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Key Highlights

• An income of $145K is needed to purchase the average-priced home in Canada
• The income to purchase an average home ranges from $66K in Newfoundland to $236K in Vancouver.
• The income required to qualify on a variable rate mortgage is currently less than what is needed to qualify on a fixed rate.

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How to Calculate Your Home Affordability

Whether or not you can afford a home depends on many factors. In this blog, we’re on a mission to show you how much mortgage a typical person can afford. We’ll also show you some common calculations needed to understand your home affordability.

Loan-to-Value (LTV) ratios impact your interest rate

Many different factors impact your home affordability, such as the borrower’s credit, the property which is being used as collateral, the borrower’s income capacity to service the debt, the borrower’s capital in the form of savings/investments and down payment, and most importantly, the conditions. Conditions such as the purpose of the loan and the loan-to-value (LTV) ratio.

Capacity to carry a mortgage payment

The most important factor in the qualification process is capacity. What does that mean, exactly? Borrower can make their mortgage payments. It is not enough to pay the mortgage payment, stress testing capacity means figuring out if you can also afford the taxes, monthly heating costs and half of the condo fees (if applicable). Secondly, you should be able to carry these payments alongside other outside debts such as car, credit card or student loan payments. 

Debt Service Ratios impact how much mortgage you can get

Capacity is tested with 2 debt-service-ratios known as Gross Debt Service Ratio (GDSR) and Total Debt Service Ratio (TDSR). As the names suggest, GDSR calculates the household debt carrying capacity against an applicant’s qualified income and TDSR calculates the total debt carrying capacity against the same income. On joint applications, ratios for qualifying are combined debt payments and incomes in the case of multiple borrowers.

GDSR = (Mortgage Payment + Property Taxes + Condo Fees/2 + Hydro) / Income

TDSR = (All debts in GDSR calculation + all other debts) / Income

Typically, insured or insurable transactions, where the purchase price or assessed value is under $1 Million, and the mortgage amortization is up to 25 years, will lend up to 39% on GDSR and 44% on TDSR. Some lenders will use different ratios due to their risk appetites.

Uninsured transactions are classified as purchases or renewals where a property is valued at more than $1M or the amortization will be more than 25 years, or the transaction is a refinance – where equity is taken out or time is being extended.

In the case of uninsured transactions, lenders will have their risk assessment criteria to use whatever ratios they feel comfortable with based on the client’s unique situation. Most lenders will have lower debt service ratios when the risk to them is higher, such as in situations where the lender is doing a refinance or purchase of $1 Million or more in property value; or one of the borrowers has a lower FICO score than the required minimum.

Type of Transaction /Limitation	Minimum GDSR	Minimum TDSR
Credit Score (FICO) for lower scoring borrower between 650 and 680	32	40
Uninsured Purchase or Refinance on property valued at $1M+	35	42
Insured / Insurable Purchase or Renewal for property valued less than $1M	39	44

To calculate your affordable mortgage payment, we can use the ratio to figure out your qualifying income and subtract the applicable debt payments. For our primary example, we will use an annual income of $100K which would be the joint income of 2 borrowers servicing the mortgage together if they made $50K each annually.

We will use the widely accepted and used debt service ratios of 39% GDSR and 44% TDSR for our discussion. We will consider taxes at 1% of property value to simplify property tax rates across Canada, ranging from 0.29% in Victoria to 2.77% in Winnipeg. The average national annual municipal tax will range from $5000 on properties valued up to $500K to $8500 for properties valued at $1M or more. We will simplify the heating (utility) cost at $100/month for all properties. 

We will also assume that the client does not have any outside debts or condo fees, though the easiest way to survey how these items affect your purchasing power is to look at what fraction of your monthly mortgage payment they affect. As you only have 5% to work with on a difference between 39% on GDSR and 44% on TDSR, it is best to think of this as an annual amount. So in the case of the borrower earning $100K, that means that any outside debts cannot exceed an annual payment of $5000 or a monthly payment of $416.

