The CMHC Ratio Calculator is a tool that helps determine your affordability level when purchasing a home in Canada. The Canada Mortgage and Housing Corporation (CMHC) sets specific guidelines regarding how much of your gross monthly income should be spent on housing-related expenses. This calculator ensures that potential homeowners stay within those recommended thresholds.
The CMHC ratio, also referred to as the Gross Debt Service (GDS) ratio, plays a key role in assessing mortgage eligibility. Whether you’re applying for a mortgage loan or simply budgeting for your new home, calculating your CMHC ratio helps ensure your finances are on solid ground.
Formula
The CMHC ratio is calculated using the following formula:
CMHC Ratio = (Total Monthly Housing Costs ÷ Gross Monthly Income) × 100
Where:
- Total Monthly Housing Costs typically include mortgage principal and interest, property taxes, heating expenses, and 50% of condo fees (if applicable).
- Gross Monthly Income includes salary, bonuses, investment income, and any other regular sources of income before taxes and deductions.
How to Use
Using the CMHC Ratio Calculator is simple:
- Input Total Monthly Housing Costs: Include your expected mortgage payment, property taxes, heating, and 50% of condo fees.
- Input Gross Monthly Income: Enter your total income before deductions.
- Click “Calculate”: The calculator will display your CMHC ratio as a percentage.
- Interpret the Result: Compare your ratio against the CMHC recommended limit.
CMHC typically recommends a GDS ratio not to exceed 32%. If your ratio is below this, your housing costs are considered affordable under CMHC standards.
Example
Let’s say your total monthly housing costs are $1,800, and your gross monthly income is $5,500.
Using the formula:
CMHC Ratio = (1,800 ÷ 5,500) × 100 = 32.73%
Since the ratio exceeds 32%, this may be a red flag for lenders, depending on your overall credit profile and Total Debt Service (TDS) ratio.
FAQs
1. What is the CMHC ratio?
It’s a measure of housing affordability, showing how much of your income is spent on housing costs.
2. What is the maximum CMHC ratio allowed?
Typically, CMHC recommends a maximum of 32% for the Gross Debt Service (GDS) ratio.
3. What expenses are included in monthly housing costs?
Mortgage payments, property taxes, heating costs, and 50% of condo fees.
4. Is this calculator only for first-time buyers?
No, it’s useful for anyone applying for a mortgage in Canada.
5. What happens if my ratio exceeds 32%?
You may not qualify for a CMHC-insured mortgage unless you have strong credit or a large down payment.
6. Does this ratio include other debts?
No, that would fall under the Total Debt Service (TDS) ratio.
7. What is the difference between GDS and TDS?
GDS includes only housing costs, while TDS includes all debt obligations (car loans, credit cards, etc.).
8. Can my CMHC ratio be improved?
Yes, by increasing income or reducing monthly housing expenses.
9. Do lenders always follow CMHC guidelines?
Most do, especially when the mortgage is insured through CMHC.
10. Is CMHC ratio relevant for renters?
Not directly, but understanding affordability helps in financial planning.
11. Is gross income the same as take-home pay?
No, gross income is before tax; take-home is after tax.
12. Should I include spousal income?
Yes, if the mortgage application includes both incomes.
13. How accurate is this calculator?
It’s very accurate for estimation, but lender calculations may vary slightly.
14. What’s the benefit of staying under 32%?
It increases your chance of mortgage approval and lowers financial stress.
15. Does CMHC offer other calculators?
Yes, including tools for TDS ratio and mortgage loan insurance.
16. Should I consult a mortgage broker?
Yes, they can guide you through qualifying and improving your financial profile.
17. What if I have variable income?
Use an average over several months to get a reliable estimate.
18. Can I include child support or alimony in income?
Yes, if it is consistent and documented.
19. What about bonuses and commissions?
Include them only if they’re regular and verifiable.
20. Is this calculator useful before house hunting?
Absolutely. It gives you a realistic sense of what you can afford.
Conclusion
The CMHC Ratio Calculator is a vital resource for anyone considering purchasing property in Canada. By evaluating how much of your income goes toward housing costs, it helps you stay within recommended financial boundaries. Keeping your CMHC ratio under 32% can greatly improve your chances of mortgage approval and long-term financial stability.
Use this calculator before speaking with a mortgage advisor, during budgeting sessions, or when evaluating housing options. It promotes responsible homeownership and helps prevent over-leveraging. Make informed decisions and buy confidently by understanding your CMHC ratio.