How lenders decide what you can afford
Two ratios cap your mortgage:
- GDS (Gross Debt Service) ≤ 39%: your housing costs (mortgage, property tax, heat, half of any condo fees) can't exceed 39% of gross income.
- TDS (Total Debt Service) ≤ 44%: housing costs plus all other debt payments can't exceed 44%.
The stress test then requires you to qualify at the higher of your rate + 2% or 5.25% — so you can still pay if rates rise. That's why your qualifying amount is lower than your rate alone suggests.
Minimum down payment in Canada: 5% up to $500,000, 10% on the portion from $500,000 to $1.5M, and 20% above $1.5M. Under 20% down requires mortgage default insurance (CMHC), not modelled here.