Question 1

What is the Canadian mortgage stress test?

Accepted Answer

Since 2018, federally regulated lenders (the Big Six banks and other federally chartered institutions) must qualify your mortgage at the higher of your contract rate plus 2 percentage points and the OSFI floor of 5.25%. This applies whether you put down less than 20% (an insured high-ratio mortgage) or more than 20% (an uninsured mortgage at a federal lender). The test protects against payment shock if rates rise at your next renewal. Provincially regulated credit unions are not strictly bound by the test but most still apply it.

Question 2

GDS vs TDS: what is the difference?

Accepted Answer

GDS (Gross Debt Service ratio) measures your housing costs only: mortgage principal and interest, property tax, heat, and 50% of any condo fees, divided by your gross monthly income. The federal regulatory maximum is 39%. TDS (Total Debt Service ratio) adds all your other monthly debt obligations: car loans, credit-card minimums, student loans, line of credit minimums. The maximum is 44%. Both must pass at the qualifying (stress-test) rate. If either fails, your application is declined at any insured lender.

Question 3

What is the minimum down payment in Canada?

Accepted Answer

For a home priced up to $500,000, you must put down at least 5%. For homes priced between $500,000 and $1.5 million, the minimum is 5% on the first $500,000 plus 10% on the portion above. For homes priced above $1.5 million, you must put down at least 20% and CMHC insurance is not available. As of December 2024, the CMHC ceiling was raised from $1 million to $1.5 million to help with higher-priced markets in Toronto and Vancouver.

Question 4

Can I afford more than the stress test allows?

Accepted Answer

Possibly, through provincial credit unions or private B-lenders that are not strictly subject to the federal stress test. Private lenders often charge 1 to 3 percentage points more than prime banks and may charge lender fees of 1 to 2% of the loan. This costs significantly more over the life of the mortgage. Most financial planners advise against stretching past the stress test, since the test exists to protect you from being unable to renew at higher rates 5 years from now.

Question 5

How does the 30-year amortization for first-time buyers work?

Accepted Answer

Effective December 2024, first-time buyers purchasing a newly constructed home can choose 30-year amortization (up from the previous 25-year cap for insured mortgages). This lowers your monthly payment by about 8 to 10% versus 25 years, raising the price you can afford under the GDS and TDS caps. You still must pay CMHC insurance and pass the stress test. The buyer must be a first-time buyer (no home owned in any of the previous 4 calendar years) and the home must be newly built (not a resale). Resale homes and non-first-time buyers remain at 25 years maximum on insured mortgages.

Question 6

Does my partner's income help?

Accepted Answer

Yes, when both partners are co-applicants on the mortgage. Lenders use the combined gross income of both applicants for GDS and TDS calculations. Both incomes need to be documented (T4s, pay stubs, NOAs for self-employed). Adding a spouse with income can substantially raise your maximum purchase price, but both partners become jointly and severally liable for the full mortgage. Consider this carefully: in a separation, one partner is still on the hook for the other's share unless the mortgage is refinanced.

Question 7

What counts as "other debt" for TDS?

Accepted Answer

Lenders include: minimum monthly payments on credit cards (typically 3% of balance for major banks), car loan or lease payments, student loan payments (in repayment), HELOC and line of credit interest-only payments (sometimes calculated as 3% of limit), other personal loan payments, child support and alimony, and lease payments. Lenders do not include groceries, utilities, daycare, internet, phone, or insurance other than mortgage default insurance. To maximize your affordability before applying, pay down high-balance cards and avoid taking on new car loans in the months before pre-approval.

Question 8

How accurate is this calculator vs an actual pre-approval?

Accepted Answer

This calculator uses the regulatory GDS, TDS, and stress-test maximums and applies CMHC premium tiers automatically. Actual lender decisions can vary because (a) different lenders use slightly different debt-payment calculation formulas (e.g., 3% vs 5% of credit-card balance for minimum), (b) some lenders give credit for assets not just income, (c) self-employed applicants may face additional scrutiny, and (d) bonus and commission income is typically averaged over 2 years and may be discounted. Use this calculator to set realistic expectations before shopping, then get a formal pre-approval to see your exact maximum.

Mortgage Affordability Calculator

Your income and home costs

Detailed breakdown

GDS and TDS ratios

About the Canadian mortgage stress test

Related calculators

Frequently Asked Questions