diff --git a/src/scheduler/etc/sched.conf b/src/scheduler/etc/sched.conf
index f8072681a9..b6f4fa4291 100644
--- a/src/scheduler/etc/sched.conf
+++ b/src/scheduler/etc/sched.conf
@@ -20,13 +20,13 @@
 #
 #  LIVE_RESCHEDS: Perform live (1) or cold migrations (0) when rescheduling a VM
 #
-#  CPU_THRESHOLD: Fraction of the actual amount of CPU
-#                 (HOST/HOST_SHARE/MAX_CPU) that the scheduler will use.
-#                 E.g. 0.9 means that only 90% of the total CPU will be used
+#  FREE_CPU_THRESHOLD: CPU usage that is neglected for computing the available
+#                      CPU. Expressed as a fraction of the total CPU. 
+#                      E.g. 0.9 means that a free CPU load greater than 90% will
+#                      result in a free CPU equal to the total CPU
 #
-#  MEM_THRESHOLD: Fraction of the actual amount of MEMORY
-#                 (HOST/HOST_SHARE/MAX_MEM) that the scheduler will use.
-#                 E.g. 0.9 means that only 90% of the total MEMORY will be used
+#  HYPERVISOR_MEM: Fraction of total MEMORY reserved for the hypervisor. 
+#                  E.g. 0.1 means that only 90% of the total MEMORY will be used
 #
 #  DEFAULT_SCHED: Definition of the default scheduling algorithm
 #    - policy: 
@@ -45,16 +45,14 @@ ONED_PORT = 2633
 
 SCHED_INTERVAL = 30
 
-MAX_VM = 300
-
+MAX_VM      = 300
 MAX_DISPATCH = 30
-
-MAX_HOST = 1
+MAX_HOST     = 1
 
 LIVE_RESCHEDS = 0
 
-CPU_THRESHOLD = 0.9
-MEM_THRESHOLD = 1
+CPU_FREE_THRESHOLD = 0.9
+HYPERVISOR_MEM     = 0.1
 
 DEFAULT_SCHED = [
 	policy = 1
diff --git a/src/scheduler/include/Scheduler.h b/src/scheduler/include/Scheduler.h
index e5df1af2bb..c531858628 100644
--- a/src/scheduler/include/Scheduler.h
+++ b/src/scheduler/include/Scheduler.h
@@ -54,8 +54,8 @@ protected:
         machines_limit(0),
         dispatch_limit(0),
         host_dispatch_limit(0),
-        cpu_threshold(0.9),
-        mem_threshold(1),
+        cpu_threshold(0),
+        mem_threshold(0),
         client(0)
     {
         am.addListener(this);
diff --git a/src/scheduler/src/pool/HostXML.cc b/src/scheduler/src/pool/HostXML.cc
index 874320da14..263d8747f4 100644
--- a/src/scheduler/src/pool/HostXML.cc
+++ b/src/scheduler/src/pool/HostXML.cc
@@ -23,18 +23,20 @@ void HostXML::get_capacity(int& cpu, int& memory,
 {
     vector<string> result;
 
-    memory      = free_mem;
-    cpu         = free_cpu;
+    cpu = free_cpu;
 
-    /* eg. 96.7 >= 0.9 * 100, We need to round */
+    /* eg. 96.7 >= 0.9 * 100, Round so 96.7 free is 100 (and CPU = 1, fits)*/
     if ( cpu >= static_cast<int>(cpu_threshold * static_cast<float>(max_cpu)) )
     {
         cpu = static_cast<int>(ceil(static_cast<float>(cpu)/100.0) * 100);
     }
 
-    if ( memory >= static_cast<int>(mem_threshold * static_cast<float>(max_mem)) )
+    memory = free_mem - static_cast<int>(mem_threshold * static_cast<float>(max_mem));
+
+    /* sanity check in case the free_mem goes below the threshold */
+    if ( memory < 0 )
     {
-        memory = static_cast<int>(ceil(static_cast<float>(memory)/100.0) * 100);
+        memory = 0;
     }
 }
 
diff --git a/src/scheduler/src/sched/Scheduler.cc b/src/scheduler/src/sched/Scheduler.cc
index 77c77dd013..0174c69248 100644
--- a/src/scheduler/src/sched/Scheduler.cc
+++ b/src/scheduler/src/sched/Scheduler.cc
@@ -139,8 +139,9 @@ void Scheduler::start()
 
     conf.get("MAX_HOST", host_dispatch_limit);
 
-    conf.get("CPU_THRESHOLD", cpu_threshold);
-    conf.get("MEM_THRESHOLD", mem_threshold);
+    conf.get("CPU_FREE_THRESHOLD", cpu_threshold);
+
+    conf.get("HYPERVISOR_MEM", mem_threshold);
 
     conf.get("LIVE_RESCHEDS", live_rescheds);
    
@@ -441,8 +442,12 @@ void Scheduler::match()
             {
                 ostringstream oss;
 
-                oss << "Host " << host->get_hid() << 
-                    " filtered out. It does not have enough capacity.";
+                oss << "Host " << host->get_hid() << " filtered out. "
+                    << "Not enough capacity: " << endl
+                    << "\t free cpu: " << host_cpu 
+                    << " vm cpu: " << vm_cpu << endl
+                    << "\t free mem: " << host_memory 
+                    << " vm mem: " << vm_memory << endl;
 
                 NebulaLog::log("SCHED",Log::DEBUG,oss);
                 
diff --git a/src/scheduler/src/sched/SchedulerTemplate.cc b/src/scheduler/src/sched/SchedulerTemplate.cc
index c6aa61fc7d..ab9ec3f935 100644
--- a/src/scheduler/src/sched/SchedulerTemplate.cc
+++ b/src/scheduler/src/sched/SchedulerTemplate.cc
@@ -41,6 +41,8 @@ void SchedulerTemplate::set_conf_default()
 #  MAX_HOST
 #  DEFAULT_SCHED
 #  LIVE_RESCHEDS
+#  CPU_FREE_THRESHOLD
+#  HYPERVISOR_MEM
 #-------------------------------------------------------------------------------
 */
     // ONED_PORT
@@ -85,6 +87,18 @@ void SchedulerTemplate::set_conf_default()
 
     vattribute = new VectorAttribute("DEFAULT_SCHED",vvalue);
     conf_default.insert(make_pair(attribute->name(),vattribute));
+
+    //CPU_FREE_THRESHOLD
+    value = "0.9";
+
+    attribute = new SingleAttribute("CPU_FREE_THRESHOLD",value);
+    conf_default.insert(make_pair(attribute->name(),attribute));
+
+    //HYPERVISOR_MEM
+    value = "0.1";
+
+    attribute = new SingleAttribute("HYPERVISOR_MEM",value);
+    conf_default.insert(make_pair(attribute->name(),attribute));
 }
 
 /* -------------------------------------------------------------------------- */