GDS = Income $100,000 x 0.39 GDSR / 12 = $3250 monthly 

TDS = Income $100,000 x 0.44 TDSR / 12 = $3666 monthly 

That means that a person or family earning a combined income of $100K will be able to service monthly mortgage payments, property taxes and heating (plus ½ of condo fees) up to a maximum of $3250. They can carry up to $416 monthly in outside debts, such as car loans, student loans, or up to 3% of the balance of all revolving debts ($416/0.03), meaning up to $13,867 balance on your credit card or lines of credit combined.

Passing the Mortgage Stress Test

You’ll have to pass the mortgage stress test to qualify for the mortgage itself. This will entail proving that you can afford payments at a qualifying interest rate typically higher than the actual rate in your mortgage contract.

You will need to pass a stress test to qualify for a mortgage, regardless of whether you need mortgage default insurance. Federally regulated lenders must be able to show that they can service your loan at the higher of the contracted interest rate plus 2%, or 5.25%.

Mortgage Default Insurance

An insured mortgage is such when your down payment is less than 20%; therefore, you will need to purchase default (high ratio) insurance. Although this insurance is added to your mortgage, the taxes (PST) on purchasing this insurance are not. 

Your solicitor will collect and remit the taxes (PST) on behalf of the high ratio insurer (CMHC, Sagen or Canada Guaranty) upon your closing. Once the high ratio default insurance is purchased from one of the 3 default insurers, the risk to the lender is reduced as the default insurance will protect them in case of default. 

All things being equal, the lowest rate, in this case, will be an insured purchase or insured transfer, where default insurance was purchased with the home by the borrower. 

Loan-to-Value	Premium on Total Loan
80.01% to 85%	2.80%
85.01% to 90%	3.10%
90.01% to 95%	4.00%

Income Needed to Buy an Average Home in Canada

The average home price in Canada has decreased from $663,000 a year ago to $637,000. As nesto has some of the best rates for insured or insurable purchases anywhere, we will use our fixed and variable rates to illustrate the income needed. 

At the time of writing, our insured/insurable fixed and variable rates are 4.34% and 4.20%, respectively. For this exercise, we will use a 1% property tax rate which applies to areas where 80% of the population lives in Canada. We will assume a minimum required down payment of 5% on the first $500,000 and 10% on purchase price over $500,000 as is required. 

As a homebuyer, many valuable resources are available to help you make informed decisions throughout the home-buying process. One of the most useful tools you’ll find is nesto’s online mortgage calculators. Calculating mortgage payments is no longer a difficult task, thanks to nesto.

Average Home in Canada Qualifying as an Insured Purchase

Loan Variables	What’s Required
Home Price	$637,000
Down Payment Needed(5% on up to $500K and 10% on the rest)	$41,300
Mortgage Default Insurance (4%)	$637,000 – $41,300 x 0.04 = $23,028
Mortgage Needed	$618,728
Stress Test Rate (Interest Rate + 2%)	4.34% + 2% = 6.34%
Mortgage Term	5 years
Mortgage Amortization	25
Heating Costs (Monthly)	$100
Property Taxes (1% of purchase price)	$6370 / 12 = $530.83
Mortgage Payment (Monthly)	$4084.57
Qualifying GDS Payment	$4715.40
Income Required for Debt Service (39%)	$4715.40 x 12 = $56,584.80
Gross Income Required (39%)	$56,584.80 / 0.39 = $145,089.23

An annual income of $56,584.80 will be needed to service the gross debt-carrying costs on an insured purchase of the average-priced ($637,000) home in Canada. However, this only represents 39% of the income required therefore, to get the actual income required to qualify for this mortgage, we must divide the number above by 39%.

To purchase the average home in Canada, you’ll need a combined income of $145,089.23. This income could be a single buyer or qualifying as a couple on $73K annually each. 

To qualify for nesto’s lower variable rate of 4.20% on the same property, you will need a combined annual income of $143,487.69. In this particular market, the risk with the variable rate trending up does not warrant qualifying for more.

