- Canada applies two ratios — GDS at 32% of gross income for housing, TDS at 40% for housing plus all other debt — and the tighter one sets your maximum.
- Every dollar of existing monthly debt payment comes straight off the TDS budget, so clearing a car loan can raise your ceiling more than a raise does.
- Property tax and heat belong inside GDS — left at zero, the price shown is optimistic by tens of thousands.
- This is a ceiling, not a pre-approval: lenders qualify you at a stress-test rate above the one you enter.
How much house you can afford in Canada
Enter your gross annual income, the minimum payments on debt you already carry, your down payment, a rate and an amortization. The calculator finds the largest monthly housing payment that stays inside both of the ratios a Canadian lender applies, converts that payment into a mortgage, and adds your down payment to get a purchase price.
Two ratios, not one. Gross debt service caps housing costs on their own; total debt service caps housing plus every other monthly payment you make. Whichever leaves less room is the one that decides your number — which is why clearing a car loan can raise your maximum price more than a raise would.
The result is a ceiling, not a target, and it is not a pre-approval. A lender also weighs your credit, your employment history and where the down payment came from, and qualifies you at a rate higher than the one you entered. Treat the figure as the top of the range worth shopping in, then decide how far below it you actually want to live.
The math
Gross monthly income is your annual income divided by twelve. Gross debt service (GDS) is capped at 32% of it and covers mortgage principal and interest, property tax, heat and half of any condo fee. Total debt service (TDS) is capped at 40% and adds every other monthly obligation — car loans, student loans, lines of credit, minimum credit-card payments. The calculator takes the smaller of 32% of income and 40% of income minus your existing debt payments, subtracts the property tax and heat you enter under Advanced options, and treats the remainder as the mortgage payment budget.
That payment becomes a loan by running the amortization formula backwards: L = P · (1 − (1 + r)⁻ⁿ) ÷ r, where P is the monthly payment, r is the annual rate divided by 12 and n is the number of months. Adding the down payment gives the purchase price.
Two limits worth naming honestly. The 32/40 pair is the conventional guideline; on an insured mortgage many lenders stretch to 39/44, so a real approval can land higher. And this calculator qualifies you at the rate you type in, while a Canadian lender must qualify you at the higher of that rate plus two percentage points or the regulatory minimum — so read the price as an upper bound.
Worked example
Take the numbers the calculator opens with: $120,000 of gross income, $400 a month of existing debt payments, $60,000 down, 6.5% over 30 years. Gross monthly income is $10,000. GDS allows $3,200 a month; TDS allows $4,000 less the $400 already committed, so $3,600. GDS is tighter, so $3,200 is the budget — a mortgage of about $506,275 and a purchase price of about $566,275.
Now put $450 a month of property tax and heat into Advanced options, which is what GDS is meant to include. The mortgage budget drops to $2,750, the loan to about $435,080 and the price to about $495,080 — roughly $71,000 less house for a cost most buyers forget to enter. Paying off the $400 debt instead changes nothing here, because TDS was never the binding ratio.
Key terms
- Gross debt service (GDS)
- Mortgage principal and interest, property tax, heat and half of any condo fee, as a share of gross monthly income. Conventionally capped at 32%.
- Total debt service (TDS)
- Everything GDS covers plus every other monthly debt payment, as a share of gross monthly income. Conventionally capped at 40%.
- Stress test
- The qualifying rate a Canadian lender must use — the higher of your contract rate plus two percentage points or the regulatory minimum. It shrinks the mortgage you qualify for without changing what you pay.
- Gross income
- Income before tax and deductions. Every ratio here is measured against it rather than take-home pay, which is why the maximum can look larger than your real budget.