Before you fall in love with a listing, it helps to know the number a lender will actually approve you for. This calculator works out the maximum home price you can afford the same way a Canadian lender does — starting from your income and debts, applying the debt-service ratios, and testing you against the mortgage stress test. Enter your numbers above and adjust the estimates until they match your situation.
How lenders decide what you can afford
Affordability isn’t really about the sticker price of a home — it’s about how much of your monthly income can safely go toward carrying it. Canadian lenders answer that with two ratios, and every insured mortgage has to stay inside both of them.
The mortgage stress test
Here’s the part that surprises many first-time buyers: you don’t qualify at the rate you’re offered. Under the federal stress test, a lender must confirm you could still afford your payments at a higher qualifying rate — the greater of your contract rate plus 2%, or 5.25%. So if you’re offered 4.79%, you actually have to qualify at 6.79%. The calculator applies this automatically, then shows your real estimated payment at the rate you entered.
The two ratios: GDS and TDS
Your Gross Debt Service (GDS) ratio compares your housing costs to your gross income. Housing costs here mean your mortgage payment (principal and interest), property taxes, heating, and half of any condo fees. For an insured mortgage, GDS can be no higher than 39% of your gross income.
Your Total Debt Service (TDS) ratio adds your other monthly debt payments — car loans, credit cards, student loans, lines of credit — on top of those housing costs. TDS can be no higher than 44%. This is why paying down a car loan or a credit-card balance before you apply can meaningfully increase how much home you qualify for: it frees up room under the 44% ceiling.
The calculator uses the lower of the two limits, because you have to satisfy both.
A worked example
Take a household earning $120,000 a year with a $500 monthly car payment and $80,000 saved for a down payment, expecting a 4.79% rate over 25 years. Their gross monthly income is $10,000, so their GDS budget is $3,900 and their TDS budget (after the car payment) is also about $3,900. After roughly $450 for property tax and heating, about $3,450 a month is left for the mortgage — qualified at 6.79%. That works out to a maximum home price of roughly $567,000. Their actual payment at 4.79%, though, would be closer to $2,860 a month — comfortably below the stress-tested figure, which is exactly the point of the test.
What this doesn’t include
- Closing costs — land transfer tax, legal fees, and the PST some provinces charge on the CMHC premium are paid on top of your down payment, not financed into the mortgage.
- The minimum down payment rules — 5% on the first $500,000, 10% on the portion up to $1.5 million, and 20% above that. The calculator respects these, so a small down payment can cap your price before your income does.
- Your credit and lender’s own limits — a lender may apply stricter ratios than the 39% / 44% maximums depending on your credit profile.
Frequently asked questions
Is household income before or after tax?
It’s your gross income — before taxes and deductions — because that’s what lenders use in the GDS and TDS calculations.
Why is my maximum lower than I expected?
Usually it’s the stress test (you qualify at 2% above your rate), other monthly debts eating into your 44% TDS room, or a down payment that’s small relative to the price. Try clearing a debt or increasing the down payment to see the effect.
Does a bigger down payment always help?
It does two things: it lowers the mortgage you need, and once you reach 20% down you avoid CMHC insurance entirely. Below 20%, a larger down payment also shrinks the insurance premium.
Sources
- Canada Mortgage and Housing Corporation (CMHC) — calculating GDS / TDS: the 39% and 44% debt-service ratio limits, and what counts as a housing cost.
- Office of the Superintendent of Financial Institutions (OSFI) — the minimum qualifying rate (mortgage stress test): the greater of your rate + 2% or 5.25%.
- Canada Mortgage and Housing Corporation (CMHC) — minimum down payment rules and the CMHC insurance premium schedule.
This page is for general information, not financial advice. Figures are estimates and change over time — confirm what you actually qualify for with your lender or a licensed mortgage professional before you commit.