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How Much House Can I Afford on $75k?

Rising home prices have been noticed by nearly everyone in Canada. From the astonishing growth of the condo market (especially in markets in Toronto and Vancouver) to the recovery of the detached market after last year’s downturn, you’d have to be living under a rock to not notice the upward trend of housing prices.

That can put a real damper on your home buying aspirations. But it doesn’t have to! While downtown Toronto may be out of your affordability range for now, there’s still plenty of places all across Canada that offer affordable housing – some even right next door to Toronto.

In Ontario, the median household income was $74,287 in 2015. That means that just as many people earn less than $74,000 as do over that much. Just under $75,000 is the midpoint for Ontario household incomes, so we’ll see what the average Canadian family can afford.


What is affordability?

There’s a difference between “what you have enough money in your bank account for” and “what you can afford.” With so many Canadians in debt, it’s no surprise that we’re losing touch with what “affordable” housing really means.

When applying for a high-ratio mortgage (a mortgage with a down payment of less than 20%), the Canadian Mortgage and Housing Corporation requires that your gross debt service ratio be 39% or under, and your total debt service ratio be 44% or under. If you are unfamiliar with those terms, read up on what GDS and TDS are here.

To give a brief explanation, GDS is how much of your income you’re going to spend on housing, and TDS is how much of your income you’re going to spend on living. To give a formula:


GDS is the cost of your home divided by your monthly income

TDS is the cost of all your debts + the cost of your home divided by your monthly income


The “cost of your home” is the estimated cost of your mortgage payments and the cost of heating and taxes. It applies to your future property, not your current one. TDS has a higher ratio than GDS because it includes your debt payments. If you have no debt, your TDS and GDS will be identical.

Just because you have enough money in your bank account to pay off your credit cards, car loans, student loans and rent every month does not mean you will be able to afford a house – in fact, you can be denied a mortgage if your existing debt load is too much even if you’re managing it. That’s because the CMHC typically won’t approve ratios above their max recommendation, except in very special circumstances.

For instance, if you live in a low-cost housing market but carry a lot of debt, your GDS may be fine but your TDS could be quite high. Alternatively, you could have no debts at all but be trying to buy in a market where your monthly housing costs would exceed 50% of your income. While you can technically pay for that, the bank won’t lend you money.

For our purposes, “affordability” will be defined as 39% of your income spent solely on housing costs. Because max affordability occurs when you have no debts, we’ll be ignoring possible debts for now – but keep in mind how debt affects how much you can qualify for.


How much can $75,000 buy?

When we calculate GDS and TDS, we use gross income. In other words, your income before tax. Don’t worry about figuring out how much you actually bring home and how big your tax return is – just use your salary. If you get paid hourly, then multiply your wage by the numbers of hours you work per week, then again by 52.

For an income of $75,000 exactly, the max allowable GDS is $2,437 (39% of the monthly income). So is a mortgage payment of $2,437 what you can afford? Not exactly.

GDS is determined by the cost of your home, which is more than just your mortgage payments. You’ll also have to consider heating and taxes, and condo fees if you’re buying a condo. For GDS calculations, we use half (50%) of the condo fees.

Heating costs vary from province to province, and property taxes vary from city to city, so we’ll use averages for estimates here. In Ontario, the average heating cost is $2,358 for the year, or $200 per month. Property taxes in Toronto are among the lowest in Canada, at 0.64% of the assessed value of a home. We’ll assume taxes of $250 per month. In a 956 sq.ft condo, condo fees average $682.02 per month, of which 50% is $341.

All those costs together total $791, which we’ll subtract from the GDS number to get our maximum monthly mortgage payments.


$2,437 - $791 = $1,646


If you bought a townhome, detached or semi-detached home, your monthly mortgage payment could be up to $1,987.

So what kind of condo can you get for $1,646, and what kind of home for $1,987?

Affordability increases as you increase your down payment. We ran a couple different scenarios with varying down payments so you can see how saving more affects how much you can afford. We used the best rate available right now (2.65%) to do the monthly payment calculations – however, for the 20% down option we used a rate of 2.85%. Rates are lower when you have an insured mortgage, but often it’s worth the extra bump in the rate to save money on the mortgage insurance.


Maximum Condo Affordability on $75,000/year


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Maximum Home Affordability on $75,000/year


5% Down Payment

10% Down Payment

15% Down Payment

20% Down Payment

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CMHC insurance





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The Home Affordability Calculator

These are just estimates. If you want a more accurate assessment, use our affordability calculator, where you can adjust parameters like your income, credit score, location and debts to see how each of those affect your rate and your payments.

RateShop Admin RateShop Admin 01/26/2019
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