Lenders do not ask how much you want to spend; they ask how much you qualify for. This calculator applies the same stress test and debt ratios banks use.
The mortgage stress test
To qualify for a mortgage at a federally regulated lender, you must prove you could still afford the payments at the higher of your contract rate plus 2%, or 5.25%. If your rate is 4.29%, you are tested at 6.29%. The calculator uses this qualifying rate to find your maximum loan.
GDS and TDS ratios
- Gross Debt Service (GDS): mortgage payment, property tax, heating (and half of condo fees) should not exceed about 39% of gross income.
- Total Debt Service (TDS): GDS costs plus car loans, credit cards, lines of credit and other debts should not exceed about 44%.
How to afford more house
- Pay down car loans and credit cards before applying; each $100 of monthly debt cuts your budget by roughly $15,000 to $20,000.
- Increase your down payment, using an FHSA or the RRSP Home Buyers’ Plan.
- Add a co-borrower’s income.
- Look at 30-year amortization if you are a first-time buyer.
FAQ
Does the stress test apply to everyone?
It applies to insured and uninsured mortgages at federally regulated lenders. Since November 2024, straight switches at renewal to a new lender are exempt for insured mortgages.
What will my payment be?
Plug the price into the mortgage payment calculator.
What about closing costs?
Keep 1.5% to 4% of the price for land transfer tax, legal fees and moving.