How Much Mortgage Can I Afford in Canada? GDS, TDS and the Stress Test (2026)

Canadian lenders answer "how much can you borrow?" with two ratios and one rule: your housing costs must fit inside GDS, all your debt inside TDS, and both are measured at a stress-tested interest rate that is higher than the one you will actually pay. On a $100,000 income that typically lands between $400k and $480k of mortgage. This guide walks the full calculation — follow along with your own numbers in the Canadian mortgage calculator.

GDS and TDS: the two ratios that decide

Gross Debt Service (GDS) is the share of your gross income that goes to housing: mortgage payment, property taxes, heating, and half of any condo fees. Insured lending guidelines cap it around 39%.

Total Debt Service (TDS) starts from GDS and adds every other monthly obligation — car loans, student loans, lines of credit, credit-card minimums. The cap is around 44%. Whichever ratio you hit first sets your maximum. A car payment of $600/month can quietly remove roughly $80,000–$100,000 of mortgage room, which is why paying down debt before applying often buys more house than saving a slightly bigger down payment.

The stress test: qualifying at a higher rate

Since 2018, federally regulated lenders must qualify you at the higher of 5.25% or your contract rate + 2%. If your bank offers 4.5%, you are assessed as if you were paying 6.5%. You never pay the test rate — it exists to prove you could absorb a rate rise at renewal (Canadian mortgages renew every 1–5 years, unlike US 30-year fixed loans). The practical effect: the stress test, not your actual rate, is what caps most buyers' budgets.

A worked $100,000 example

Income $100,000 ($8,333/month gross), no other debts, property taxes $350/month, heat $150/month, 4.5% contract rate — so a 6.5% test rate:

Step	Figure
GDS cap (39% of gross)	$3,250 / month
Less taxes + heat	−$500
Room for the mortgage payment	$2,750 / month
Loan that payment supports at 6.5% (test), 25-yr	≈ $410,000
Actual payment at your real 4.5% rate	≈ $2,270 / month

Note the last row: you qualify as if paying $2,750, but actually pay about $2,270. That gap is your built-in safety margin. Add a 10% down payment and you are shopping around $455,000 — before CMHC insurance, which the next section covers.

Down payment rules and CMHC insurance

• Minimum down payment: 5% of the first $500,000, 10% of the portion above, up to $1.5 million (homes above that need 20%).
• Under 20% down: mortgage default insurance is mandatory. The premium is roughly 2.8%–4% of the loan depending on your down payment, and it is added to the mortgage rather than paid in cash.
• 25-year amortization is the standard for insured mortgages (30 for eligible first-time buyers of new builds); longer amortization lowers the payment but raises total interest.

Insurance is not wasted money — insured mortgages often get better rates than uninsured ones, because the lender's risk is covered. The mortgage calculator adds the CMHC premium automatically when your down payment is under 20%, and uses Canadian semi-annual compounding, which US calculators get wrong.

What moves your number

• Existing debt — the biggest controllable factor; clearing a car loan can add ~$100k of room.
• Rate — every 1% off the test rate adds roughly 9–10% more borrowing power.
• Property taxes and heat — a high-tax suburb quietly shrinks GDS room versus a condo with low costs.
• Income documentation — variable or self-employed income is usually averaged over two years.

Finally: what a lender approves is a ceiling, not advice. Renewal risk is real in Canada — the payment you can "afford" today will be re-priced at whatever rates are in five years, so leaving margin under the caps is the difference between a comfortable renewal and a painful one.

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