Before you fall in love with a listing, it helps to know what a Canadian lender will actually approve. The answer isn't just about your income — it's about the specific debt ratios lenders are required to use, the mortgage stress test, and how your down payment affects the equation. This guide walks through the exact math lenders use so you can estimate your ceiling before stepping into a realtor's office.
Use our mortgage affordability calculator to enter your income, debts, and down payment and get an instant estimate of your maximum purchase price using the same GDS/TDS rules Canadian lenders use.
Quick reference: estimated max purchase price by income
These estimates assume no other debts, a 10% down payment, 5.25% stress test rate, and average property taxes. Actual approval will vary.
The two ratios lenders use: GDS and TDS
Every Canadian mortgage lender uses two debt ratios to determine how much they'll lend you. Understanding these is the key to understanding your affordability ceiling.
GDS — Gross Debt Service Ratio (max 39%)
GDS measures what percentage of your gross monthly income goes toward housing costs. Lenders require GDS to be 39% or less.
GDS = (Monthly mortgage payment + property taxes + heat + 50% of condo fees) ÷ Gross monthly income
On a $100,000 salary ($8,333/month gross), your GDS budget is $8,333 × 39% = $3,250/month for all housing costs combined.
TDS — Total Debt Service Ratio (max 44%)
TDS adds all your other monthly debt obligations (car loan, student loan, credit card minimums) to the housing costs above. Lenders require TDS to be 44% or less.
TDS = (All housing costs + all other monthly debt payments) ÷ Gross monthly income
If you have a $500/month car payment, that reduces your available mortgage budget by $500 directly — it comes straight off your TDS allowance. This is why existing debts have such a significant impact on how much house you can afford.
The mortgage stress test adds another layer
Even after passing GDS and TDS, you must also pass the mortgage stress test. Your lender must verify that you can afford the mortgage payments at the higher of:
- Your contract rate + 2%, or
- 5.25% (the regulatory floor)
So if you're offered a 4.75% mortgage, you're stress tested at 6.75%. This is designed to ensure you can still afford your mortgage if rates rise. In practice, it reduces your maximum purchase price by roughly 15–20% compared to what you'd qualify for without the test. For more detail, see our mortgage stress test guide.
Down payment requirements in Canada (2026)
| Purchase Price | Minimum Down Payment | CMHC Insurance Required? |
|---|---|---|
| Up to $500,000 | 5% | Yes |
| $500,001 – $999,999 | 5% on first $500K + 10% on remainder | Yes |
| $1,000,000 – $1,499,999 | 10% | Yes (new rule as of Dec 2024) |
| $1,500,000+ | 20% | No |
Buying with less than 20% down means you'll need CMHC mortgage insurance, which adds 2.8–4% of your mortgage amount to your loan. On a $500,000 purchase with 5% down ($25,000), the CMHC premium would be approximately $19,000 added to your mortgage. For a full breakdown, see our CMHC insurance guide.
Worked example: $100,000 household income
Let's run through a real example. Assume:
- Gross household income: $100,000/year ($8,333/month)
- Other debts: $400/month car loan
- Down payment: $60,000 (roughly 11% of a $550K home)
- Stress test rate: 6.75% (contract rate 4.75% + 2%)
- Property taxes: $400/month | Heat: $150/month
GDS limit: $8,333 × 39% = $3,250. Subtract taxes ($400) and heat ($150) = $2,700/month available for mortgage P&I.
TDS limit: $8,333 × 44% = $3,667. Subtract taxes ($400) + heat ($150) + car loan ($400) = $2,717/month available for mortgage P&I.
GDS is the binding constraint here at $2,700/month. At a stress test rate of 6.75% over 25 years, $2,700/month supports a mortgage of approximately $400,000. Add the $60,000 down payment: maximum purchase price ≈ $460,000.
Calculate your exact affordability
Enter your income, debts, and down payment to get your personal maximum purchase price using the real GDS/TDS rules Canadian lenders apply.
→ Calculate My AffordabilityWhat lenders don't tell you: affordability vs. comfort
Lenders will approve you up to the maximum their rules allow — but that doesn't mean you should borrow the maximum. The GDS/TDS limits are ceilings, not targets. Many financial planners recommend keeping housing costs under 30% of gross income (not 39%) to leave room for savings, emergencies, and life goals.
The difference matters. On $100,000 income, 39% GDS = $3,250/month for housing. At 30%, that's $2,500/month — roughly $80,000 less in purchase price. The extra financial breathing room often matters more than the bigger house.
Tips to increase your maximum purchase price
- Pay down existing debts first — a $400/month car payment reduces your purchase price by roughly $60,000
- Save a larger down payment — every extra $10,000 increases your purchase price by $10,000 and also reduces your CMHC premium if you cross the 10% or 20% threshold
- Use the First Home Savings Account (FHSA) — contributions are tax deductible and withdrawals are tax-free for a first home purchase
- Consider the Home Buyers' Plan (HBP) — withdraw up to $35,000 from your RRSP tax-free toward your down payment, repaid over 15 years
- Add a co-borrower — a spouse or partner's income is added to yours for qualification purposes
Frequently asked questions
How much house can I afford on a $100,000 salary in Canada?
With no other debts and a 10% down payment, you can typically afford a home priced around $490,000–$510,000 in Canada. If you have significant other debts (car loan, student loan), that figure drops. Use our affordability calculator for a precise number based on your situation.
What is the GDS ratio and what is the limit?
The Gross Debt Service (GDS) ratio is the percentage of your gross monthly income going to housing costs — mortgage payments, property taxes, heat, and 50% of condo fees. Canadian lenders require GDS to be 39% or less. This is the primary test that determines how much mortgage you qualify for.
Does the stress test reduce how much I can borrow?
Yes, significantly. The stress test requires you to qualify at your contract rate + 2% (minimum 5.25%). This typically reduces your maximum mortgage by 15–20% compared to what you'd qualify for at the actual contract rate. It's the single biggest factor limiting affordability for many Canadian buyers.
What is the minimum down payment for a $700,000 home in Canada?
For a $700,000 home: 5% on the first $500,000 = $25,000, plus 10% on the remaining $200,000 = $20,000. Total minimum down payment = $45,000 (6.4% of purchase price). CMHC insurance would apply and be added to the mortgage amount.