How Much Mortgage Can You Afford in Canada? 🏡💰

When you're thinking about buying a home, two key questions always come up:

🔹How much do homes cost?

🔹How much can you afford?

In this guide, we’ll focus on that second question—mortgage affordability—and break down the major components you need to understand to confidently navigate Canada’s real estate financing process.

What Affects Your Mortgage Affordability? 🧾💡

Key Factors Lenders Consider

Your ability to afford a mortgage is based on several important criteria:

• Your income and employment stability

• Current debts (like car loans or credit cards)

• The size of your down payment

• Property value and type

• Credit score and financial history

• Ability to pass the mortgage stress test

Lenders also consider your Loan-to-Value (LTV) ratio, debt service ratios (GDS/TDS), and whether your mortgage will require default insurance.

Understanding the LTV Ratio 📊🏘️

The Loan-to-Value (LTV) ratio compares your loan amount to the property’s market value.

Example:
If the home is worth $1,000,000 and your mortgage is $800,000, the LTV is 80%.

This ratio determines if your mortgage will be:

• ✅ Insured (High-Ratio) – LTV above 80%

• ✅ Uninsured (Conventional) – LTV at or below 80%

Your LTV also affects your interest rate, insurance requirements, and mortgage term options.

Debt Ratios: GDS vs. TDS 💳📈

What They Measure

Lenders use two main ratios to assess how much you can afford:

• Gross Debt Service (GDS) – mortgage + property taxes + heat + ½ strata (if applicable)

• Total Debt Service (TDS) – GDS + all other debts (loans, credit cards, etc.)

In most cases:

• GDS should not exceed 39% of your gross income

• TDS should not exceed 44%

Let’s break it down with an example 👇

Mortgage Affordability Example 🔍

For a household earning $100,000 per year:

• GDS = $100,000 x 0.39 ÷ 12 = $3,250/month

• TDS = $100,000 x 0.44 ÷ 12 = $3,666/month

• Difference = $416/month in allowable outside debt payments

This means you can spend $3,250/month on your mortgage, property taxes, heating, and ½ strata fees—and still carry up to $416/month in other debts.

The Mortgage Stress Test 😰📉

To qualify for a mortgage in Canada, you must pass the federal Mortgage Stress Test.

You must show you can handle payments at the greater of:

• Your contract rate + 2%, or

• 5.25% (current benchmark)

Example:
If your actual rate is 4%, you must qualify as if the rate is 6%.
If your actual rate is 1.5%, you still must qualify at 5.25%.

What Is Mortgage Default Insurance? 🛡️🏠

If you put down less than 20%, mortgage default insurance is mandatory. It protects the lender in case of default.

Three main insurers in Canada:

• CMHC

• Sagen

• Canada Guaranty

You don’t choose your insurer—it’s assigned by your lender. Premiums typically range from 2.8% to 4% of your mortgage and are added to your loan.

✅ Fun Fact: The lowest mortgage rates are usually reserved for insured buyers since they represent less risk to the lender.

Insured vs. Insurable vs. Conventional Mortgages 🧾🔍

Here’s a breakdown:

• Insured – Less than 20% down, primary residence under $1M, amortization up to 25 years

• Insurable – 20%+ down, property still under $1M, up to 25-year amortization

• Uninsured/Conventional – 20%+ down OR purchase price over $1M OR rentals/refinances

Banks often give slightly higher rates for uninsured mortgages because of the higher risk.

Why You Should Get Pre-Approved First 📝🔐

Before you start home shopping, speak with a mortgage broker (or your bank) to get a fully underwritten pre-approval.

Here’s why:

• ✔️ You’ll know exactly how much you can afford

• ✔️ You’ll move faster when you find the right home—crucial in a competitive market

• ✔️ The broker will already have your documents, speeding up final approval ⏱️

Ready to Figure Out What You Can Afford? 📞🏡

Mortgages might sound intimidating at first—but with the right strategy and expert advice, you’ll be well-equipped to make a confident decision.

If you’re buying or selling in Surrey, Langley, or the Greater Vancouver area, I’d love to help. If you're looking for a trusted mortgage professional, I'm also able to make a suggestion. Just send me an email and I'd be happy to connect you with one.

1️⃣ 𝐆𝐞𝐭 𝐚 𝐌𝐨𝐫𝐭𝐠𝐚𝐠𝐞 𝐏𝐫𝐞-𝐀𝐩𝐩𝐫𝐨𝐯𝐚𝐥: https://bit.ly/mortgage-preapproval-now

2️⃣ 𝐁𝐨𝐨𝐤 𝐀 𝐂𝐚𝐥𝐥: https://calendly.com/alexdunbar

3️⃣ 𝐅𝐫𝐞𝐞 𝐃𝐨𝐰𝐧𝐥𝐨𝐚𝐝𝐬

🔹Buyers Guide: https://bit.ly/Free-Ultimate-Buyers-Guide

🔹Sellers Guide: https://bit.ly/Ultimate-Sellers-Guide

🔹Pre-Sales Guide: https://bit.ly/Ultimate-Guide-to-Buying-a-Pre-Sale

🔹Search for Homes: https://discoverhomesfirst.com/listing