Income Needed To Get A Mortgage In Canada
What You Should Know
- Your mortgage affordability is determined on the basis of your income, estimated monthly housing costs and monthly debt payments.
- Lenders use debt service ratios to determine whether your income is sufficient to service your monthly mortgage payments.
- Federally regulated lenders conduct a stress test to check if you will be able to keep up with your mortgage payments if the mortgage rates increase in future.
- The average value of new mortgage loans in Canada for Q3 of 2023 was $338,522, according to data published by CMHC.
- As of March 2024, the income required to buy an average home in Canada with the minimum required downpayment is around $152,000.
Minimum income required for a $1M mortgage is $219,368
based on an assumed home price of $1,250,000, a downpayment of $250,000, annual property tax of $4,296, monthly heating cost of $200, and monthly car loan payment of $700.
Minimum income required for a $900K mortgage is $201,192
based on an assumed home price of $990,000, a downpayment of $90,000, annual property tax of $3,600, monthly heating cost of $200, and monthly car loan payment of $700.
Minimum income required for a $800K mortgage is $179,532
based on an assumed home price of $880,000, a downpayment of $80,000, annual property tax of $3,204, monthly heating cost of $200, and monthly car loan payment of $700.
Minimum income required for a $700K mortgage is $158,995
based on an assumed home price of $770,000, a downpayment of $70,000, annual property tax of $2,796, monthly heating cost of $200, and monthly car loan payment of $700.
Minimum income required for a $600K mortgage is $139,796
based on an assumed home price of $660,000, a downpayment of $60,000, annual property tax of $2,400, monthly heating cost of $200, and monthly car loan payment of $700.
Minimum income required for a $500K mortgage is $124,687
based on an assumed home price of $550,000, a downpayment of $50,000, annual property tax of $2,004, monthly heating cost of $100, and monthly car loan payment of $700.
Minimum income required for a $400K mortgage is $97,571
based on an assumed home price of $400,000, a downpayment of $40,000, annual property tax of $1,596, monthly heating cost of $100, and monthly car loan payment of $700.
Minimum income required for a $300K mortgage is $84,898
based on an assumed home price of $330,000, a downpayment of $30,000, annual property tax of $1,200, monthly heating cost of $100, and monthly car loan payment of $700.
Minimum income required for a $200K mortgage is $65,235
based on an assumed home price of $220,000, a downpayment of $20,000, annual property tax of $1,800, monthly heating cost of $200, and monthly car loan payment of $700.
Minimum income required for a $100K mortgage is $43,527
based on an assumed home price of $110,000, a downpayment of $10,000, annual property tax of $900, monthly heating cost of $150, and monthly car loan payment of $700.
Your income is one of the many factors that help determine your mortgage affordability. Along with your income, mortgage lenders also consider your monthly debt payments and monthly housing costs to determine how much mortgage you can afford. Basically, the lenders want to ensure that your income is sufficient to cover your mortgage payments along with other debt and housing payments.
Another key factor that affects your mortgage affordability is the ongoing mortgage rates. This is because monthly mortgage payments increase as mortgage rates go up, which reduces affordability. This means that with the same salary, you can qualify for a larger mortgage amount when the mortgage rates are low than when the mortgage rates are high. WOWA.ca’s July 2024 study of mortgage affordability over 50 years suggests that in 2023, unaffordability reached its peak since 1991. This was the time when mortgage rates were significantly high. Read below to find out how different factors affect the income required to get a mortgage in Canada.
Mortgage Affordability in Canadian Provinces
The income requirement to buy an average home in Canada and its provinces and the change in income requirements from October 2022 to October 2023 are as follows:
Annual Income Needed to Buy an Average Home in Canadian Provinces
(October 2022 vs October 2023)
| Province | Avg. Home Price (Oct 2022) | Avg. Home Price (Oct 2023) | Change in Home Price | Income Required (Oct 2022) | Income Required (Oct 2023) | Change in Income Required |
|---|---|---|---|---|---|---|
| Canada | $644,643 | $656,625 | +$11,982 | $152,154 | $161,754 | +$9,600 |
| British Columbia | $931,525 | $968,786 | +$37,261 | $211,815 | $229,908 | +$18,092 |
| Ontario | $831,058 | $855,990 | +$24,932 | $190,923 | $205,262 | +$14,338 |
| Quebec | $444,113 | $466,319 | +$22,206 | $109,815 | $119,785 | +$9,969 |
| Alberta | $430,000 | $455,891 | +$25,891 | $106,708 | $117,385 | +$10,677 |
| Nova Scotia | $388,627 | $419,717 | +$31,090 | $97,631 | $109,046 | +$11,415 |
| Prince Edward Island | $380,961 | $380,961 | $0 | $95,938 | $100,092 | +$4,154 |
| Manitoba | $337,724 | $344,478 | +$6,754 | $86,462 | $91,692 | +$5,231 |
| New Brunswick | $267,418 | $299,508 | +$32,090 | $71,015 | $81,323 | +$10,308 |
| Saskatchewan | $284,857 | $296,251 | +$11,394 | $74,554 | $80,585 | +$6,031 |
