How much house can I afford in Ontario?
Last reviewed Oct 2026 · OntarioHomeMath
Lenders don’t start from the price you want; they start from your income, debts and down payment. Here are the four rules that set your maximum in 2026, with the math so you can check it yourself.
Rule 1: The stress test
Every federally regulated lender must check that you could still afford payments if rates were higher. You qualify at the greater of 5.25% or your contract rate plus 2 percentage points. If you are offered 4.19%, you are tested at 6.19%. If you are offered 3.00%, you are tested at 5.25%.
The stress test applies to insured mortgages (under 20% down) and, through OSFI’s Guideline B-20, to uninsured mortgages at banks. You still pay your actual contract rate; the qualifying rate only decides how big a loan you can get.
Rule 2: GDS and TDS ratios
Two ratios limit how much of your gross (before-tax) income can go to housing and debt:
- Gross Debt Service (GDS): mortgage payment at the qualifying rate + property tax + heating + 50% of condo fees. CMHC’s maximum is 39% of gross income.
- Total Debt Service (TDS): everything in GDS plus all other debt payments (car loan or lease, student loans, lines of credit, credit cards, support payments). CMHC’s maximum is 44%.
Uninsured lenders set their own limits, often similar. Whichever ratio binds first sets your maximum.
Example: household income $150,000, or $12,500 a month. 39% GDS allows $4,875 a month for mortgage, tax and heat. 44% TDS allows $5,500 a month including other debts. If you have a $600 car payment, TDS leaves $4,900 for housing, so GDS ($4,875) still binds. With a $900 car payment, TDS leaves only $4,600 and becomes the limit. Debt payments reduce your buying power more than most people expect.
Rule 3: Minimum down payment
- Up to $500,000: 5%.
- $500,000 to $1,499,999: 5% of the first $500,000 plus 10% of the portion above $500,000.
- $1.5 million or more: 20%.
For an $800,000 home the minimum is $25,000 + $30,000 = $55,000 (6.9%). Lenders will want to see where it came from: savings, an FHSA or HBP withdrawal, sale of a property, or a gift from immediate family with a signed gift letter. Borrowed down payments are restricted for insured mortgages.
Rule 4: Mortgage default insurance (CMHC)
With less than 20% down, the mortgage must be insured by CMHC, Sagen or Canada Guaranty. Insurance is only available on homes priced below $1.5 million and with an amortization of at most 25 years, or 30 years for first-time buyers and buyers of newly built homes.
| Down payment | CMHC premium (% of loan) |
|---|---|
| 5% to 9.99% | 4.00% |
| 10% to 14.99% | 3.10% |
| 15% to 19.99% | 2.80% |
| 20% or more | Not required |
Add 0.20 percentage points for a 30-year amortization. The premium is usually added to your mortgage, but Ontario’s 8% PST on it must be paid in cash at closing. On an $800,000 home with $55,000 down (6.9%), the premium is 4.00% × $745,000 = $29,800, making the mortgage $774,800, with $2,384 PST due on closing.
Putting the rules together
Here is the order a lender effectively works in:
- Take 39% of gross monthly income (or 44% minus other debts, if lower).
- Subtract property tax, heating and half of any condo fee. What’s left is the maximum mortgage payment.
- Convert that payment into a loan amount at the qualifying rate over your amortization.
- Add your down payment, then check the price against the minimum down payment and the $1.5 million insured cap. Remember that the CMHC premium is added to the loan.
Worked example: household income $150,000, no other debts, contract rate 4.5% (so a 6.5% qualifying rate), 25-year amortization, and an assumed $500 a month property tax and $100 heating. GDS allows $4,875; subtracting tax and heat leaves $4,275 for the mortgage payment. At 6.5% with Canadian semi-annual compounding, that payment supports a mortgage of about $638,000. With $160,000 (20%) down, the maximum price is about $798,000, and the real payment at 4.5% would be about $3,530 a month. With less than 20% down, the premium would be added to the loan and the price limit would fall. These are illustrative assumptions, not a quote.
Property tax matters more than buyers expect. In Ontario, tax rates differ a lot between municipalities, so the same price can qualify in one city and not another. Our property tax calculator uses each city’s 2026 rate.
What the lender’s maximum doesn’t tell you
GDS and TDS are based on gross income. They ignore income tax, CPP and EI, childcare, transit, and savings goals. A payment that passes at 39% of gross can be well over half of take-home pay. Before you set a budget:
- Work out your real take-home pay and compare the payment at your contract rate to it. The take-home pay and affordability calculator does both in one place.
- Keep cash for closing costs, which are separate from the down payment. Land transfer tax alone is $10,475 on a $700,000 home outside Toronto. See the closing costs checklist.
- Plan for renewal. Most Ontario mortgages have 5-year or shorter terms, so your rate will reset several times.
- Budget for maintenance, insurance and, for condos, fee increases.
Ways to increase what you can afford
- Pay down or close revolving debt before applying.
- Use a 30-year amortization if you qualify (first-time buyer or new build), keeping in mind you pay more interest over time.
- Use an FHSA and the Home Buyers’ Plan to raise your down payment; see our first-time buyer programs guide.
- Get to 20% down if you can: no insurance premium, no PST on it.
- Get pre-approved so you know the rate and the lender’s actual policy before you make an offer.
Official sources
- OSFI — Minimum qualifying rate for uninsured mortgages
- CMHC — Purchase product (GDS/TDS, qualifying rate, eligibility)
- CMHC — Mortgage loan insurance premiums
- Finance Canada — 30-year amortizations and $1.5M insured cap
- FCAC — Saving for a down payment
- Ontario — Calculating land transfer tax
Last reviewed Oct 2026. General information only, not legal, tax or financial advice. Rules change; confirm with the official sources above and your lawyer or lender.