Mortgage Math and Affordability Calculator

Duncan Wilson

How much of a mortgage can I afford (mortgage affordability)? 


Your journey has begun. You are starting your search for that new home. Maybe you have already bought a house previously and simply didn’t notice the very fulcrum that decided what you could be approved for, or your mortgage affordability. There are ratios involved that pre-determine the maximum you can buy or what you have to put down as a down payment to increase this max. 

There are two of these ratios.

Gross debt service ratio, and total debt service ratio

Now, remember a ratio is the quantitative relation between two amounts showing the number of times one value contains or is contained within the other. And these rules of ratios do change in the industry from time to time. Current the ratios for max approval are 39% GDSR (GDSR = Gross Debt Service Ratio)

Let’s not get too complicated here. It’s basically your yearly income broken down monthly. This amount is then multiplied by the gross debt service ratio. Let’s have a look below at the example:

Mr. Client has income of $60,000.00 per year. This is 5,000.00 per month. His gross debt service amount would be ($5000.00 x 39%) which is 1,950. This $1,950 is what Mr. Client would be max approved for.

This $1,950.00 would be Mr. Client’s mortgage payment which is (principal with interest) + property tax + heat allotment. These are the three factors that make up your mortgage payment.

In general Mr. Client maxing out at $1,950 would be approximately $325,000. in affordability. This is all based on the three factors that add up to the GDSR.


Now, let’s add in a wee bit more affordability in your ratios. By allowing you to carry debt outside and above this gross debt max you can carry external debt. Meaning, Mr. Client can still get the $325,000.00 home while carrying a small amount of debt

This is the second ratio and is called total debt service ratio

TDSR = Total Debt Service Ratio.

Let’s take a look below to see how this works. 

Mr. Client, has one outside debt–a car payment of $200 per month. We need to calculate this amount using the total monthly income to see if we are over the max ratio. The ratio for TDSR is 44%. So, $1,950 + $200 = $2,150 (total debt payments plus the three factors that make up your mortgage payment) $2,150 / $5,000 = 43%. 

So, Mr. Client will be approved for his home with his car payment. He is on his way to Mortgage Suite to get the best rate, and you could be too! Click here to speak with an agent instantly and see how much you can afford. Get pre-qualified today!