How Much Mortgage Can I Qualify For in Canada? Quick Rules of Thumb
Most Buyers Get This Number Wrong
Ask ten people how much mortgage they think they can afford, and you’ll get ten different answers. Most are way off - either too high, risking disappointment when the bank says no, or too low, missing out on properties they could actually buy.
The truth is, lenders use a handful of formulas and ratios to decide your maximum mortgage amount. I’m going to give you the quick “back-of-the-napkin” rules so you can estimate your number before you even book a showing or chat with a mortgage professional.
The more you know….about mortgage qualification!
Rule of Thumb #1: 4 to 4.5 Times Your Gross Annual Income
This is the fastest way to ballpark your approval amount.
Example: Household income of $120,000/year → likely $480,000–$540,000 in mortgage funds.
This works for a lot of scenarios, but it’s still oversimplified, doesn’t account for existing debt, and current rates - so let’s get a little more precise.
Rule of Thumb #2: GDS Under 39% of Gross Income
In Canada, your Gross Debt Service (GDS) ratio is the percentage of your gross monthly income that goes toward:
Mortgage payment
Property taxes
Heat
50% of condo fees (if applicable)
Most lenders cap GDS at 39%.
Example:
Household income = $120,000/year ($10,000/month)
39% of $10,000 = $3,900/month for housing costs.
Rule of Thumb #3: TDS Under 44% of Gross Income
Your Total Debt Service (TDS) ratio includes all housing costs plus all other monthly debt payments, like:
Car loans/leases
Student loans
Credit card minimums
Lines of credit
Most lenders cap TDS at 44%.
Example:
Using the same $120,000/year household income:
44% of $10,000 = $4,400/month for housing + other debts combined.
If you have $500/month in car payments, that leaves $3,900/month for housing - which matches the GDS limit in our earlier example.
Putting It Together – Real Example
Household income: $120,000/year
Debts: $500/month car loan
Down payment: $80,000
Interest rate: 5-year fixed at 4.79%
Amortization: 25 years
Based on the GDS/TDS rules and today’s stress test (qualify at the greater of 5.25% or your rate + 2%), this household would likely qualify for around $520,000 in mortgage funds - meaning a purchase price of about $600,000 with their down payment.
What These Rules Miss
These shortcuts are great for a ballpark, but there are a lot of factors that can push your number higher or lower:
Credit score – Lower scores can lower your allowable ratios.
Down payment size – Bigger down payment = bigger purchase price.
Amortization – 30-year amortizations can qualify you for more than 25 years. You can access 30 year amortizations anytime with 20% or more as a down payment, or if you’re a first-time homebuyer or buying a new build with less that 20% down.
Interest rates – Higher rates reduce how much you can borrow.
The stress test – You must qualify at the higher of 5.25% or your rate + 2%.
Why Online Calculators Can Be Wrong
Mortgage calculators are a starting point, but many:
Use outdated rates.
Ignore specific lender rules.
Don’t account for your actual debt payments or credit profile.
That’s why someone might see “$700,000” online and then get $550,000 in reality - or the other way around.
Bottom Line
These rules of thumb are great for quick math, but the only way to know your real number is to run it through a broker who can check multiple lenders at once.
I can give you your exact maximum in ten minutes, tell you which lenders will work with you, and show you what to do if you want to qualify for more.
📩 Book a free consult now before you start house hunting (your realtor will thank you for it!)
Jeff Dinsmore
Mortgage Broker
FSRA # 10315
TMG - The Mortgage Group
VeloMortgage.ca