How Much Mortgage Can I Afford in Canada?

If you’ve ever tried to figure out how much mortgage you can afford and ended up staring at a blank calculator like it personally offended you, I get it — I’ve been there with clients countless times. This is one of the most Googled mortgage questions in Canada. And for good reason. Home prices keep climbing, interest rates keep shifting, and every lender seems to have their own opinion about what you should qualify for. It’s confusing. So let me break it down in plain English.

What Determines Mortgage Affordability?

The truth is, affordability comes down to one thing: how lenders calculate your ability to handle the payments. It’s not based on how confident you feel, how much your aunt thinks you can afford, or how quickly you fall in love with a kitchen island. It’s based on math. Not fun math, but math.

Understanding GDS and TDS Ratios

There are two big ratios that lenders use: GDS and TDS. These stand for Gross Debt Service and Total Debt Service. GDS looks at your housing costs alone: mortgage payment, property taxes, heat, and condo fees if you have them. TDS looks at all of that plus everything else you owe — credit cards, car loans, lines of credit, student loans. If it shows up on your credit bureau, it counts.

If you want to see exactly how lenders calculate this, check out CMHC’s guide on GDS and TDS or my blog: Understanding Debt-to-Income (DTI) Ratio for Canadian Mortgage Applicants

Most lenders want your GDS at or below 39% and your TDS at or below 44%. These numbers don’t change no matter where you’re buying in Canada, even though your cost of living probably does.

How the Stress Test Affects Your Borrowing Power

On top of GDS and TDS, you also have to qualify at the “stress test” rate — either your contract rate plus 2% or the Bank of Canada benchmark rate (5.25%), whichever is higher. Even if you’re getting a rate in the low 4’s, you’re qualifying in the 6’s. That can shrink your maximum mortgage pretty quickly.

Learn more about the stress test at Government of Canada – Preparing to get a Mortgage.

How Your Down Payment Impacts Affordability

Your down payment plays a big role too. Less than 20% down means your mortgage is insured, which affects how much you can borrow but can give you access to better rates. Twenty percent or more down opens uninsured options but can sometimes come with slightly higher rates. The down payment doesn’t change the math, but it changes the price range you can shop in.

If you want to learn more about mortgage default insurance, check out my blog here: Understanding High Ratio Mortgages in Canada

What Counts as Income for a Mortgage in Canada?

Then there’s your income. This one seems obvious, but what counts as income is where most people get confused. Lenders love boring, predictable income. Salary is straightforward. Hourly with guaranteed hours is fine. Overtime, bonuses, and commission can be used, but only if you’ve earned them consistently for at least two years. Self-employed income? That usually means digging through tax returns, business financials, and sometimes a mild identity crisis.

I’ve written more about what documents you need for a mortgage: What Documents Do You Need Proof of to Qualify for a Mortgage in Canada?

How to Figure Out How Much Mortgage You Can Afford

All of these pieces come together to determine your maximum purchase price. Sometimes the number feels higher than you expected. Sometimes it feels unfairly low. Either way, it’s the number lenders will work with.

If you want a realistic idea of what you can afford, start by looking at your income, monthly debt payments, and expected down payment. Or skip the math entirely and book an appointment with me. This is literally what I do every day, and I’ll make sure you’re not guessing based on an online calculator that doesn’t include heat or property taxes.

Why Affordability Is More Than Just a Number

Here’s the biggest thing I always tell clients: just because a lender says you qualify for a certain number doesn’t mean that number fits your lifestyle. Lenders don’t look at your groceries, daycare, hobbies, travel, or the money you spend on your dog. You still have to feel comfortable with the payment. Affordability is part math and part personal comfort.

The good news is that once you have a clear idea of your borrowing power, the whole home-shopping experience gets easier. You know what you can afford, what you want to afford, and how to position yourself for a smooth approval. And if you’re not quite where you want to be yet, there are always ways to improve things over time. Pay down debt, increase income, save a bigger down payment, or plan your purchase around changing life circumstances.

Affordability isn’t about making the biggest number work. It’s about finding a mortgage that supports the life you actually want to live. And that’s something you can feel good about long after the keys are in your hand.

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