Average Home in Canada Qualifying on Uninsured Purchase

What would this all look like if you had a 20% down payment saved up and could get a 30-year amortization to keep your cash flow in line with your budget? 

The example below will discuss the same average home in Canada but with different financial circumstances for the borrower. We will use the 5.39% as the applicable mortgage rate, which is currently nesto’s advertised best-fixed rate for uninsured transactions. The income inclusion Gross Debt Service Ratio (GDSR) for an uninsured transaction is only 35%.

Loan Variables	What’s Required
Home Price	$637,000
Down Payment Needed(20% on the whole amount)	$127,400
Mortgage Default Insurance (N/A)	$0
Mortgage Needed	$509,600
Stress Test Rate (Interest Rate + 2%)	5.39% + 2% = 7.39%
Mortgage Term	5 years
Mortgage Amortization	30
Heating Costs (Monthly)	$100
Property Taxes (1% of purchase price)	$6370 / 12 = $530.83
Mortgage Payment (Monthly)	$3486.31
Qualifying GDS Payment	$4117.14
Income Required for Debt Service (35%)	$4117.14 x 12 = $49,405.68
Gross Income Required (35%)	$49,405.68 / 0.35 = $141,159.09

What Does the Average Income Buy You in Canada

The average income in Canada ranges from $68,000 to $72,000 – qualifying you for less than the average price of a home in Canada. 

But no matter, the average home price is far lower than this amount if you buy a home outside of British Columbia or Ontario. 

Qualifying for your mortgage can be a breeze with nesto’s mortgage affordability calculator, just input all the details you have at your fingertips and voila, there you have it. 

On this average income range, the qualifying mortgage amount will range from $281K to $303K on nesto’s fixed rate of 4.34%, which is stress tested at 6.34%; however, this amount must also include any high ratio mortgage default insurance.

How much do you need to earn in each province and some large cities to afford an average-priced home there?

There is no simple answer to mortgage affordability across Canada, as each municipality in every province has its municipal property rate. 

We’ve used the highest average municipal rate on a provincial basis to figure out the taxes on the average property price in that province. 

We also indicated the qualifying income needed for each province and the top ten metropolitan markets based on those tax rates and other factors, such as qualifying stress test rates.

As you can see from the chart below, qualification income amounts are not always proportional to the property price, as some provinces have twice the municipal tax rate compared to other provinces.

Province/ City	Average Home Price	Expected Monthly Property Tax Amount	25yrs Stress Tested Monthly Mtg Pymt	Annual Gross Income Needed on 25yrs (39%)	30yrs Stress Tested Monthly Mtg Pymt	Annual Gross Income Needed on 30yrs (35%)
BC	$904,020	$753	$4,905.82	$178,743.69	$4,900	$198,977
AB	$422,709	$395	$2,293.90	$87,336.26	$2,291	$97,227
SK	$321,000	$289	$1,741.96	$67,103.38	$1,740	$74,703
MB	$330,742	$763	$1,794.83	$83,332.09	$1,793	$92,785
ON	$829,934	$692	$4,503.78	$164,473.59	$4,499	$183,092
QC	$476,787	$517	$2,587.37	$100,119.67	$2,584	$111,459
NB	$269,800	$573	$1,464.12	$67,306.00	$1,462	$74,940
NS	$368,800	$338	$2,001.36	$76,597.74	$1,999	$85,273
PE	$355,000	$494	$1,926.47	$79,092.67	$1,924	$88,055
NL	$280,200	$234	$1,520.56	$58,586.46	$1,519	$65,222
Vancouver	$1,131,600	$943	NA	NA	$6,134	$247,773
Calgary	$509,300	$424	$2,763.80	$102,714.36	$2,761	$114,344
Edmonton	$367,100	$306	$1,992.13	$75,324.51	$1,990	$83,854
Winnipeg	$330,000	$344	$1,790.80	$70,293.85	$1,789	$78,256
Toronto	$1,089,800	$908	NA	NA	$5,907	$238,811
Hamilton	$830,900	$879	$4,509.02	$170,411.97	$4,504	$189,709
Ottawa	$623,500	$556	$3,383.53	$125,830.28	$3,380	$140,077
Montreal	$501,000	$418	$2,718.76	$101,115.69	$2,716	$112,564

