How Much Mortgage Can You Afford in Canada?

In Canada, mortgage affordability is governed by two key rules set by OSFI (Office of the Superintendent of Financial Institutions): the Gross Debt Service (GDS) ratio and Total Debt Service (TDS) ratio. Most federally regulated lenders (major banks) use these guidelines to determine how much they will lend you.

GDS and TDS Ratios Explained

• GDS (Gross Debt Service) ratio: Your monthly housing costs (mortgage payment + property tax + heat + 50% of condo fees) should not exceed 39% of your gross monthly income.
• TDS (Total Debt Service) ratio: All monthly debt payments (housing costs + all other debt payments: car loans, student loans, credit cards) should not exceed 44% of your gross monthly income.

The Mortgage Stress Test

Since 2018, Canadian mortgage applicants must qualify at the stress test rate — the higher of 5.25% or your contract rate plus 2%. This ensures you can still afford your mortgage if rates rise. Even if your actual rate is 4.5%, you must qualify as if you were paying 6.5%. This is the single biggest factor that reduces your purchasing power.

Down Payment Rules in Canada

CMHC Mortgage Insurance

If your down payment is less than 20%, you must purchase CMHC (Canada Mortgage and Housing Corporation) mortgage default insurance. The premium ranges from 2.8% to 4% of the mortgage amount and is added to your mortgage balance. While it adds cost, it also allows you to enter the market sooner with a smaller down payment.