How Much Mortgage Can I Afford in Canada?
In Canada, mortgage affordability isn't a feeling — it's two ratios and a stress test. Lenders use the same arithmetic every time, which means you can run it yourself before you start house hunting. Here's how it works, with a worked example.
Key takeaways
- Lenders cap housing costs at about 39% of gross income (GDS) and all debts at about 44% (TDS).
- You must qualify at the greater of your contract rate plus 2% or 5.25% — the mortgage stress test.
- Your down payment sets the maximum purchase price your mortgage can support.
- A 30-year amortization, now available to first-time buyers and buyers of new builds with insured mortgages, raises the amount you can borrow.
The two ratios every lender checks
Gross debt service (GDS) is your housing cost as a share of your gross (pre-tax) income. Housing cost means the mortgage payment, property taxes and heating — plus half of any condo fees.
Total debt service (TDS) is GDS plus every other debt payment: car loans, student loans, lines of credit, credit cards and support payments.
For insured mortgages, CMHC caps GDS at 39% and TDS at 44%. Lenders use similar limits for uninsured mortgages, and some are stricter. Two details catch people out: unsecured credit cards and lines count at 3% of the balance each month even if you pay them off, and a car lease counts in full.
The mortgage stress test
Federally regulated lenders don't calculate those ratios at your actual rate. They use a qualifying rate: the greater of your contract rate plus 2%, or 5.25%. If you're offered 4.50%, you qualify at 6.50%. The stress test doesn't change what you pay — it limits what you can borrow, so you could handle higher rates at renewal.
There's one notable exception: since November 2024, if you're renewing and switch an uninsured mortgage to another federally regulated lender without increasing the amount or amortization, the stress test doesn't apply.
A worked example
Take a household earning $120,000 a year — $10,000 a month — with property taxes of $400 a month, heating of $100 a month and a $400 car payment. The best rate on offer is 4.50%, so they qualify at 6.50%.
| Step | GDS (39%) | TDS (44%) |
|---|---|---|
| Limit on $10,000 a month | $3,900 | $4,400 |
| Less taxes and heat | −$500 | −$500 |
| Less other debts | — | −$400 |
| Room for the mortgage payment | $3,400 | $3,500 |
The lower figure wins, so the maximum qualifying payment is $3,400 a month. At 6.50% over 25 years, that supports a mortgage of about $507,600. With a 30-year amortization it rises to about $542,800.
At their actual 4.50% rate, the 25-year payment on $507,600 would be about $2,809 a month — comfortably below what they qualified for, which is the point of the stress test.
With 20% down, a $507,600 mortgage supports a purchase price of about $634,500. With less down, the price is lower and mortgage insurance applies — see CMHC mortgage insurance.
How your down payment caps the price
The minimum down payment in Canada depends on the purchase price:
| Purchase price | Minimum down payment |
|---|---|
| $500,000 or less | 5% |
| $500,000 to under $1.5 million | 5% of the first $500,000 + 10% of the rest |
| $1.5 million or more | 20% |
So even if your income qualifies you for a large mortgage, your savings may set the real ceiling. First-time buyers should look at the first-time home buyer page for programs that help with the down payment.
Ways to afford more — safely
- Pay down revolving debt first. Every $10,000 of credit card or line balance costs $300 a month of TDS room, at 3%.
- Add a co-borrower. Two incomes on the application change both ratios.
- Consider amortization. First-time buyers and buyers of new builds can now take an insured mortgage over 30 years. It lowers the payment but increases total interest.
- Look beyond the big banks. Credit unions and alternative lenders don't all apply the same rules or limits. Self-employed borrowers in particular may qualify differently — see our self-employed mortgage page.
Just because you qualify for a number doesn't mean you should spend it. Leave room for maintenance, savings and the possibility of higher rates at renewal.
Sources
This article is general information, not financial advice. Examples are illustrative; your qualification depends on the lender, your full financial picture and current rules. Mortgage financing is subject to lender approval.
Frequently asked questions
It depends on your debts, taxes, heating costs and the rate you're offered. Using the 39% and 44% limits at a 6.50% qualifying rate with no other debts, $400 a month of property tax and $100 of heating, a $100,000 household income supports a mortgage of about $410,000 over 25 years. Run your own numbers, or ask us to.
A mortgage affordability calculator — or any home affordability calculator — does the same thing as the example above: it subtracts taxes, heat and debts from 39% and 44% of your income, takes the lower figure, and works out what mortgage that payment supports at the stress-test rate.
Gross income — before tax. That's one reason the qualifying number can feel higher than what your take-home budget would comfortably carry.
It applies to mortgages from federally regulated lenders and to all insured mortgages. Some provincially regulated credit unions and private lenders use their own rules. Uninsured straight switches at renewal have been exempt since November 2024.
A calculator that works out your gross and total debt service ratios from your income and costs, so you can see which one is limiting how much you can borrow.
Find out what you can afford — exactly
We'll run your file against several lenders' rules, not just one, and show you where the limit really is.