Quick answer: Most Canadian buyers qualify for a mortgage of about 4×-5× gross household income, capped by GDS (housing costs ≤ 39% of income) and TDS (total debt ≤ 44%) at the OSFI stress-tested qualifying rate.
What this means: The stress test (your contract rate + 2 percentage points, or 5.25%, whichever is higher) is the binding number. Your contract-rate payment is what you actually pay; the stress-tested payment is what you have to qualify against.
What to do next: Estimate your max purchase price with your numbers. Run the affordability calculator →
How affordability is calculated in Canada
Canadian mortgage affordability is the lower of two ratios:
- Gross Debt Service (GDS) ≤ 39%: housing costs (mortgage payment + property tax + heat + 50% of condo fees) divided by gross monthly income.
- Total Debt Service (TDS) ≤ 44%: GDS expenses plus all other monthly debt payments (cars, credit cards, student loans, lines of credit), divided by gross monthly income.
Both ratios are measured at the stress-tested qualifying rate — not your actual contract rate. The qualifying rate is the higher of:
- Your contract rate plus 2 percentage points, or
- 5.25% (the OSFI floor)
Run your actual numbers in the affordability calculator.
Income and debts
Lenders use qualifying income, which may be lower than your gross income:
- Salary: usually counted at 100%
- Bonus and commission: typically averaged over the past 2 years
- Self-employment: net business income from the past 2 years (T1 line 26000)
- Rental income: 50%-80% of gross rent counts as qualifying income
Debts that count in TDS:
- Other monthly minimum payments on credit cards, lines of credit (3% of balance is the typical proxy)
- Car loans / lease payments
- Student loans
- Court-ordered alimony or child support
- Co-signed debts (yes, even if someone else pays)
Down payment minimums
| Purchase price | Minimum down payment | Insurance |
|---|---|---|
| Up to $500,000 | 5% of purchase price | CMHC insurable |
| $500,001 to $1,500,000 | 5% on first $500K + 10% on remainder | CMHC insurable |
| Over $1,500,000 | 20% of purchase price | Not CMHC insurable — conventional only |
The $1.5M insurable cap took effect December 15, 2024 (was $1M before). Detailed mechanics in 5% vs 10% vs 20% down payment in Canada.
The stress test
OSFI Guideline B-20 requires federally regulated lenders to qualify all borrowers at the stress-tested rate. The rule applies to:
- All new purchases (insured and uninsured)
- Refinances with any lender
- Switches to a new lender
Exempt since 2024: renewals with the same lender. Detailed mechanics in OSFI B-20 mortgage stress test rules.
Amortization
Standard Canadian amortization is 25 years for insured mortgages (less than 20% down). Conventional mortgages can amortize up to 30 years. As of 2025, first-time buyers purchasing newly-built homes can also use 30-year amortization on insured mortgages, even with less than 20% down. Stretching amortization lowers the monthly payment but raises lifetime interest cost.
How rate affects what you can afford
A 1-percentage-point change in the qualifying rate moves the maximum mortgage by roughly 8-10%. So when rates jumped from ~3% to ~6% in 2022-2023, qualifying maximums fell by 25-30% for the same income.
Closing costs and other expenses
Beyond the down payment, plan for 1.5%-4% of purchase price in closing costs:
- Land transfer tax — varies by province (and Toronto adds a municipal LTT)
- Legal fees: $1,500-$3,000
- Title insurance: $250-$400
- Home inspection: $400-$600 (optional but recommended)
- Property tax adjustments and prepaid utilities
Worked example
The Singh household earns $140,000/year combined. They have $500/month in car payments and a $80,000 down payment.
Inputs: $140K income, $500/month debts, $80K down, 4.99% contract rate, 25-year amortization, $4,500 property tax, $1,800 heating cost, no condo fees.
| Metric | Result |
|---|---|
| Qualifying rate | 6.99% (contract + 2pp) |
| Max housing budget (GDS 39%) | $4,550 / month |
| Max housing budget (TDS 44% − debts) | $4,633 / month |
| Binding ratio | GDS |
| Max mortgage at qualifying rate | ~$535,000 |
| Max purchase price | ~$615,000 |
| Monthly payment at contract rate (4.99%) | ~$3,110 |
| Monthly payment at stress-tested rate (6.99%) | ~$3,755 |
The Singhs can afford about $615,000. Their actual monthly mortgage payment would be ~$3,110 at their 4.99% contract rate.
Common mistakes
- Confusing qualifying rate with contract rate. The stress-tested rate is what you have to qualify against; the contract rate is what you actually pay.
- Forgetting CMHC insurance is added to the mortgage. A 5% down payment on a $500K home means a $475K mortgage plus ~$19,000 of insurance — you pay interest on the $494K total for 25 years.
- Treating qualifying income as gross income. Lenders apply haircuts to bonus, commission, and rental income.
- Ignoring closing costs. 1.5%-4% on top of the down payment surprises a lot of first-time buyers.
- Stretching amortization without doing the math. 30 years lowers the monthly but adds tens of thousands in interest over the life of the loan.
Frequently asked questions
- How much mortgage can I afford in Canada?
- Most buyers qualify for about 4× to 5× gross household income, capped by GDS ≤ 39% and TDS ≤ 44% at the stress-tested qualifying rate (contract rate + 2 percentage points, or 5.25%, whichever is higher).
- What is the rule of 4 for mortgages in Canada?
- An informal rule that you can afford ~4× your gross household income as a mortgage. Useful for a rough first pass; the actual maximum depends on your debts, down payment, and current qualifying rates.
- What is GDS for a Canadian mortgage?
- Gross Debt Service ratio: principal + interest + property tax + heat + 50% of condo fees, divided by gross monthly income. Most lenders cap at 39%.
- What is the mortgage stress test rate?
- Higher of your contract rate + 2 percentage points or 5.25%. Set by OSFI Guideline B-20.
- What's the minimum down payment in Canada?
- 5% on the first $500,000 of price, 10% on $500K-$1.5M, 20% on properties over $1.5M. The insurable cap rose from $1M to $1.5M effective December 15, 2024.
- Can I get a 30-year amortization in Canada?
- Yes for conventional mortgages (20%+ down). For insured mortgages, 30-year amortization is available to first-time buyers purchasing newly-built homes. Otherwise insured mortgages cap at 25 years.
- Does the stress test apply to renewals?
- Not for renewals with the same lender (since 2024). Refinancing or switching to a new lender still requires the stress test.
- How does paying off debt affect my mortgage approval?
- Significantly. A $500/month debt payment cuts your TDS-allowed mortgage by roughly $90,000 at current rates.