How lenders calculate what you can afford in Canada. GDS ratio, TDS ratio, stress test explained with real examples. Find out your maximum purchase price.
Canadian mortgage lenders use two debt ratios to determine how much you can borrow. Understanding these is essential before you start house hunting.
GDS = (Monthly Mortgage Payment + Property Tax + Heat + 50% Condo Fee) ÷ Gross Monthly Income
Example: $90,000/yr income = $7,500/mo gross. Max GDS = $7,500 × 39% = $2,925/mo for housing.
TDS = (GDS items + All Monthly Debt Payments) ÷ Gross Monthly Income
Example: Same $7,500/mo with $500/mo car payment. Max TDS = $7,500 × 44% = $3,300 - $500 = $2,800/mo for housing.
| Household Income | Max Mortgage | Max Price (20% down) |
|---|---|---|
| $60,000 | $285,000 | $356,000 |
| $80,000 | $380,000 | $475,000 |
| $100,000 | $475,000 | $594,000 |
| $120,000 | $570,000 | $713,000 |
| $150,000 | $715,000 | $894,000 |
Assumes: 4.89% rate, 25yr amortization, $500/mo existing debts, stress tested at 6.89%
The stress test reduces your maximum purchase price by approximately 15–20%. A household that could afford $600K at their actual rate might only qualify for $500K after the stress test.