Real Estate

Are mortgage affordability calculators any good?

  • Last Updated:
  • Feb 14th, 2018 8:48 pm
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[OP]
Deal Addict
Nov 22, 2009
2638 posts
518 upvotes
Toronto

Are mortgage affordability calculators any good?

https://www.bmo.com/main/personal/mortg ... rdability/

Annual household income: $100,000
Property tax: $4,000
Monthly living cost: $500
Monthly loan: $0
Other monthly: $300
Down payment $600,000

Only around 900k? So essentially only a 300k loan for a household with 100k income? I thought it was 5x annual salaries?

If I use CIBC, then it became 450k loan..... https://www.cibc.com/ca/mortgages/calcu ... ility.html
61 replies
Deal Addict
Feb 13, 2017
1295 posts
149 upvotes
CIBC's is more realistic. Also don't forget to use 2% higher then current rate or BoC 5 year posted rate to determine a more realistic approval amount (due to recent stress test requirements)
Sr. Member
Sep 18, 2008
849 posts
206 upvotes
Woodbridge
They aren't. I can't even find a mortgage affordability calculator for rental units that can count in rental income.
Penalty Box
Aug 11, 2005
4175 posts
1427 upvotes
lol how can anyone be comfortable with a mortgage that's 5x salary.
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Deal Fanatic
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Dec 27, 2009
7392 posts
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Victoria, BC
Luckyinfil wrote: lol how can anyone be comfortable with a mortgage that's 5x salary.
In our case that would be about a $1 million dollar mortgage - and we would NEVER even consider it. We went with approximately 1/2 of that, and I honestly would not want to handle anything more than that.
Deal Guru
Feb 22, 2011
10424 posts
12950 upvotes
Toronto
There is no multiple of income that works because the base line cost of living is relatively the same for everyone. So if you make $50k you might get 0x income because you can barely afford to live. Whereas if you make $200k you might get 5x because you have a lot more disposable to net income.
Deal Addict
Jan 20, 2016
2028 posts
1010 upvotes
Houston, TX
blitzforce wrote: https://www.bmo.com/main/personal/mortg ... rdability/

Annual household income: $100,000
Property tax: $4,000
Monthly living cost: $500
Monthly loan: $0
Other monthly: $300
Down payment $600,000

Only around 900k? So essentially only a 300k loan for a household with 100k income? I thought it was 5x annual salaries?

If I use CIBC, then it became 450k loan..... https://www.cibc.com/ca/mortgages/calcu ... ility.html
5x in 50k income and on 200kis quite different...
5x on 100k is doable (not sure it will pass stress test however, maybe on 30y it will) but I'd say 3x is more realistic and gave some margins while 5x doesn't.
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[OP]
Deal Addict
Nov 22, 2009
2638 posts
518 upvotes
Toronto
asa1973 wrote: 5x in 50k income and on 200kis quite different...
5x on 100k is doable (not sure it will pass stress test however, maybe on 30y it will) but I'd say 3x is more realistic and gave some margins while 5x doesn't.
No wonder housing prices are going down since 100k household income hardly even qualifies for 300k.
[OP]
Deal Addict
Nov 22, 2009
2638 posts
518 upvotes
Toronto
Chickinvic wrote: In our case that would be about a $1 million dollar mortgage - and we would NEVER even consider it. We went with approximately 1/2 of that, and I honestly would not want to handle anything more than that.
So 300k loan for 100k household income is the correct amount?
Deal Addict
Jan 20, 2016
2028 posts
1010 upvotes
Houston, TX
blitzforce wrote: No wonder housing prices are going down since 100k household income hardly even qualifies for 300k.
You're wrong. Even with conservative 32%GDS 100k incomer could qualify for 400k under stress test (5.15%), possibly for 450k. With 30y amortization they could stretch to ~500k. Again it depends on other factors like other debts which could limit TDS in their turn, but 400k on 100k quite ligitimate for 25y imo
Mortgage Amount

$450,000
Go

Amortization period
25 years
Amortization period 1

25 years
Amortization period 2

30 years
Amortization period 3

30 years
Amortization period 4

Mortgage rate
2.94 %
Select rate
5.15 %
Select rate
2.94 %
Select rate
5.15 %
Select rate
Mortgage type 5-Year Fixed N/A 5-Year Fixed N/A
Total Mortgage Payment
$2,116
Get rate $2,656
Get rate $1,878
Get rate $2,442
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Deal Guru
User avatar
Mar 23, 2008
12332 posts
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Edmonton
blitzforce wrote: https://www.bmo.com/main/personal/mortg ... rdability/

Annual household income: $100,000
Property tax: $4,000
Monthly living cost: $500
Monthly loan: $0
Other monthly: $300
Down payment $600,000

Only around 900k? So essentially only a 300k loan for a household with 100k income? I thought it was 5x annual salaries?