Income needed to qualify for common mortgage balances

In this section, we will qualify some common mortgage amounts that borrowers show interest in. Typically, 400K, 500K, 600K, 700K, 800K, 900K and $1 million mortgages are quite popular in Canada. To simplify the qualifying criteria, we have used 30yrs amortizations with a 20% down payment, thus revealing the carrying costs of a typical balance without any mortgage default insurance premiums added to those balances.

It is important to highlight that lenders will use lower debt service ratios when mortgages are not default-insured; therefore, instead of including 39% of the borrower’s gross income, they will typically use 35%. Also, it is important to mention that if your credit score (specifically FICO) is below 680, lenders will prefer that your loan is default insured with less than 20% down payment to avoid additional risk to themselves – and qualify you on a GDS ratio of 32% (not used in any of our calculations here).

Income Needed for 400k Mortgage in Canada

Here is a look at the numbers to see what kind of income is required to qualify for a $400,000 mortgage in Canada. 

Just to keep things simple, we are using a purchase with a 20% down payment so that the mortgage can be amortized to 30 years and avoid paying any high ratio default insurance on the mortgage balance.

 If you go with a fixed-rate mortgage

Loan Variables	What’s Required
Home Price	$500,000
Down Payment Needed(20% on the whole amount)	$100,000
Mortgage Default Insurance (N/A)	$0
Mortgage Needed	$400,000
Stress Test Rate (Interest Rate + 2%)	5.39% + 2% = 7.39%
Mortgage Term	5 years
Mortgage Amortization	30
Heating Costs (Monthly)	$100
Property Taxes (1% of purchase price)	$5000 / 12 = $416.67
Mortgage Payment (Monthly)	$2736.51
Qualifying GDS Payment	$3253.18
Income Required for Debt Service (35%)	$3253.18 x 12 = $39,038.16
Gross Income Required (35%)	$49,405.68 / 0.35 = $111,538

Based on these numbers, you’ll need to make at least $112,000 gross (before your income is taxed) to pass the stress test to qualify for a $400,000 mortgage in Canada.

If you go with a variable-rate mortgage

Loan Variables	What’s Required
Home Price	$500,000
Down Payment Needed(20% on the whole amount)	$100,000
Mortgage Default Insurance (N/A)	$0
Mortgage Needed	$400,000
Stress Test Rate (Interest Rate + 2%)	4.95% + 2% = 6.95%
Mortgage Term	5 years
Mortgage Amortization	30
Heating Costs (Monthly)	$100
Property Taxes (1% of purchase price)	$5000 / 12 = $416.67
Mortgage Payment (Monthly)	$2621.43
Qualifying GDS Payment	$3138.10
Income Required for Debt Service (35%)	$3138.10 x 12 = $
Gross Income Required (35%)	$37,657.20 / 0.35 = $107,592

Based on these numbers, you’ll need to make at least $108,000 gross (before your income is taxed) to pass the stress test to qualify for a $400,000 mortgage in Canada if you choose nesto’s uninsured 5-yr variable rate. 

Overall, you’ll need to make about $4,000 less to qualify for nesto’s variable rate. While this is good news for your income level, it should be considered that the savings from the variable rate (as well as carrying costs) might not outweigh the risks due to ever-changing market conditions. As rates rise, carrying costs will rise, too.

Income Needed for 500k Mortgage in Canada

How much income do you need to qualify for a $500,000 mortgage in Canada? Find below what’s needed with nesto’s 5-year fixed and 5-year variable. For this qualification, you’ll need a 20% down payment to stress test and amortize the mortgage over 30 years. For a mortgage at $500,000, you’ll need a down payment of $125,000, so this means you can purchase a home up to $625,000.