| Newfoundland and Labrador | $287,270 | $281,525 | -$5,745 | $75,385 | $77,200 | +$1,815 |
Note - The calculations are made using BMO’s qualifying rates (Stress Test Rates) in October 2022 and October 2023. Assumptions - It is assumed that the minimum required downpayment is paid in each case. The housing costs apart from mortgage payments (property taxes + heating costs + ½ of condo fees) are assumed to be $4,800 / year, irrespective of the location. It is assumed that there are no other monthly loan payments, such as car loans, credit card debt, lines of credit etc. | ||||||
Mortgage Affordability in Major Canadian Cities
The income requirement to buy an average home in major Canadian cities as of October 2023 is as follows:
Annual Income Needed to Buy an Average Home in Major Canadian Cities
(October 2023)
| City | Avg. Home Price | Monthly Mortgage Payment | Monthly Property Tax | Required Annual Income | ||
|---|---|---|---|---|---|---|
| Toronto | $1,125,928 | $6,669 | $331 | $220,003 | ||
| Vancouver | $1,299,503 | $7,697 | $279 | $250,036 | ||
| Montreal | $578,399 | $4,094 | $343 | $141,133 | ||
| Calgary | $545,746 | $3,840 | $301 | $132,021 | ||
| Edmonton | $396,550 | $2,802 | $292 | $99,818 | ||
| Ottawa | $660,836 | $4,610 | $351 | $157,249 | ||
| Quebec City | $377,911 | $2,694 | $348 | $98,208 | ||
| Winnipeg | $369,325 | $2,667 | $337 | $97,038 | ||
| Hamilton | $789,040 | $5,469 | $342 | $183,403 | ||
| London | $629,605 | $4,401 | $268 | $148,274 | ||
| Kitchener-Waterloo-Cambridge | $767,848 | $5,327 | $327 | $178,590 | ||
| Halifax-Dartmouth | $531,129 | $3,758 | $494 | $135,431 | ||
| Oshawa | $804,047 | $5,569 | $426 | $189,062 | ||
| Saskatoon | $385,765 | $2,738 | $556 | $105,982 | ||
| Victoria | $958,161 | $6,601 | $327 | $217,790 | ||
Note - The calculations are made using the lowest qualifying rate in each city in November 2023 (Lowest rate + 2%). The property taxes are calculated using WOWA’s property tax calculators for each city and the property’s fair market value. Assumptions - It is assumed that the minimum required downpayment is paid in each case. The monthly heating cost is assumed to be $150. It is assumed that no condo or HOA fees are required to be paid. It is assumed that there are no other monthly loan payments, such as car loans, credit card debt, lines of credit etc. | ||||||
Annual Income Needed to Buy an Average Detached Home in Major Canadian Cities
(October 2023)
| City | Avg. Home Price | Monthly Mortgage Payment | Monthly Property Tax | Required Annual Income |
|---|---|---|---|---|
| Toronto | $1,450,112 | $8,589 | $400 | $282,738 |
| Vancouver | $2,236,349 | $13,246 | $500 | $429,113 |
| Montreal* | $545,000 | $3,868 | $323 | $135,110 |
| Calgary | $725,758 | $5,045 | $400 | $173,687 |
| Edmonton | $486,751 | $3,440 | $359 | $123,031 |
| Ottawa | $810,319 | $5,611 | $430 | $192,026 |
| Quebec City* | $350,000 | $2,495 | $321 | $92,810 |
| Winnipeg | $399,017 | $2,882 | $364 | $106,026 |
| Hamilton | $870,085 | $6,011 | $377 | $202,697 |
| London | $678,821 | $4,731 | $289 | $160,613 |
*Median Price Note - The calculations are made using the lowest qualifying rate in each city in November 2023 (Lowest rate + 2%). The property taxes are calculated using WOWA’s property tax calculators for each city and the property’s fair market value. Assumptions - It is assumed that the minimum required downpayment is paid in each case. The monthly heating cost is assumed to be $200. It is assumed that no condo or HOA fees are required to be paid. It is assumed that there are no other monthly loan payments, such as car loans, credit card debt, lines of credit etc. | ||||
Annual Income Needed to Buy an Average Condo Home in Major Canadian Cities
(October 2023)
| City | Avg. Home Price | Monthly Mortgage Payment | Monthly Property Tax | Required Annual Income |
|---|---|---|---|---|
| Toronto | $708,780 | $4,932 | $204 | $167,246 |
| Vancouver | $810,944 | $5,615 | $174 | $187,362 |
| Montreal* | $390,000 | $2,780 | $216 | $101,421 |
| Calgary | $321,641 | $2,273 | $186 | $84,897 |
| Edmonton | $203,663 | $1,439 | $152 | $58,182 |
| Ottawa | $465,568 | $3,290 | $299 | $119,649 |
| Quebec City* | $249,000 | $1,775 | $229 | $70,897 |
| Winnipeg | $259,127 | $1,871 | $252 | $74,546 |
| Hamilton | $495,705 | $3,503 | $215 | $123,618 |
| London | $349,860 | $2,473 | $149 | $89,905 |
*Median Price Note - The calculations are made using the lowest qualifying rate in each city in November 2023 (Lowest rate + 2%). The property taxes are calculated using WOWA’s property tax calculators for each city and the property’s fair market value. Assumptions - It is assumed that the minimum required downpayment is paid in each case. The monthly heating cost is assumed to be $100. It is assumed that the monthly condo fee is $400. It is assumed that there are no other monthly loan payments, such as car loans, credit card debt, lines of credit etc. | ||||
How do Lenders Determine Your Mortgage Affordability?
To determine how much mortgage you can really afford, mortgage lenders compare your income with your debt payments using debt service ratios. The debt service ratios are also used during a mortgage stress test to determine whether you’ll be able to afford mortgage payments even if mortgage rates go up.
