgage Insurance Fees
5% to 9.99% 4% of loan
10% to 14.99% 3.1% of loan
15% to 19.99% 2.8% of loan
20% + not required

CMHC coverage policies have the following requirements:

  • Your gross debt service ratio must be below 39%
  • Your total debt service ratio must be below 44%
  • Your credit score must be at least 600
  • Your down payment must not come from borrowed funds

Hybrid Adjustable Mortgage Rates

Most Canadian mortgages are issued with a fixed rate for five years, which is something that puts the market closer to the UK than the US.

After the five-year term loans are renegotiated for another five years, with loans typically using a 25-year amortization schedule, shorter than the US standard of 30 years.

Interest & Capital Gains

In Canada mortgage interest is compounded semi-annually, rather than once a month. Meanwhile interest is charged at the end of the month rather than at the beginning.

Mortgage interest is not tax-deductible, but homeowners also don't have to pay taxes on capital gains when they sell their homes.

Those who try to pre-pay their mortgage may have to pay a penalty, though it depends on the original mortgage agreement, as some do allow you to make some overpayments of 10-20% without penalty. When lenders allow you to overpay it's known as a prepayment privilege.

Canadian Mortgage Affordability: Understanding GDS & TDS

American Mortgage Affordability: DTI Ratios

In the United States there are concepts called the front-end debt ratio and back-end debt ratio which compare the homebuyer's income against their monthly housing expenses and their total debt service expenses.

1

Front-End Ratio: this figure compares your housing cost to your total monthly income. It covers mortgage principal & interest payments, property taxes, PMI, homeowner's insurance & HOA. These costs are often called PITI.

 

2

Back-End Ratio: this figures everything included in your front-end ratio as well as your other monthly payments servicing your mandatory debt obligations.

 

Canadian Mortage Affordability

In Canada there are similar concepts to DTI (debt to income) where the Canada Mortgage and Housing Corporation (CMHC) sets limits to protect homeowners from loans they are unlikely to afford paying. They ensure that both the housing and total cost of managing all debts with housing payments do not exceed practical levels.

When stress testing mortgages, lenders use either a rate of 5.25%, or the offered mortgage rate plus 2% - whichever is higher.

What is Gross Debt Service Ratio?

The first metric used to determine affordability is a gross debt service (GDS) ratio. This is similar to the front-end ratio in the U.S. except it also includes your heating expenses and the condo dues (which are similar to HOA fees in the US) only count at 50%. The percentage of your pre-tax income you'll use to pay for these housing costs needs to be under 39%.

The inclusion of heating expenses changes the GDS acronym PITI to PITH. Add up those housing expenses and divide those by your monthly pre-tax income. A GDS of 32% or below is considered good. The GDS formula is published below.

GDS = 100 * (P + I + H + (C/2)) / I

Where:

  • GDS = Gross Debt Service Ratio
  • P = monthly principal and interest payment
  • H = average monthly heating bill
  • C = monthly condo dues
  • I = monthly pretax income

What is Total Debt Service Ratio?

TDS includes your GDS along with your other monthly debt payments including credit cards, auto loans, and other loan expenses. A TDS of 40% or below is considered good. The TDS formula is published below.

TDS = 100 * (P + I + H + (C/2) + D1 + D2 ... Dn) / I

Where:

  • GDS = Gross Debt Service Ratio
  • P = monthly principal and interest payment
  • H = average monthly heating bill
  • C = monthly condo dues
  • I = monthly pretax income
  • Dn = required monthly debt payments

What are the GDS & TDS Limits?

Industry sandards for GDS and TDS are 32% & 40%. CMHC itself will not insure above 39%/44%.

Calculating Monthly Costs

Since mortgage interest is compounded differently, payments would not be the same as they would for the same loan terms in the United States. In most cases, you would actually pay slightly less due to interest compounding only twice annually.

For example, if you buy a $250,000 home with a $200,000 loan at a 5% interest rate, you would expect to pay $1,067.38 in principle and interest every month. For the same loan terms in the US, you would expect to pay $1,073.64 in principle and interest.

By using the above calculator, you can determine your financial obligations for buying a home in Canada so that you can make the right financial plan to meet your personal investing goals.

Ryan Bembridge headshot.

About The Author

 

Ryan Bembridge has edited three property magazines – Mortgage Introducer, Property Investor Post, and PropertyWire. He is a regular contributor to ProperPR, where he interprets raw data and turns them into press release, while he has written for audiences in Canada, the UK and the US.

His main interest comes from the politics of housing, given that affordability struggles and building enough homes represent some of the major challenges of our times.

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