How lenders actually calculate this
Your qualifying rate is the higher of your contract rate plus 2 percentage points, or 5.25% — a rule set by OSFI (the federal banking regulator), not by individual lenders, so it applies the same way whether you're mortgage shopping at a big bank or a credit union. Two ratios are checked against your gross income at that qualifying rate: GDS (housing costs alone, capped at 39%) and TDS (housing costs plus all other debts, capped at 44%). Whichever ratio is tighter for your situation sets your maximum. You'll usually pay a lower rate than the qualifying rate in practice — this calculator shows both numbers side by side so you can see the gap between what you'd actually pay and what determines your ceiling.
What counts toward GDS and TDS
GDS (Gross Debt Service) includes your mortgage payment, property tax, heating costs, and half of any condo fees — all divided by your gross monthly income. TDS (Total Debt Service) takes that same GDS number and adds every other debt payment you carry: car loans, credit card minimums, student loans, lines of credit. A lot of buyers assume their income is the limiting factor, but for people carrying meaningful other debt, TDS is very often the tighter constraint, not GDS — which is why paying down a car loan or consolidating credit card debt before applying can sometimes raise your maximum more than a raise would.
Why the stress test exists
The qualifying rate buffer exists so that a rate increase at renewal doesn't immediately put homeowners in payment shock they can't absorb. It was introduced after the 2008 financial crisis prompted regulators across several countries to build more cushion into mortgage underwriting. It's a genuine source of frustration for buyers — qualifying at a higher rate than you'll actually pay means your maximum price is lower than what your real monthly budget could technically support — but it's also part of why Canada's mortgage default rates have stayed low even through periods of rapidly rising interest rates.
Using the savings and liabilities sections
The income, savings, and liabilities sections above feed directly into your down payment and TDS calculation — filling them in with real numbers, rather than skipping straight to the future home fields, gives you a genuinely more accurate maximum than guessing at a lump-sum down payment figure. The advanced section further down lets you model a HELOC-funded down payment, a second property with rental income, or a refinance scenario, if any of those apply to your situation.
Once you have a target price, check your closing costs for that province to make sure your down payment savings will cover both, or see the specific payment that price would produce.