Debt Service Ratios
Mortgage lenders use two debt service ratios to determine your capacity to service mortgage payments – Gross Debt Service (GDS) and Total Debt Service (TDS). These ratios determine how much of your income will go towards paying for your housing costs and making debt payments. The maximum permissible GDS and TDS ratios vary from lender to lender based on their risk tolerance; however, Canada Mortgage and Housing Corporation (CMHC) has set a maximum limit for these ratios for insured mortgages. The lower your debt service ratios are, the better your chances of mortgage approval.
- GDS Ratio - The GDS Ratio is the ratio of your housing costs to your household’s gross income. The housing costs include mortgage payments, property taxes, heating costs, 50% of condo fees / HOA fees (if applicable) and site/land rent. For CMHC-insured mortgages, this ratio must be less than 39%.
- TDS Ratio - The TDS Ratio is the ratio of your housing costs and debt payments to your household’s gross income. The debt payments include credit card debt payments, car loan payments/lease payments, line of credit debt and any other loan payments. For CMHC-insured mortgages, this ratio should be less than 44%.
Example of GDS and TDS
Let us assume that a person wants to get a $400,000 mortgage, to buy a condo worth $500,000 in Toronto, and the mortgage rate is 5%. Then, for an amortization of 25 years, the monthly mortgage payment is $2,326. In this case, the monthly costs are as follows:
Housing Costs -
| Mortgage Payments | $2,326 |
| Property taxes | $150 |
| Heating | $100 |
| 50% of Condo fees | $250 |
| Total Housing Costs | $2,826 |
Debt Payments -
| Car Loan / Lease Payments | $600 |
| Credit Card Debt | $0 |
| Line of Credit | $500 |
| Other Loans | $0 |
| Total Debt Payments | $1,100 |
Assuming that the household makes $100,000, the gross monthly income comes to $8,333.
Then,
Stress Test
All federally regulated mortgage lenders require you to pass the mortgage stress test to determine whether your income is enough to keep up with mortgage payments if the interest rates were to increase in future. A qualifying rate, also called a stress test rate, is used for qualification to ensure that you will still be able to afford the mortgage payments if the mortgage rates increase. The qualifying rate is the higher of -
- the benchmark rate of 5.25%, and
- the current mortgage rate plus 2%.
Your income needs to be high enough so that the debt service ratios do not exceed the maximum limits required by the lenders. This means that for CMHC-insured mortgages, the GDS ratio must not exceed 39%, and the TDS ratio must not exceed 44%, even with the qualifying rate.
Credit unions, private lenders and b-lenders aren’t required to conduct a stress test and may be a good option for homebuyers who have failed a stress test or are looking to avoid one.
Income and Downpayment
If you fail to qualify for a mortgage based on your current income, one of the ways to qualify is to pay a higher down payment. This is because paying a higher downpayment will reduce your mortgage amount and, in turn, your mortgage payments. Your current income may not be enough for the mortgage amount you originally wanted, but you could qualify for a lower mortgage amount.
You could consider withdrawing from your RRSP (Registered Retirement Savings Plan) or your TFSA (Tax-Free Savings Account) to increase your downpayment. Some people also choose to borrow from their parents or other close relatives to increase their downpayment. You can also check out downpayment assistance programs available in your province. If you plan to buy a home in a few years, you could start saving for a downpayment with an FHSA (First Home Savings Account)
To get an estimate of how much mortgage you will qualify for based on your unique situation, you can get a mortgage pre-approval.
Income Needed to Qualify for Different Mortgage Amounts
The income needed to get a mortgage of a particular amount can vary based on many factors, and every case is unique. However, we have made calculations below based on some assumptions to help you understand how lenders decide whether your income is sufficient to qualify for a mortgage. The qualifying rate used for the stress test is used for calculations, as the mortgage applicant will have to pass the stress test to qualify for a mortgage.
Suppose you want to buy a $1,250,000 house in Toronto. To buy a home with a price over 1M in Canada, you are required to put down at least a 20% downpayment. In this case, you will have to pay $250,000 as the downpayment, and you can get a $1,000,000 mortgage. This mortgage cannot be insured by CMHC, and uninsurable mortgage rates will be applicable.
| Factor | Value | Assumption / Description |
|---|---|---|
| Home Purchase Price | $1,250,000 | Assumed purchase price of home |
| Downpayment | $250,000 | 20% of home price |
| Mortgage Amount | $1,000,000 | Home price minus downpayment |
| CMHC Insurance Premium | $0 | As the home value is over $1M, the mortgage is not insurable |
| Amortization | 25 years | Maximum amortization for a CMHC-insured mortgage |
| 5-year fixed mortgage rate | 4.29% | The best available 5-year uninsurable fixed mortgage rate |
| Qualifying Rate / Stress Test Rate | 6.29% | Higher of 5.25% and current 5-year fixed uninsurable mortgage rate + 2% |
| Monthly Mortgage Payment | $6,571 | Monthly mortgage payments, including CMHC premium, based on the qualifying rate |
| Monthly Property Tax Payment | $358 | Based on the assumed property tax of $4,296 per year |
| Heating Costs | $200 | Assumed monthly heating cost |
| 50% of Condo / HOA Fees | $0 | Assuming that the home is not a part of a condo / HOA Association |
| Total Monthly Housing Cost | $7,129 | Monthly mortgage payment + Property taxes + Heating cost + 50% of condo fees |
| Monthly Household Income Requirement based on GDS | $18,281 | Based on a maximum GDS of 39% |
| Annual Household Income Requirement based on GDS | $219,368 | Monthly household income requirement based on GDS x 12 |
| Monthly Car Loan Payment | $700 | Assumed monthly car loan payment |
| Other Debt Payment | $0 | Assuming there is no other debt, such as credit card debt, line of credit, etc. |
| Total Debt Payment | $700 | Car loan payments + Credit card debt payments + Line of credit payments + Other debt payments |
| Monthly Household Income Requirement based on TDS | $17,794 | Based on a maximum TDS of 44% |
| Annual Household Income Requirement based on TDS | $213,530 | Monthly household income requirement based on TDS x 12 |
| Minimum Annual Household Income Requirement | $219,368 | Greater of household income requirement based on GDS and household income requirement based on TDS. |
From the above calculations, we can conclude that the minimum income required for a $1,000,000 mortgage in this particular case is $219,368. The income requirement for the same mortgage amount can vary based on your housing costs, debt payments, downpayment and other such factors.
