Quick answer: Most Canadian buyers qualify for a mortgage of roughly 4-5× gross household income, capped by two CMHC/lender ratios computed at the OSFI stress-tested qualifying rate: GDS ≤ 39% (housing costs to income) and TDS ≤ 44% (all debt to income). The qualifying rate is the greater of your contract rate + 2 percentage points or 5.25%.
What this means: The stress test is the binding number. Your contract-rate payment is what you actually pay; the stress-tested payment is what you have to qualify against. As of December 15, 2024, the CMHC insurable cap is $1.5M (was $1M). First-time buyers purchasing newly built homes can use 30-year amortization on insured mortgages.
What to do next: Estimate your max purchase price with your real numbers. Run the affordability calculator →
How affordability is calculated in Canada (2026)
Canadian mortgage affordability is the lower of two debt-service ratios:
- Gross Debt Service (GDS) ≤ 39%: housing costs (mortgage principal + interest + 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 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 or the stress test calculator to see what each ratio limits you to.
Income and debts that count
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), sometimes with add-backs for non-cash deductions like CCA.
- Rental income: 50%-80% of gross rent counts as qualifying income; conventional lenders may go higher with strong documentation.
Debts that count in TDS:
- Other monthly minimum payments on credit cards and lines of credit (3% of balance is the typical proxy if no statement minimum).
- Car loans / lease payments.
- Student loans (federal and private).
- Court-ordered alimony or child support.
- Co-signed debts — yes, even if someone else makes the payments. You’re legally on the hook.
Down payment minimums (2026)
| Purchase price | Minimum down payment | CMHC insurance |
|---|---|---|
| Up to $500,000 | 5% of purchase price | Insurable |
| $500,001 to $1,500,000 | 5% on first $500K + 10% on the remainder | 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 and 2026 CMHC premium tiers in CMHC premium 2026.
The stress test in 2026
OSFI Guideline B-20 requires federally regulated lenders to qualify borrowers at the stress-tested rate. As of 2026, the rule applies to:
- All new purchases (insured and uninsured).
- Refinances with any lender.
- Switches to a new lender (mortgage transfers).
Exempt since 2024: renewals with the same lender. For the full mechanic and 2026 examples, see Mortgage stress test 2026.
Amortization rules in 2026
- Insured mortgages: standard 25 years.
- Conventional mortgages (20%+ down): up to 30 years.
- 30-year insured amortization for first-time buyers on newly built homes — effective August 1, 2024 for FTBs; expanded December 15, 2024 to all FTBs on insured mortgages for new builds.
Stretching amortization lowers the monthly payment and bumps the maximum qualifying mortgage by 5-10% — but adds tens of thousands of interest over the life of the loan.
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 contract rates jumped from ~3% to ~6% in 2022-2023, qualifying maximums for the same income fell by 25-30%.
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 on top).
- Legal fees: $1,500-$3,000.
- Title insurance: $250-$400.
- Home inspection: $400-$600 (optional but strongly recommended).
- Appraisal: $300-$600 (when required by the lender).
- Property tax adjustments and prepaid utilities at closing.
Worked example: $140K income, $500/mo debts, $80K down
The Singh household earns $140,000/year combined. They have $500/month in car payments and an $80,000 down payment.
Inputs: $140K income, $500/month debts, $80K down, 4.99% contract rate, 25-year amortization, $4,500/year property tax, $1,800/year heat, no condo fees.
| Metric | Result | Math |
|---|---|---|
| Qualifying rate | 6.99% | contract (4.99%) + 2pp; higher than 5.25% floor |
| Gross monthly income | $11,667 | $140,000 / 12 |
| Max housing budget (GDS 39%) | $4,550 / month | $11,667 × 39% |
| Max housing budget (TDS 44% minus $500 debts) | $4,633 / month | $11,667 × 44% − $500 |
| Binding ratio | GDS | $4,550 < $4,633 |
| Available for principal + interest (after PT $375 + heat $150) | $4,025 / month | $4,550 − $375 − $150 |
| Max mortgage at qualifying rate (25-yr amort, 6.99%) | ~$535,000 | Standard mortgage amortization formula |
| Max purchase price | ~$615,000 | $535K mortgage + $80K down |
| Monthly payment at contract rate (4.99%) | ~$3,110 / month | Principal $535K, 25-yr, 4.99% |
| Monthly payment at stress-tested rate (6.99%) | ~$3,755 / month | Principal $535K, 25-yr, 6.99% |
The Singhs can afford about $615,000. Their actual monthly mortgage payment at the contract rate is ~$3,110, but they qualified against the stress-tested $3,755. The “buffer” between the two is what keeps them solvent if rates rise on renewal.
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 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 the full amortization. See CMHC premium 2026.
- 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. Have an extra $10K-$25K liquid at closing.
- Stretching amortization without doing the math. 30 years lowers the monthly but adds tens of thousands in lifetime interest.
- Forgetting the renewal exemption is only for same-lender renewals. Switching lenders at renewal triggers the stress test again.
Frequently asked questions
What is the 2026 mortgage stress test?
Qualify at the higher of your contract rate + 2 percentage points or 5.25% (the OSFI floor). The rule applies to new purchases, refinances, and lender switches. Same-lender renewals are exempt.
What are the GDS and TDS limits?
GDS ≤ 39% and TDS ≤ 44% for most CMHC-insured mortgages. Some conventional lenders allow slightly higher (GDS 39%/TDS 44% or up to GDS 42%/TDS 47% for very strong borrowers).
What is the minimum down payment in 2026?
5% on the first $500,000, 10% on the portion from $500,001 to $1,500,000, and 20% on anything above $1,500,000. The $1.5M insurable cap took effect December 15, 2024.
Can I use 30-year amortization?
Yes if your mortgage is conventional (20%+ down). Or if you are a first-time buyer purchasing a newly built home on an insured mortgage (effective December 15, 2024).
How do I know how much mortgage I can afford?
Run the affordability calculator with your income, debts, down payment, and current contract rate. The calculator applies the stress test and the GDS/TDS limits.
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.