1. What is a Mortgage Affordability Calculator Canada?

Definition: This calculator determines the maximum mortgage principal you can afford based on your comfortable monthly payment, interest rate, and amortization period.

Purpose: It helps Canadian homebuyers understand their purchasing power before house hunting.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( P \) — Affordable principal (CAD)
• \( M \) — Affordable monthly payment (CAD)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (years × 12)

Explanation: This formula calculates the present value of an annuity (the mortgage principal) based on regular payments.

3. Importance of Mortgage Affordability Calculation

Details: Knowing your affordable principal helps set realistic home price expectations and prevents overextension of your budget.

4. Using the Calculator

Tips: Enter your maximum comfortable monthly payment, current mortgage interest rate (default 5.00%), and amortization period (default 25 years). All values must be > 0.

5. Frequently Asked Questions (FAQ)

Q1: Does this include property taxes and insurance?
A: No, this calculates principal only. Remember to account for additional housing costs (typically 15-30% of payment).

Q2: What's a typical Canadian amortization period?
A: Most Canadian mortgages have 25-year amortization, though some first-time buyers may qualify for 30 years.

Q3: How does interest rate affect affordability?
A: Higher rates significantly reduce affordable principal. A 1% rate increase can decrease purchasing power by ~10%.

Q4: What about the mortgage stress test?
A: Canadian lenders qualify you at ~2% above your contract rate. Consider using a higher rate in calculations.

Q5: Does this account for down payment?
A: No, add your down payment to the affordable principal to determine maximum home price.