Suppose you want to buy a $990,000 house in Toronto, of which you are paying $90,000 as a downpayment and require a $900,000 mortgage to cover the rest. The mortgage will be insured by CMHC, and the following calculations will apply:
| Factor | Value | Assumption / Description |
|---|---|---|
| Home Purchase Price | $990,000 | Assumed purchase price of home |
| Downpayment | $90,000 | Assumed downpayment |
| Mortgage Amount | $900,000 | Home price minus downpayment |
| CMHC Insurance Premium | $36,000 | 4% of the mortgage amount that needs to be paid back to the lender with the mortgage |
| Amortization | 25 years | Maximum amortization for a CMHC-insured mortgage |
| 5-year fixed mortgage rate | 4.09% | The best available 5-year insured fixed mortgage rate |
| Qualifying Rate / Stress Test Rate | 6.09% | Higher of 5.25% and current 5-year fixed insured mortgage rate + 2% |
| Monthly Mortgage Payment | $6,039 | Monthly mortgage payments, including CMHC premium, based on the qualifying rate |
| Monthly Property Tax Payment | $300 | Based on the assumed property tax of $3,600 per year |
| Heating Costs | $200 | Assumed monthly heating cost |
| 50% of Condo / HOA Fees | $0 | Assuming that the home is not a part of a condo / HOA Association |
| Total Monthly Housing Cost | $6,539 | Monthly mortgage payment + Property taxes + Heating cost + 50% of condo fees |
| Monthly Household Income Requirement based on GDS | $16,766 | Based on a maximum GDS of 39% |
| Annual Household Income Requirement based on GDS | $201,192 | Monthly household income requirement based on GDS x 12 |
| Monthly Car Loan Payment | $700 | Assumed monthly car loan payment |
| Other Debt Payment | $0 | Assuming there is no other debt, such as credit card debt, line of credit, etc. |
| Total Debt Payment | $700 | Car loan payments + Credit card debt payments + Line of credit payments + Other debt payments |
| Monthly Household Income Requirement based on TDS | $16,452 | Based on a maximum TDS of 44% |
| Annual Household Income Requirement based on TDS | $197,421 | Monthly household income requirement based on TDS x 12 |
| Minimum Annual Household Income Requirement | $201,192 | Greater of household income requirement based on GDS and household income requirement based on TDS. |
From the above calculations, we can conclude that the minimum income required for a $900,000 mortgage in this particular case is $201,192. The income requirement for the same mortgage amount can vary based on your housing costs, debt payments, downpayment and other such factors.
Suppose you want to buy a $880,000 house in Toronto, of which you are paying $80,000 as a downpayment and require a $800,000 mortgage to cover the rest. The mortgage will be insured by CMHC, and the following calculations will apply:
| Factor | Value | Assumption / Description |
|---|---|---|
| Home Purchase Price | $880,000 | Assumed purchase price of home |
| Downpayment | $80,000 | Assumed downpayment |
| Mortgage Amount | $800,000 | Home price minus downpayment |
| CMHC Insurance Premium | $32,000 | 4% of the mortgage amount that needs to be paid back to the lender with the mortgage |
| Amortization | 25 years | Maximum amortization for a CMHC-insured mortgage |
| 5-year fixed mortgage rate | 4.09% | The best available 5-year insured fixed mortgage rate |
| Qualifying Rate / Stress Test Rate | 6.09% | Higher of 5.25% and current 5-year fixed insured mortgage rate + 2% |
| Monthly Mortgage Payment | $5,368 | Monthly mortgage payments, including CMHC premium, based on the qualifying rate |
| Monthly Property Tax Payment | $267 | Based on the assumed property tax of $3,204 per year |
| Heating Costs | $200 | Assumed monthly heating cost |
| 50% of Condo / HOA Fees | $0 | Assuming that the home is not a part of a condo / HOA Association |
| Total Monthly Housing Cost | $5,835 | Monthly mortgage payment + Property taxes + Heating cost + 50% of condo fees |
| Monthly Household Income Requirement based on GDS | $14,961 | Based on a maximum GDS of 39% |
| Annual Household Income Requirement based on GDS | $179,532 | Monthly household income requirement based on GDS x 12 |
| Monthly Car Loan Payment | $700 | Assumed monthly car loan payment |
| Other Debt Payment | $0 | Assuming there is no other debt, such as credit card debt, line of credit, etc. |
| Total Debt Payment | $700 | Car loan payments + Credit card debt payments + Line of credit payments + Other debt payments |
| Monthly Household Income Requirement based on TDS | $14,852 | Based on a maximum TDS of 44% |
| Annual Household Income Requirement based on TDS | $178,221 | Monthly household income requirement based on TDS x 12 |
| Minimum Annual Household Income Requirement | $179,532 | Greater of household income requirement based on GDS and household income requirement based on TDS. |
From the above calculations, we can conclude that the minimum income required for a $800,000 mortgage in this particular case is $179,532. The income requirement for the same mortgage amount can vary based on your housing costs, debt payments, downpayment and other such factors.