If you go with a fixed-rate mortgage

Loan Variables	What’s Required
Home Price	$625,000
Down Payment Needed(20% on the whole amount)	$125,000
Mortgage Default Insurance (N/A)	$0
Mortgage Needed	$500,000
Stress Test Rate (Interest Rate + 2%)	5.39% + 2% = 7.39%
Mortgage Term	5 years
Mortgage Amortization	30
Heating Costs (Monthly)	$100
Property Taxes (1% of purchase price)	$6250 / 12 = $520.83
Mortgage Payment (Monthly)	$3420.63
Qualifying GDS Payment	$4041.46
Income Required for Debt Service (35%)	$4041.46 x 12 = $48,497.52
Gross Income Required (35%)	$48,497.52 / 0.35 = $138,564

Based on these numbers, you will need to make at least $139,000 gross (before your income is taxed) to pass the stress test to qualify for a $500,000 mortgage in Canada.

If you go with a variable-rate mortgage

Loan Variables	What’s Required
Home Price	$625,000
Down Payment Needed(20% on the whole amount)	$125,000
Mortgage Default Insurance (N/A)	$0
Mortgage Needed	$500,000
Stress Test Rate (Interest Rate + 2%)	4.95% + 2% = 6.95%
Mortgage Term	5 years
Mortgage Amortization	30
Heating Costs (Monthly)	$100
Property Taxes (1% of purchase price)	$6250 / 12 = $520.83
Mortgage Payment (Monthly)	$3276.79
Qualifying GDS Payment	$3897.62
Income Required for Debt Service (35%)	$3897.62 x 12 = $46,771.44
Gross Income Required (35%)	$49,405.68 / 0.35 = $133,633

Based on these numbers, you will need to make at least $134,000 gross (before your income is taxed) to pass the stress test to qualify for a $500,000 mortgage in Canada if you choose nesto’s uninsured 5-year variable rate. 

Overall you’ll need to make about $5,000 less to be stress tested to qualify on nesto’s variable rate compared to nesto’s uninsured 5-year fixed rate.

Income Needed for 600k Mortgage in Canada

You’ll need a downpayment of $150,000 to be able to carry a mortgage for $600,000 if you want to avoid mortgage default insurance.

If you go with a fixed-rate mortgage

Loan Variables	What’s Required
Home Price	$750,000
Down Payment Needed(20% on the whole amount)	$150,000
Mortgage Default Insurance (N/A)	$0
Mortgage Needed	$600,000
Stress Test Rate (Interest Rate + 2%)	5.39% + 2% = 7.39%
Mortgage Term	5 years
Mortgage Amortization	30
Heating Costs (Monthly)	$100
Property Taxes (1% of purchase price)	$7500 / 12 = $625
Mortgage Payment (Monthly)	$4104.76
Qualifying GDS Payment	$4829.76
Income Required for Debt Service (35%)	$4829.76 x 12 = $57,957.12
Gross Income Required (35%)	$57,957.12 / 0.35 = $165,591.77

Based on these numbers, you will need to make at least $166,000 gross (before your income is taxed) to pass the stress test to qualify for a $600,000 mortgage in Canada if you choose nesto’s uninsured 5-year fixed rate. 

If you go with a variable-rate mortgage

Loan Variables	What’s Required
Home Price	$750,000
Down Payment Needed(20% on the whole amount)	$150,000
Mortgage Default Insurance (N/A)	$0
Mortgage Needed	$600,000
Stress Test Rate (Interest Rate + 2%)	4.95% + 2% = 6.95%
Mortgage Term	5 years
Mortgage Amortization	30
Heating Costs (Monthly)	$100
Property Taxes (1% of purchase price)	$7500 / 12 = $625
Mortgage Payment (Monthly)	$3932.14
Qualifying GDS Payment	$4657.14
Income Required for Debt Service (35%)	$4657.14 x 12 = $55,885.68
Gross Income Required (35%)	$55,885.68 / 0.35 = $159,673.37

Based on these numbers, you will need to make at least $160,000 gross (before your income is taxed) to pass the stress test to qualify for a $600,000 mortgage in Canada if you choose nesto’s uninsured 5-year variable rate. You need at least $6,000 more in annual income to qualify for the fixed rate option from nesto.

