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Your Borrowing Capacity
A conventional mortgage loan
usually does not exceed 75% of the value of a property. If you need a
higher percentage, you must obtain mortgage
insurance. This insurance protects the lender in the event of default.
If you are a first-time buyer, you can obtain
a mortgage loan of up to 95% of the cost or market value of the home,
under the following conditions:
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The property you would like to purchase must be your principal residence.
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The price of the property (taxes and land included) must not exceed
certain limits that have been established for each region by the
Canada
Mortgage and Housing Corporation (CMHC).
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You must meet the financial criteria of the CMHC, which measures
your borrowing capacity using the following two indicators:
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Repayment of the principal, as well as the interest, property
taxes, electricity, and heating, must not exceed 32% of your
gross family income. This is called the gross debt service
(GDS) ratio.
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The total repayment of all your debts must not exceed 40%
of your gross family income. This is called the total debt
service (TDS) ratio.
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Would you like to measure your borrowing capacity
according to the CMHC’s ratios? Simply enter the information requested
and click on “Calculate.” Enter only whole numbers (for example,
475 rather than 474.70).
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