Suppose you want to buy a $770,000 house in Toronto, of which you are paying $70,000 as a downpayment and require a $700,000 mortgage to cover the rest. The mortgage will be insured by CMHC, and the following calculations will apply:
| Factor | Value | Assumption / Description |
|---|---|---|
| Home Purchase Price | $770,000 | Assumed purchase price of home |
| Downpayment | $70,000 | Assumed downpayment |
| Mortgage Amount | $700,000 | Home price minus downpayment |
| CMHC Insurance Premium | $28,000 | 4% of the mortgage amount that needs to be paid back to the lender with the mortgage |
| Amortization | 25 years | Maximum amortization for a CMHC-insured mortgage |
| 5-year fixed mortgage rate | 4.09% | The best available 5-year insured fixed mortgage rate |
| Qualifying Rate / Stress Test Rate | 6.09% | Higher of 5.25% and current 5-year fixed insured mortgage rate + 2% |
| Monthly Mortgage Payment | $4,697 | Monthly mortgage payments, including CMHC premium, based on the qualifying rate |
| Monthly Property Tax Payment | $233 | Based on the assumed property tax of $2,796 per year |
| Heating Costs | $200 | Assumed monthly heating cost |
| 50% of Condo / HOA Fees | $0 | Assuming that the home is not a part of a condo / HOA Association |
| Total Monthly Housing Cost | $5,130 | Monthly mortgage payment + Property taxes + Heating cost + 50% of condo fees |
| Monthly Household Income Requirement based on GDS | $13,153 | Based on a maximum GDS of 39% |
| Annual Household Income Requirement based on GDS | $157,840 | Monthly household income requirement based on GDS x 12 |
| Monthly Car Loan Payment | $700 | Assumed monthly car loan payment |
| Other Debt Payment | $0 | Assuming there is no other debt, such as credit card debt, line of credit, etc. |
| Total Debt Payment | $700 | Car loan payments + Credit card debt payments + Line of credit payments + Other debt payments |
| Monthly Household Income Requirement based on TDS | $13,250 | Based on a maximum TDS of 44% |
| Annual Household Income Requirement based on TDS | $158,995 | Monthly household income requirement based on TDS x 12 |
| Minimum Annual Household Income Requirement | $158,995 | Greater of household income requirement based on GDS and household income requirement based on TDS. |
From the above calculations, we can conclude that the minimum income required for a $700,000 mortgage in this particular case is $158,995. The income requirement for the same mortgage amount can vary based on your housing costs, debt payments, downpayment and other such factors.
Suppose you want to buy a $660,000 house in Toronto, of which you are paying $60,000 as a downpayment and require a $600,000 mortgage to cover the rest. The mortgage will be insured by CMHC, and the following calculations will apply:
| Factor | Value | Assumption / Description |
|---|---|---|
| Home Purchase Price | $660,000 | Assumed purchase price of home |
| Downpayment | $60,000 | Assumed downpayment |
| Mortgage Amount | $600,000 | Home price minus downpayment |
| CMHC Insurance Premium | $24,000 | 4% of the mortgage amount that needs to be paid back to the lender with the mortgage |
| Amortization | 25 years | Maximum amortization for a CMHC-insured mortgage |
| 5-year fixed mortgage rate | 4.09% | The best available 5-year insured fixed mortgage rate |
| Qualifying Rate / Stress Test Rate | 6.09% | Higher of 5.25% and current 5-year fixed insured mortgage rate + 2% |
| Monthly Mortgage Payment | $4,026 | Monthly mortgage payments, including CMHC premium, based on the qualifying rate |
| Monthly Property Tax Payment | $200 | Based on the assumed property tax of $2,400 per year |
| Heating Costs | $200 | Assumed monthly heating cost |
| 50% of Condo / HOA Fees | $0 | Assuming that the home is not a part of a condo / HOA Association |
| Total Monthly Housing Cost | $4,426 | Monthly mortgage payment + Property taxes + Heating cost + 50% of condo fees |
| Monthly Household Income Requirement based on GDS | $11,348 | Based on a maximum GDS of 39% |
| Annual Household Income Requirement based on GDS | $136,180 | Monthly household income requirement based on GDS x 12 |
| Monthly Car Loan Payment | $700 | Assumed monthly car loan payment |
| Other Debt Payment | $0 | Assuming there is no other debt, such as credit card debt, line of credit, etc. |
| Total Debt Payment | $700 | Car loan payments + Credit card debt payments + Line of credit payments + Other debt payments |
| Monthly Household Income Requirement based on TDS | $11,650 | Based on a maximum TDS of 44% |
| Annual Household Income Requirement based on TDS | $139,796 | Monthly household income requirement based on TDS x 12 |
| Minimum Annual Household Income Requirement | $139,796 | Greater of household income requirement based on GDS and household income requirement based on TDS. |
From the above calculations, we can conclude that the minimum income required for a $600,000 mortgage in this particular case is $139,796. The income requirement for the same mortgage amount can vary based on your housing costs, debt payments, downpayment and other such factors.