Income Needed for 700k Mortgage in Canada

You’ll need an income in the range of $186,000 to $193,000 to be able to qualify for a mortgage of $700,000 or more. The range applies due to the difference in the fixed and variable rates that need to be stress tested.

If you go with a fixed-rate mortgage

Loan Variables	What’s Required
Home Price	$875,000
Down Payment Needed(20% on the whole amount)	$175,000
Mortgage Default Insurance (N/A)	$0
Mortgage Needed	$700,000
Stress Test Rate (Interest Rate + 2%)	5.39% + 2% = 7.39%
Mortgage Term	5 years
Mortgage Amortization	30
Heating Costs (Monthly)	$100
Property Taxes (1% of purchase price)	$8750 / 12 = $729.17
Mortgage Payment (Monthly)	$4788.89
Qualifying GDS Payment	$5618.06
Income Required for Debt Service (35%)	$5618.06 x 12 = $67,416.72
Gross Income Required (35%)	$67,416.72 / 0.35 = $192,619.20

Based on these numbers, you will need to make at least $193,000K gross (before your income is taxed) to pass the stress test to be able to qualify for a $700,000K mortgage in Canada if you choose nesto’s uninsured 5-year fixed rate. 

If you go with a variable-rate mortgage

Loan Variables	What’s Required
Home Price	$875,000
Down Payment Needed(20% on the whole amount)	$175,000
Mortgage Default Insurance (N/A)	$0
Mortgage Needed	$700,000
Stress Test Rate (Interest Rate + 2%)	4.95% + 2% = 6.95%
Mortgage Term	5 years
Mortgage Amortization	30
Heating Costs (Monthly)	$100
Property Taxes (1% of purchase price)	$8750 / 12 = $729.17
Mortgage Payment (Monthly)	$4587.50
Qualifying GDS Payment	$5416.67
Income Required for Debt Service (35%)	$5416.67x 12 = $65,000.04
Gross Income Required (35%)	$65,000.04 / 0.35 = $185,714.40

You will need to make at least $186,000K gross (before your income is taxed) to pass the stress test to be able to qualify for a $700,000K mortgage in Canada if you choose nesto’s uninsured 5-year variable rate. 

Income Needed for 800k Mortgage in Canada

You’ll need an income in the range of $212K to $220K to be able to qualify for a mortgage of $800K. The range applies due to the difference in the fixed and variable rates that need to be stress tested.

If you go with a fixed-rate mortgage

Loan Variables	What’s Required
Home Price	$1,000,000
Down Payment Needed(20% on the whole amount)	$200,000
Mortgage Default Insurance (N/A)	$0
Mortgage Needed	$800,000
Stress Test Rate (Interest Rate + 2%)	5.39% + 2% = 7.39%
Mortgage Term	5 years
Mortgage Amortization	30
Heating Costs (Monthly)	$100
Property Taxes (1% of purchase price)	$10,000 / 12 = $833.33
Mortgage Payment (Monthly)	$5473.01
Qualifying GDS Payment	$6406.34
Income Required for Debt Service (35%)	$6406.34 x 12 = $76,876.08
Gross Income Required (35%)	$76,876.08 / 0.35 = $219,645.94

Based on these numbers, you will need to make at least $220K gross (before your income is taxed) to pass the stress test to qualify for an $800K mortgage in Canada if you choose nesto’s uninsured 5-yr fixed rate.