If I use CIBC, then it became 450k loan..... https://www.cibc.com/ca/mortgages/calcu ... ility.html
Define "good"...

Does good mean you can spend that amount and not be house poor? Does it mean you're guaranteed to get a mortgage for that amount? Or does it mean getting a rough idea so you can go talk to a mortgage broker and not walk away in tears as he breaks your heart telling you that you can't afford your dream home...

Cause I'd say they're really only good for the last one... You should go talk to a broker if you're seriously shopping.

C
[OP]
Deal Addict
Nov 22, 2009
2638 posts
518 upvotes
Toronto
CNeufeld wrote: Define "good"...

Does good mean you can spend that amount and not be house poor? Does it mean you're guaranteed to get a mortgage for that amount? Or does it mean getting a rough idea so you can go talk to a mortgage broker and not walk away in tears as he breaks your heart telling you that you can't afford your dream home...

Cause I'd say they're really only good for the last one... You should go talk to a broker if you're seriously shopping.

C
Good meaning is it reliable. All of the calculators (big 5 banks) provide a different amount. Which one can I rely on.
Deal Guru
User avatar
Mar 23, 2008
12332 posts
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Edmonton
blitzforce wrote: Good meaning is it reliable. All of the calculators (big 5 banks) provide a different amount. Which one can I rely on.
None. Go talk to a broker.

C
Newbie
Oct 20, 2017
31 posts
12 upvotes
Ontario
Based on your numbers, it definitely seems like BMO is more conservative but there's nothing wrong with that.

If you want to try the CIBC calculator again, lenders typically use $1/sq.ft. when estimating heating costs. Make sure you're also entering your other debt obligations (car loan, credit card, line of credit).

Have you also thought about land transfer taxes and closing costs?
Deal Fanatic
User avatar
Dec 27, 2009
7392 posts
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Victoria, BC
blitzforce wrote: So 300k loan for 100k household income is the correct amount?
That's all I would feel comfortable with. I'm not a fan of being house poor.
Deal Fanatic
User avatar
Feb 2, 2014
8965 posts
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Toronto
blitzforce wrote: https://www.bmo.com/main/personal/mortg ... rdability/

Annual household income: $100,000
Property tax: $4,000
Monthly living cost: $500
Monthly loan: $0
Other monthly: $300
Down payment $600,000

Only around 900k? So essentially only a 300k loan for a household with 100k income? I thought it was 5x annual salaries?

If I use CIBC, then it became 450k loan..... https://www.cibc.com/ca/mortgages/calcu ... ility.html
It depends on how aggressive you want to be.

If don't stress test and do a 30-year AM, I can get you a $1.2M house with $600k down.
Kevin Somnauth, CFA
Principal Broker - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative
Sr. Member
Sep 9, 2014
591 posts
536 upvotes
Vancouver
Luckyinfil wrote: lol how can anyone be comfortable with a mortgage that's 5x salary.
Why not? My mortgage is closer to 6x and we are fine. It all depends on your budget, spending, whether you have a pension, etc.
Sr. Member
Sep 9, 2014
591 posts
536 upvotes
Vancouver
Chickinvic wrote: In our case that would be about a $1 million dollar mortgage - and we would NEVER even consider it. We went with approximately 1/2 of that, and I honestly would not want to handle anything more than that.
200k annual income and you can't imagine having a mortgage higher than 500k? Come on, stop trolling.
Deal Fanatic
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Dec 27, 2009
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Victoria, BC
BryanBreguet wrote: 200k annual income and you can't imagine having a mortgage higher than 500k? Come on, stop trolling.
I'm not trolling, so not sure why the accusation? I would not want to be a slave to a mortgage payment. I like having a good life and not being house broke.
Sr. Member
Sep 9, 2014
591 posts
536 upvotes
Vancouver
I consider it borderline trolling because at 200k annual income, you are in like the top what, 5% of Canadians? And yet you are pretending you wouldn't comfortable with a mortgage barely enough to buy a 1br condo in Vancouver with 20% down...

This is just absurd. Not sure what you do with your money but you could go a lot higher than 500k before being remotely "house broke". Everybody is different obviously but your post is more typical of the extreme risk aversion we see on personalfinanceon Reddit.

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