Suppose you want to buy a $550,000 house in Toronto, of which you are paying $50,000 as a downpayment and require a $500,000 mortgage to cover the rest. The mortgage will be insured by CMHC, and the following calculations will apply:
| Factor | Value | Assumption / Description |
|---|---|---|
| Home Purchase Price | $550,000 | Assumed purchase price of home |
| Downpayment | $50,000 | Assumed downpayment |
| Mortgage Amount | $500,000 | Home price minus downpayment |
| CMHC Insurance Premium | $20,000 | 4% of the mortgage amount that needs to be paid back to the lender with the mortgage |
| Amortization | 25 years | Maximum amortization for a CMHC-insured mortgage |
| 5-year fixed mortgage rate | 4.09% | The best available 5-year insured fixed mortgage rate |
| Qualifying Rate / Stress Test Rate | 6.09% | Higher of 5.25% and current 5-year fixed insured mortgage rate + 2% |
| Monthly Mortgage Payment | $3,355 | Monthly mortgage payments, including CMHC premium, based on the qualifying rate |
| Monthly Property Tax Payment | $167 | Based on the assumed property tax of $2,004 per year |
| Heating Costs | $100 | Assumed monthly heating cost |
| 50% of Condo / HOA Fees | $250 | Assuming that the condo fee is $500 per month |
| Total Monthly Housing Cost | $3,872 | Monthly mortgage payment + Property taxes + Heating cost + 50% of condo fees |
| Monthly Household Income Requirement based on GDS | $9,928 | Based on a maximum GDS of 39% |
| Annual Household Income Requirement based on GDS | $119,134 | Monthly household income requirement based on GDS x 12 |
| Monthly Car Loan Payment | $700 | Assumed monthly car loan payment |
| Other Debt Payment | $0 | Assuming there is no other debt, such as credit card debt, line of credit, etc. |
| Total Debt Payment | $700 | Car loan payments + Credit card debt payments + Line of credit payments + Other debt payments |
| Monthly Household Income Requirement based on TDS | $10,391 | Based on a maximum TDS of 44% |
| Annual Household Income Requirement based on TDS | $124,687 | Monthly household income requirement based on TDS x 12 |
| Minimum Annual Household Income Requirement | $124,687 | Greater of household income requirement based on GDS and household income requirement based on TDS. |
From the above calculations, we can conclude that the minimum income required for a $500,000 mortgage in this particular case is $124,687. The income requirement for the same mortgage amount can vary based on your housing costs, debt payments, downpayment and other such factors.
Suppose you want to buy a $400,000 house in Toronto, of which you are paying $40,000 as a downpayment and require a $360,000 mortgage to cover the rest. The mortgage will be insured by CMHC, and the following calculations will apply:
| Factor | Value | Assumption / Description |
|---|---|---|
| Home Purchase Price | $400,000 | Assumed purchase price of home |
| Downpayment | $40,000 | Assumed downpayment |
| Mortgage Amount | $360,000 | Home price minus downpayment |
| CMHC Insurance Premium | $11,160 | 4% of the mortgage amount that needs to be paid back to the lender with the mortgage |
| Amortization | 25 years | Maximum amortization for a CMHC-insured mortgage |
| 5-year fixed mortgage rate | 4.09% | The best available 5-year insured fixed mortgage rate |
| Qualifying Rate / Stress Test Rate | 6.09% | Higher of 5.25% and current 5-year fixed insured mortgage rate + 2% |
| Monthly Mortgage Payment | $2,395 | Monthly mortgage payments, including CMHC premium, based on the qualifying rate |
| Monthly Property Tax Payment | $133 | Based on the assumed property tax of $1,596 per year |
| Heating Costs | $100 | Assumed monthly heating cost |
| 50% of Condo / HOA Fees | $250 | Assuming that the condo fee is $500 per month |
| Total Monthly Housing Cost | $2,878 | Monthly mortgage payment + Property taxes + Heating cost + 50% of condo fees |
| Monthly Household Income Requirement based on GDS | $7,378 | Based on a maximum GDS of 39% |
| Annual Household Income Requirement based on GDS | $88,541 | Monthly household income requirement based on GDS x 12 |
| Monthly Car Loan Payment | $700 | Assumed monthly car loan payment |
| Other Debt Payment | $0 | Assuming there is no other debt, such as credit card debt, line of credit, etc. |
| Total Debt Payment | $700 | Car loan payments + Credit card debt payments + Line of credit payments + Other debt payments |
| Monthly Household Income Requirement based on TDS | $8,131 | Based on a maximum TDS of 44% |
| Annual Household Income Requirement based on TDS | $97,571 | Monthly household income requirement based on TDS x 12 |
| Minimum Annual Household Income Requirement | $97,571 | Greater of household income requirement based on GDS and household income requirement based on TDS. |
From the above calculations, we can conclude that the minimum income required for a $360,000 mortgage in this particular case is $97,571. The income requirement for the same mortgage amount can vary based on your housing costs, debt payments, downpayment and other such factors.