If you go with a variable-rate mortgage

Loan Variables	What’s Required
Home Price	$1,000,000
Down Payment Needed(20% on the whole amount)	$200,000
Mortgage Default Insurance (N/A)	$0
Mortgage Needed	$800,000
Stress Test Rate (Interest Rate + 2%)	4.95% + 2% = 6.95%
Mortgage Term	5 years
Mortgage Amortization	30
Heating Costs (Monthly)	$100
Property Taxes (1% of purchase price)	$10,000 / 12 = $833.33
Mortgage Payment (Monthly)	$5242.86
Qualifying GDS Payment	$6176.19
Income Required for Debt Service (35%)	$6176.19 x 12 = $74,114.28
Gross Income Required (35%)	$74,114.28 / 0.35 = $211,755.09

Based on these numbers, you will need to make at least $212K gross (before your income is taxed) to pass the stress test to qualify for an $800K mortgage in Canada if you choose nesto’s uninsured 5-yr variable rate. You need at least $8000 more in annual income to qualify for the fixed rate option from nesto.

Income Needed for 900k Mortgage in Canada

You’ll need an income between $238K to $247K to qualify for a mortgage of $900K. The range applies due to the difference in the fixed and variable rates that must be stress tested.

If you go with a fixed-rate mortgage

Loan Variables	What’s Required
Home Price	$1,125,000
Down Payment Needed(20% on the whole amount)	$225,000
Mortgage Default Insurance (N/A)	$0
Mortgage Needed	$900,000
Stress Test Rate (Interest Rate + 2%)	5.39% + 2% = 7.39%
Mortgage Term	5 years
Mortgage Amortization	30
Heating Costs (Monthly)	$100
Property Taxes (1% of purchase price)	$11,250 / 12 = $937.50
Mortgage Payment (Monthly)	$6157.14
Qualifying GDS Payment	$7194.64
Income Required for Debt Service (35%)	$7194.64 x 12 = $86,335.68
Gross Income Required (35%)	$86,335.68 / 0.35 = $246,673.37

You will need to make at least $247K gross (before your income is taxed) to pass the stress test to qualify for a $900K mortgage in Canada if you choose nesto’s uninsured 5-yr fixed rate.

If you go with a variable-rate mortgage

Loan Variables	What’s Required
Home Price	$1,125,000
Down Payment Needed(20% on the whole amount)	$225,000
Mortgage Default Insurance (N/A)	$0
Mortgage Needed	$900,000
Stress Test Rate (Interest Rate + 2%)	4.95% + 2% = 6.95%
Mortgage Term	5 years
Mortgage Amortization	30
Heating Costs (Monthly)	$100
Property Taxes (1% of purchase price)	$11,250 / 12 = $937.50
Mortgage Payment (Monthly)	$5898.21
Qualifying GDS Payment	$6935.71
Income Required for Debt Service (35%)	$6935.71 x 12 = $83,228.52
Gross Income Required (35%)	$83,228.52 / 0.35 = $237,795.77

Based on these numbers, you will need to make at least $238K gross (before your income is taxed) to pass the stress test to qualify for a $900K mortgage in Canada if you choose nesto’s uninsured 5-yr variable rate. You need at least $9000 more in annual income to qualify for the fixed rate option from nesto.

Income Needed for $1 Million Mortgage in Canada

In past examples, we looked at mortgage amounts that could qualify on an insured basis, but once the property price is over $1M, there is no way to qualify with less than a 20% down payment. 

Generally, with all purchase prices less than $1M, you could put less than 20% down to get a better rate and qualify for more, as the stress testing would also be done at a lower rate. At this point, it would not impact your rate if you were to go with 25yrs or 30yrs amortization as the rate would be the same in both cases.

Now the amortization you choose will become more of a question of affordability versus savings. Going with a 25-year amortization will save you considerable interest over the life of the mortgage; however, going with a 30-year amortization will reduce your carrying costs and make it easier to qualify for your mortgage.

If you go with a fixed-rate mortgage

You’ll need a range of income from $264K and $274K to qualify for a $1 million mortgage on nesto’s 5-year variable and 5-year fixed-rate mortgages, respectively.

