1. What is the Mortgage Affordability Calculator?

This calculator estimates how much mortgage you can afford in Alberta, Canada based on your gross income, expenses, and the Gross Debt Service (GDS) ratio. It helps potential homebuyers understand their purchasing power.

2. How Does the Calculator Work?

The calculator uses the mortgage affordability formula:

Where:

• \( \text{Gross Income} \) — Annual pre-tax income in CAD
• \( \text{GDS Ratio} \) — Gross Debt Service ratio (typically 32-39%)
• \( \text{Expenses} \) — Annual property taxes, heating, and other housing costs
• \( \text{Monthly Rate} \) — Monthly interest rate (annual rate ÷ 12)

Explanation: The formula calculates the maximum mortgage payment you can afford while staying within recommended debt service ratios.

3. Importance of GDS Ratio

Details: The GDS ratio is the percentage of your gross income needed to cover housing costs. Lenders typically use 39% as the maximum GDS ratio for mortgage qualification in Canada.

4. Using the Calculator

Tips: Enter your gross annual income, GDS ratio (default is 39%), annual housing expenses, and current mortgage interest rate. The calculator will show the maximum mortgage amount you can afford.

5. Frequently Asked Questions (FAQ)

Q1: What is a good GDS ratio?
A: While lenders may approve up to 39%, a ratio below 32% is more comfortable and leaves room for other expenses.

Q2: Does this include the down payment?
A: No, this calculates the mortgage amount only. You'll need additional funds for the down payment (typically 5-20% of home price).

Q3: What expenses should I include?
A: Include property taxes, heating costs, condo fees (if applicable), and 50% of strata fees for condominiums.

Q4: How does interest rate affect affordability?
A: Higher rates reduce affordability as more of your payment goes toward interest rather than principal.

Q5: Is this calculation specific to Alberta?
A: While the formula is universal, it uses Alberta's typical GDS ratio standards and Canadian mortgage practices.