Suppose you want to buy a $330,000 house in Toronto, of which you are paying $30,000 as a downpayment and require a $300,000 mortgage to cover the rest. The mortgage will be insured by CMHC, and the following calculations will apply:
| Factor | Value | Assumption / Description |
|---|---|---|
| Home Purchase Price | $330,000 | Assumed purchase price of home |
| Downpayment | $30,000 | Assumed downpayment |
| Mortgage Amount | $300,000 | Home price minus downpayment |
| CMHC Insurance Premium | $12,000 | 4% of the mortgage amount that needs to be paid back to the lender with the mortgage |
| Amortization | 25 years | Maximum amortization for a CMHC-insured mortgage |
| 5-year fixed mortgage rate | 4.09% | The best available 5-year insured fixed mortgage rate |
| Qualifying Rate / Stress Test Rate | 6.09% | Higher of 5.25% and current 5-year fixed insured mortgage rate + 2% |
| Monthly Mortgage Payment | $2,013 | Monthly mortgage payments, including CMHC premium, based on the qualifying rate |
| Monthly Property Tax Payment | $100 | Based on the assumed property tax of $1,200 per year |
| Heating Costs | $100 | Assumed monthly heating cost |
| 50% of Condo / HOA Fees | $200 | Assuming that the condo fee is $400 per month |
| Total Monthly Housing Cost | $2,413 | Monthly mortgage payment + Property taxes + Heating cost + 50% of condo fees |
| Monthly Household Income Requirement based on GDS | $6,187 | Based on a maximum GDS of 39% |
| Annual Household Income Requirement based on GDS | $74,244 | Monthly household income requirement based on GDS x 12 |
| Monthly Car Loan Payment | $700 | Assumed monthly car loan payment |
| Other Debt Payment | $0 | Assuming there is no other debt, such as credit card debt, line of credit, etc. |
| Total Debt Payment | $700 | Car loan payments + Credit card debt payments + Line of credit payments + Other debt payments |
| Monthly Household Income Requirement based on TDS | $7,075 | Based on a maximum TDS of 44% |
| Annual Household Income Requirement based on TDS | $84,898 | Monthly household income requirement based on TDS x 12 |
| Minimum Annual Household Income Requirement | $84,898 | Greater of household income requirement based on GDS and household income requirement based on TDS. |
From the above calculations, we can conclude that the minimum income required for a $300,000 mortgage in this particular case is $84,898. The income requirement for the same mortgage amount can vary based on your housing costs, debt payments, downpayment and other such factors.
Suppose you want to buy a $220,000 house in Toronto, of which you are paying $20,000 as a downpayment and require a $200,000 mortgage to cover the rest. The mortgage will be insured by CMHC, and the following calculations will apply:
| Factor | Value | Assumption / Description |
|---|---|---|
| Home Purchase Price | $220,000 | Assumed purchase price of home |
| Downpayment | $20,000 | Assumed downpayment |
| Mortgage Amount | $200,000 | Home price minus downpayment |
| CMHC Insurance Premium | $8,000 | 4% of the mortgage amount that needs to be paid back to the lender with the mortgage |
| Amortization | 25 years | Maximum amortization for a CMHC-insured mortgage |
| 5-year fixed mortgage rate | 4.09% | The best available 5-year insured fixed mortgage rate |
| Qualifying Rate / Stress Test Rate | 6.09% | Higher of 5.25% and current 5-year fixed insured mortgage rate + 2% |
| Monthly Mortgage Payment | $1,342 | Monthly mortgage payments, including CMHC premium, based on the qualifying rate |
| Monthly Property Tax Payment | $150 | Based on the assumed property tax of $1,800 per year |
| Heating Costs | $200 | Assumed monthly heating cost |
| 50% of Condo / HOA Fees | $0 | Assuming that the home is not a part of a condo / HOA Association |
| Total Monthly Housing Cost | $1,692 | Monthly mortgage payment + Property taxes + Heating cost + 50% of condo fees |
| Monthly Household Income Requirement based on GDS | $4,338 | Based on a maximum GDS of 39% |
| Annual Household Income Requirement based on GDS | $52,060 | Monthly household income requirement based on GDS x 12 |
| Monthly Car Loan Payment | $700 | Assumed monthly car loan payment |
| Other Debt Payment | $0 | Assuming there is no other debt, such as credit card debt, line of credit, etc. |
| Total Debt Payment | $700 | Car loan payments + Credit card debt payments + Line of credit payments + Other debt payments |
| Monthly Household Income Requirement based on TDS | $5,436 | Based on a maximum TDS of 44% |
| Annual Household Income Requirement based on TDS | $65,235 | Monthly household income requirement based on TDS x 12 |
| Minimum Annual Household Income Requirement | $65,235 | Greater of household income requirement based on GDS and household income requirement based on TDS. |
From the above calculations, we can conclude that the minimum income required for a $200,000 mortgage in this particular case is $65,235. The income requirement for the same mortgage amount can vary based on your housing costs, debt payments, downpayment and other such factors.
Suppose you want to buy a $110,000 house in Toronto, of which you are paying $10,000 as a downpayment and require a $100,000 mortgage to cover the rest. The mortgage will be insured by CMHC, and the following calculations will apply:
| Factor | Value | Assumption / Description |
|---|---|---|
| Home Purchase Price | $110,000 | Assumed purchase price of home |
| Downpayment | $10,000 | Assumed downpayment |
| Mortgage Amount | $100,000 | Home price minus downpayment |
| CMHC Insurance Premium | $4,000 | 4% of the mortgage amount that needs to be paid back to the lender with the mortgage |
| Amortization | 25 years | Maximum amortization for a CMHC-insured mortgage |
| 5-year fixed mortgage rate | 4.09% | The best available 5-year insured fixed mortgage rate |
| Qualifying Rate / Stress Test Rate | 6.09% | Higher of 5.25% and current 5-year fixed insured mortgage rate + 2% |
| Monthly Mortgage Payment | $671 | Monthly mortgage payments, including CMHC premium, based on the qualifying rate |
| Monthly Property Tax Payment | $75 | Based on the assumed property tax of $900 per year |
| Heating Costs | $150 | Assumed monthly heating cost |
| 50% of Condo / HOA Fees | $0 | Assuming that the home is not a part of a condo / HOA Association |
| Total Monthly Housing Cost | $896 | Monthly mortgage payment + Property taxes + Heating cost + 50% of condo fees |
| Monthly Household Income Requirement based on GDS | $2,297 | Based on a maximum GDS of 39% |
| Annual Household Income Requirement based on GDS | $27,568 | Monthly household income requirement based on GDS x 12 |
| Monthly Car Loan Payment | $700 | Assumed monthly car loan payment |
| Other Debt Payment | $0 | Assuming there is no other debt, such as credit card debt, line of credit, etc. |
| Total Debt Payment | $700 | Car loan payments + Credit card debt payments + Line of credit payments + Other debt payments |
| Monthly Household Income Requirement based on TDS | $3,627 | Based on a maximum TDS of 44% |
| Annual Household Income Requirement based on TDS | $43,527 | Monthly household income requirement based on TDS x 12 |
| Minimum Annual Household Income Requirement | $43,527 | Greater of household income requirement based on GDS and household income requirement based on TDS. |
From the above calculations, we can conclude that the minimum income required for a $100,000 mortgage in this particular case is $43,527. The income requirement for the same mortgage amount can vary based on your housing costs, debt payments, downpayment and other such factors.
