Take a household earning $120,000 a year, putting $80,000 down, carrying $400 of other monthly debt, and shopping at a 5.5 percent contract rate. Because of the stress test, the lender does not qualify the buyer at 5.5 percent but at the higher of the 5.25 percent floor and the contract rate plus 2 percent, which is 7.5 percent. Monthly income is $10,000. The Gross Debt Service rule caps housing costs at 32 percent of that, about $3,200, and after a roughly $350 allowance for property tax and heat the mortgage portion is about $2,850. The Total Debt Service rule caps all debt at 40 percent, about $4,000, and after the same allowance and the $400 of other debt it leaves about $3,250 for the mortgage. The binding limit is the lower of the two, so $2,850 a month. Amortised over 25 years at the 7.5 percent qualifying rate, that payment supports a loan of about $389,581, and adding the $80,000 down payment gives a maximum home price near $469,581.
How it is calculated
Canadian mortgage affordability is governed by two debt-service ratios and the federal stress test. Gross Debt Service caps mortgage payment plus property tax and heat at 32 percent of gross income, while Total Debt Service caps that plus all other debt payments at 40 percent. The tool computes both monthly ceilings, subtracts an allowance for tax and heat, and takes the lower of the two as the payment you can support. Critically, the payment is then converted into a loan amount using the stress-test qualifying rate, not your actual contract rate, which is the higher of a 5.25 percent floor or your rate plus two percentage points. That deliberately shrinks the loan so you can still afford payments if rates rise at renewal. The maximum price is the supported loan plus your down payment, computed on a 25-year amortisation. The tax and heat allowance is an approximation, and lenders may stretch the ratios slightly for strong credit, so treat the result as a planning baseline.
Frequently asked questions
GDS vs TDS?
GDS = (mortgage + tax + heat) / gross income. TDS = GDS + all other debt payments. Both must pass for approval. Typical caps are 32% GDS and 40% TDS, but some lenders extend to 39%/44%.
What is the B-20 stress test and why does it matter?
The B-20 guideline requires federally regulated lenders to qualify borrowers at the higher of the contract rate plus 2 percentage points or the 5.25% floor, whichever is greater. This means you are tested at a rate above what you actually pay, so you have room to absorb rate increases at renewal. The stress test does not apply to credit unions or private lenders in most provinces, but those lenders carry other risks.
How much of a down payment do I need in Canada?
For homes priced up to $500,000, the minimum down payment is 5% of the purchase price. For the portion between $500,000 and $999,999, the minimum rises to 10%. Homes priced at $1,000,000 or more require at least 20% down and are not eligible for CMHC mortgage insurance. Putting less than 20% down on an insurable home triggers a CMHC premium of up to 4% of the loan amount.
Do property tax and heating estimates affect my qualifying amount?
Yes. Lenders include a monthly estimate for property tax and heating costs in the GDS calculation, which reduces the mortgage payment you can be approved for. This calculator uses a $350 per month approximation, which is reasonable for a mid-range Canadian property but will vary by location and home type. Your actual lender may use a different figure, so treat this result as a planning estimate.