Maximum affordability
When shopping for a home, it’s important to determine the maximum mortgage and home price you can qualify for. Mortgage affordability refers to how much you can afford to borrow from a mortgage provider - your maximum affordability is simply the maximum amount that you can borrow. To determine your maximum affordability, lenders take several factors into account. The two primary factors that will be considered are:
- Your down payment
- Your debt service ratios (based on your income and current debt obligations)
Mortgage affordability and your down payment
Because Canada has minimum down payment rules in place, the amount of money you've saved for a down payment can limit your maximum mortgage affordability. The minimum down payments in Canada are:
- 5% of the purchase price up to $500,000, plus
- 10% of any part of the price between $500,000 and $1.5 million, or
- 20% of the total purchase price for homes valued at over $1.5 million.
For example, if you’ve saved $15,000, the maximum home price you could afford (based solely on the minimum 5% requirement) would be $300,000. If you have $30,000, your maximum affordability increases to about $550,000. Want to see what’s possible with your savings? Try our mortgage affordability calculator to run the numbers.
Debt service ratios and mortgage affordability
Set by the Canada Mortgage and Housing Corporation (CMHC), your debt service ratios – including your gross debt service ratio (GDS) and your total debt service ratio (TDS) – are used to calculate the maximum mortgage the lender can offer. This maximum mortgage is then combined with your available down payment to determine the maximum home price you can purchase.
Your lenders uses these ratios to ensure you can consistently make your monthly payment, as they place a limit on the amount of your income that can go towards your housing expenses and monthly debt obligations. The industry standard guideline for GDS is no more than 32% and the guideline for TDS is no more than 40%. However, you may be allowed to exceed these limits if you have a stable source of income and good credit. If the mortgage you want to take on forces your GDS or TDS above 39% and 44% respectively, you will not be approved for that amount.
To use our earlier example, even if you have $15,000 for a down payment, your GDS and TDS score may only approve you for a $250,000 mortgage. Thus, when combined with your $30,000 down payment, your maximum affordability would be $265,000 ($250,000 + $15,000).
Gross Debt Service Ratio
[Mortgage Payments + Property taxes + Heating Costs + 50% of Condo Fees]
÷ Annual Income
= Ratio (should be < 32%)
Total Debt Service Ratio
[Housing expenses (per GDS) + Credit card interest + Car payments + Loan expenses]
÷ Annual Income
= Ratio (should be < 40%)
The maximum GDS limit used by most lenders to qualify borrowers is 39% and the maximum TDS limit is 44%.
On July 1st, 2020, the CMHC implemented new GDS and TDS limits for mortgages that it insured. The new GDS/TDS limits for CMHC-insured mortgages was 35/42. However, on July 5, 2021, the CMHC reversed the new rules and reverted to the previous GDS/TDS limits of 39/44. It is noteworthy that none of the private companies providing mortgage default insurance in Canada did not follow suit to make the requirements more stringent - as a result, these private insurers' market share has increased dramatically at the expense of the CMHC.
How to increase your maximum mortgage affordability
If you’ve used our mortgage affordability calculator and you’re unhappy with your results, there are several steps you can take to increase your mortgage affordability:
- Increase your down payment: This will give you the ability to increase your affordability and purchase a more expensive home. Many Canadians do this with family assistance, also known as borrowing from the Bank of Mom and Pop.
- Pay off your debts: This will lower your TDS ratio and free up more of your income for your mortgage payment, ultimately giving you the ability to carry a larger mortgage and therefore afford a more expensive home.
- Increase your income: This is the tougher option, but it will allow you to afford a larger monthly mortgage payment, which will increase the overall size of the mortgage you can afford to borrow and repay. One way to do this is by switching to a better-paying job, but changing jobs during the homebuying process can be risky. Alternatively, you can apply for your mortgage with your partner, or get a co-signer, such as your parents, to guarantee your mortgage.
Maximum affordability vs. what you should actually spend
Your GDS and TDS ratios are guidelines for what a lender might approve, but that doesn’t mean you should borrow the maximum. With household budgets stretched, it’s more important than ever to be realistic.
According to CMHC’s 2025 consumer survey, 51% of mortgage holders reported difficulty maintaining debt payments, up from 42% in 2024. Among them, 17% struggled with their mortgage specifically, and 14% reported missing a mortgage payment altogether. That’s why some industry experts are pushing for a revised metric: the TDSS ratio (Total Debt Service + Savings), which encourages borrowers to factor in a savings buffer. When setting your homebuying budget, make sure there’s enough room left to save, repay other debts, and weather job loss or rising costs, because affordability isn’t just about qualifying. It’s about sustaining.
A sample maximum affordability calculation
Let’s say your annual income is $75,000, and you’ve saved $20,000 for a down payment. You’re buying a house (no condo fees), with estimated:
- Property taxes: $3,600/year
- Heating costs: $200/month
- Car loan payments: $300/month
- Credit card payments: $250/month
We’ll calculate your maximum monthly mortgage payment based on both the GDS and TDS ratios.
Step 1: Determine your maximum affordability based on your GDS
The gross debt service (GDS) ratio limits your housing costs to 32% of your annual income. In this case, 32% of $75,000 is $24,000 per year. From this, you subtract your property taxes ($3,600) and heating costs ($2,400 annually), which leaves $18,000 per year for mortgage payments. That works out to a maximum of $1,500 per month ($18,000/12) under your GDS ratio.
Step 2: Determine your maximum affordability based on your TDS score
Under the total debt service (TDS) ratio, you’re allowed to spend up to 40% of your annual income on housing and debt payments. In this case, you’ll have 40% of $75,000 – $30,000 to work with. After subtracting $3,600 for property taxes, $2,400 for heating, $3,600 for car payments, and $3,000 for credit cards, you're left with $17,400 per year, or $1,450 per month, for mortgage payments.
Because lenders use the more conservative of the two ratios, your maximum monthly mortgage payment is $1,450. At a 3.74% fixed mortgage rate over a 25-year amortization, this monthly payment translates to a mortgage of about $282,000. Finally, you must ensure you have the minimum down payment of 5%. Since $20,000 / $282,000 = 7.09% you can satisfy the minimum down payment requirement.
Although your GDS ratio would allow for a slightly higher mortgage payment, it’s your TDS that’s the limiting factor in this case. If you want to increase your affordability, paying off your car loan or credit card debt could help.