Different Income Requirements for the Same Mortgage Amount
Case 1: Different Amortization Periods
Let us compare two scenarios where the mortgage amount is the same, but other parameters differ.
| Parameter | House 1 | House 2 | House 3 |
|---|---|---|---|
| House Price | $500,000 | $500,000 | $500,000 |
| Downpayment | $100,000 | $100,000 | $100,000 |
| Mortgage Amount | $400,000 | $400,000 | $400,000 |
| Amortization | 25 years | 30 years | 35 years |
| Mortgage Rate | 5.54% (Best rate for insurable mortgages for LTV of 80% as of Nov 22, 2023) | 5.64% (Best rate for uninsurable mortgages as Nov 22, 2023) | 5.64% (Best rate for uninsurable mortgages as Nov 22, 2023) |
| Qualifying Mortgage Rate | 7.54% | 7.64% | 7.64% |
| Monthly Mortgage Payment | $2,936 | $2,803 | $2,703 |
| Monthly Property Tax | $150 | $150 | $150 |
| Monthly Heating Cost | $200 | $200 | $200 |
| Total Monthly Housing Cost | $3,286 | $3,153 | $3,053 |
| Minimum Annual Income based on GDS of 39% | $101,108 | $97,015 | $93,938 |
| Total Interest Paid | $480,880 | $608,953 | $735,264 |
In the above example, house 1 has a standard amortization period of 25 years and house 2 has an amortization period of 30 year and house 3 has an amortization period of 35 years. It is evident that increasing the amortization period can decrease the income requirement. However, the total interest paid increases significantly with increasing amortization.
Case 2: Different Home Values
Let us compare two scenarios where the mortgage amount is the same, but the home values differ, changing other parameters as well.
| Parameter | House 1 | House 2 |
|---|---|---|
| House Price | $1,200,000 | $770,000 |
| Downpayment | $500,000 | $70,000 |
| Mortgage Amount | $700,000 | $700,000 |
| Mortgage Rate | 5.64% (Best rate for uninsurable mortgages as Nov 22, 2023) | 5.24% (Best rate for insured mortgages as of Nov 22, 2023) |
| Qualifying Mortgage Rate | 7.64% | 7.24% |
| Monthly Mortgage Payment | $5,183 | $5,207 (Including CMHC premium) |
| Monthly Property Tax | $350 | $233 |
| Monthly Heating Cost | $250 | $200 |
| Total Monthly Housing Cost | $5,833 | $5,640 |
| Minimum Annual Income based on GDS of 39% | $181,015 | $173,538 |
In the above example, house 1 has a greater price than house 1, but the mortgage amount for both of them is the same. Assuming that the two houses are located in the same locality, it is likely that house 1 is bigger than house 2 and will have a higher property tax and heating cost. Meanwhile, the monthly mortgage payment of house 2 is higher despite the mortgage rate being lower, as it includes CMHC premium payments as well. It is evident from the above example that even though the mortgage amount is the same, the minimum income requirement for both homes is slightly different based on different factors.
Case 3: Different Debt Payments
Another example is where the mortgage amount is the same, and the housing costs are the same, but the debt payment amount is different. Let us compare the two scenarios below:
| Parameter | Buyer 1 | Buyer 2 |
|---|---|---|
| House Price | $770,000 | $770,000 |
| Mortgage Amount | $700,000 | $700,000 |
| Qualifying Mortgage Rate | 7.24% | 7.24% |
| Monthly Mortgage Payment | $5,207 | $5,207 |
| Other Monthly Housing Costs | $433 | $433 |
| Total Monthly Housing Cost | $5,640 | $5,640 |
| Monthly Debt Payment (Car Loan + Credit Card Debt + Other Loans) | $1,000 | $0 |
| Minimum Annual Income based on GDS | $173,538 | $173,538 |
| Minimum Annual Income based on TDS of 44% | $181,091 | $173,538 |
In the above scenario, both buyer 1 and 2 purchase similar homes with the same home price and mortgage amount in the same locality. However, buyer 1 has to make monthly payments for other debt, while buyer 2 does not have any other debt. Due to this, buyer 1 has a higher income requirement for the same mortgage amount.
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- Any analysis or commentary reflects the opinions of WOWA.ca analysts and should not be considered financial advice. Please consult a licensed professional before making any decisions.
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- Interest rates are sourced from financial institutions' websites or provided to us directly. Real estate data is sourced from the Canadian Real Estate Association (CREA) and regional boards' websites and documents.