Loan Variables	What’s Required
Home Price	$1,250,000
Down Payment Needed(20% on the whole amount)	$250,000
Mortgage Default Insurance (N/A)	$0
Mortgage Needed	$1,000,000
Stress Test Rate (Interest Rate + 2%)	5.39% + 2% = 7.39%
Mortgage Term	5 years
Mortgage Amortization	30
Heating Costs (Monthly)	$100
Property Taxes (1% of purchase price)	$12,500 / 12 = $1041.67
Mortgage Payment (Monthly)	$6841.26
Qualifying GDS Payment	$7982.93
Income Required for Debt Service (35%)	$7982.93 x 12 = $95,795.16
Gross Income Required (35%)	$95,795.16 / 0.35 = $273,700.46

You’ll need an income of $274K to qualify for a $1 million-dollar fixed-rate mortgage.

If you go with a variable-rate mortgage

Loan Variables	What’s Required
Home Price	$1,250,000
Down Payment Needed(20% on the whole amount)	$250,000
Mortgage Default Insurance (N/A)	$0
Mortgage Needed	$1,000,000
Stress Test Rate (Interest Rate + 2%)	4.95% + 2% = 6.95%
Mortgage Term	5 years
Mortgage Amortization	30
Heating Costs (Monthly)	$100
Property Taxes (1% of purchase price)	$12,500 / 12 = $1041.67
Mortgage Payment (Monthly)	$6553.57
Qualifying GDS Payment	$7695.24
Income Required for Debt Service (35%)	$7695.24 x 12 = $92,342.88
Gross Income Required (35%)	$92,342.88 / 0.35 = $263,836.80

You’ll need an income of $264K to qualify on nesto’s 5-yr variable rate today.

Frequently Asked Questions

What salary do I need to buy a house in Canada?

You can buy a house in Canada on any salary. The salary required to qualify for a mortgage will depend on the stress-tested mortgage payment, property taxes and heating costs. We recommend that you have an in-depth conversation with your realtor and mortgage professional before moving ahead with your plans to purchase any property.

How many times my salary can I borrow for a mortgage in Canada?

You will qualify for about 4 times your income if you put less than 20% down payment; conversely, you’ll qualify for approximately 4.5 times your income if you have saved more than 20% towards your down payment. These ratios don’t apply to all situations, as municipal tax rates differ quite a bit between municipalities and provinces. Typically, property tax rates are lower in areas with higher density. Conversely, these areas have higher property values as they are more sought after.

Why choose a 25yrs versus a 30yrs amortization?

Choosing an amortization of 25 years versus 30 years can save you a lot of money on your cost of borrowing, that is, the interest charged over the life of the mortgage. Suppose your property value is less than $1 million. In that case, it may be worthwhile to discuss insured pricing options with your mortgage professional as this might save you not only on interest costs (rates can be quite a lot lower on insured mortgages) but also make it easier to qualify since you can use up to 39% of your income to carry your mortgage.

What income is needed for each $100K mortgage balance?

You need a gross income (before taxes) between $26K and $32K annually to qualify for a mortgage balance of $100K. The assumption is based on stress testing of the current lowest rate at nesto and applying a range of gross debt ratios depending on factors such as the percentage of down payment and credit score.

What other costs should I consider when purchasing a home in Canada?

There are various other costs to consider when purchasing your home. You should set aside 1.5% to 2.5% of the purchase price for closing costs, land transfer taxes, inspections, appraisals, taxes on default insurance, and other costs not mentioned here. Your mortgage and real estate professionals can highlight any costs specific to your purchase.

The answers are always in the professional advice

Overall, we have seen that income is not the only factor that impacts your qualifications. Your down payment as a percentage of the purchase price, property tax rates where your subject property is located and your credit score are all important factors in stress testing your mortgage. 

Getting the planning and advice right will put you on your way to finding a home you can afford and in a neighbourhood you love. If you’re ready to start your homeownership journey, speak with one of our qualified and friendly mortgage experts today. They can help guide you through the process and find the best mortgage solutions that meet your unique needs.

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