Income Needed To Get A Mortgage In Canada
Key Highlights
- An income between $158K to $187K is needed to purchase the average-priced home in Canada with a 20% downpayment.
- An income between $146K to $160K is needed to purchase the average-priced home in Canada with a 10% downpayment.
- The gross annual combined household income required to purchase an average home ranges from $64K in Newfoundland to $296K in Vancouver.
Are you a first-time buyer?
How To Calculate Your Mortgage 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 Qualifying 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 downpayment, and most importantly, the conditions. Conditions such as the purpose of the loan and the loan-to-value (LTV) ratio.
Capacity To Service A Mortgage Payment
The most important factor in the qualification process is capacity. What does that mean, exactly? It means that the borrower can make their mortgage payments. It is not enough just to pay the mortgage payment. The lender will stress-test that payment at a higher interest rate. This test also means determining if you can 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 Your Qualifying Mortgage Amount
Capacity is tested with 2 debt-service ratios: Gross Debt Service (GDS) and Total Debt Service (TDS). GDS and TDS are also known as debt-to-income ratios. As the names suggest, GDS calculates the household debt carrying capacity against an applicant’s qualified income, and TDS 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.
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GDS Ratio= (Mortgage Payment + Property Taxes + Condo Fees/2 + Hydro) / Income
TDS Ratio = (All debts in GDS 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 limited to 25 years, will lend up to 39% on GDS and 44% on TDS. 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, the amortization will be over 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 risk assessment criteria to apply for elevated debt service ratios. In these cases, lenders will consider the client’s unique financial situation. Most lenders will have lower debt service ratios when the risk is higher, such as for a refinance or an uninsured transaction, or if one of the borrowers has a lower FICO score than their required minimum.
|
Transaction Type & Limitation |
Maximum Allowable GDS |
Maximum Allowable TDS |
|---|---|---|
| Credit Score (FICO) 650 and 680 (on the lower-scoring applicant, insured only) | 32 | 40 |
| Uninsured Transaction – purchase of property valued at $1M + or a refinance where a mortgage can be amortized up to 30yrs | 35 | 42 |
| Insured / Insurable Transaction – purchase or renewal of property valued less than $1M where a mortgage is limited to 25yrs amortization. | 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% GDS and 44% TDS for our discussion. We will consider taxes at 1% of property value to simplify property tax rates across Canada, ranging from 0.27% in Vancouver to 3.27% in Manitoba. The municipal property tax rate has a range nationally. However, as two of the biggest markets, Greater Vancouver and Greater Toronto, are well below the national average, we’ll use 1% wherever an average is unavailable. We will simplify the heating (utility) cost for all properties at $100/month.
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, any outside debts cannot exceed an annual payment of $5000 or a monthly payment of $416.
GDS = Income $100,000 x 0.39 GDS / 12 = $3250 monthly
TDS = Income $100,000 x 0.44 TDS / 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 you 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 downpayment 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.
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Upon your closing, your solicitor will collect and remit the taxes (PST) on behalf of the high ratio insurer (CMHC, Sagen or Canada Guaranty). 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 renewal. An insured renewal is one where the borrower purchased default insurance with the home. The second lowest rates apply to an insurable purchase where the borrower puts down 35% or more of the purchase price in a downpayment. Similarly, this also applies to renewals where the property has 35% or more equity at the time the mortgage is renewed. This insured or insurable mortgage rate pricing only applies to mortgages where the property value is less than $1M, and the new mortgage will be amortized no more than 25 years.
An insurable transaction means that the lender arranged insurance on the backend to protect themselves from the borrower defaulting – this automatically comes with better rates even though the lender pays for the (much lower) insurance premium.
| Loan-to-Value | Premium |
|---|---|
| 80.01% to 85% | 2.80% |
| 85.01% to 90% | 3.10% |
| 90.01% to 95% | 4.00% |
Housing Affordability By Province
In August 2023, all Canadian provinces reported decreases in housing affordability based on average income, despite home prices declining in Saskatchewan.
*Data is based on a mortgage with a 25-year amortization, a 20% down payment, and includes $100 for monthly heating costs.
**Home prices sourced from CREA Report.
Income Needed To Buy An Average-Priced Home In Canada
The average home price in Canada currently stands at $757,300. 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.
For this exercise, we will use a 1% property tax rate which is the average that applies to areas where 80% of the population lives in Canada. We will assume a minimum required downpayment of 10% on the purchase price. However, for insured purchases, you need a minimum downpayment of at least 5% on the first $500,000 and 10% on the purchase price above $500,000.
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.
Income Needed To Buy An Average-Price Home In Canada On An Insured Fixed Rate
Qualifying on an insured rate with a 10% downpayment over a 25-year amortization:
Income Needed To Buy An Average-Price Home In Canada On An Uninsured Fixed Rate
Qualifying on an insured rate with a 20% downpayment over a 30-year amortization:
What Does The Average Income Buy You Across 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.
On this average income range, the qualifying mortgage amount will range from $217K to $220K on nesto’s insured 5-year fixed rate of
Income Needed To Buy An Average-Priced Homes In Different Provinces
There is no simple or blanket answer to the qualifying income amount across Canada, as each municipality in every province has its municipal property rate, which directly affects the answer we seek.
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 have calculated the qualifying income needed for each province and the top urban 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 | Average Home Price | Monthly Property Tax Amount | Municipal Property Tax Rate (%) |
Stress Tested Mtg Payment 25-year |
Gross Income Needed 25-year (39%) |
Stress Tested Mtg Payment 25-year |
Gross Income Needed 30-year (39%) |
| Canada | $757,300 | $631 | 1.00% | $4,371.34 | $158,536 | $4,678 | $187,172 |
| BC | $998,900 | $832 | 0.83% | $5,765.92 | $207,641 | $6,171 | $245,245 |
| AB | $483,300 | $451 | 1.12% | $2,789.74 | $104,333 | $2,986 | $122,969 |
| SK | $333,100 | $372 | 1.34% | $1,922.74 | $75,222 | $2,058 | $88,445 |
| MB | $362,352 | $987 | 3.27% | $2,091.60 | $99,354 | $2,238 | $115,741 |
| ON | $920,000 | $828 | 1.08% | $5,310.48 | $193,492 | $5,683 | $228,383 |
| QC | $469,900 | $509 | 1.30% | $2,712.39 | $103,737 | $2,903 | $122,119 |
| NB | $292,300 | $621 | 2.55% | $1,687.24 | $75,642 | $1,806 | $88,347 |
| NS | $401,000 | $368 | 1.10% | $2,314.68 | $87,147 | $2,477 | $102,676 |
| PE | $360,700 | $502 | 1.67% | $2,082.06 | $84,124 | $2,228 | $98,748 |
| NL | $289,800 | $242 | 0.77% | $1,672.81 | $63,517 | $1,790 | $74,801 |
Insured qualifying criteria are limited to a 39% gross debt service (GDS) ratio and up to 25 years of amortization. For insured mortgage transaction calculations, we have used a 10% downpayment in our examples and excluded any mortgage default insurance (CMHC) premium.
Uninsured qualifying criteria are limited to a 35% gross debt service (GDS) ratio and up to 30 years of amortization. For uninsured mortgage transaction calculations, we have used a 20% downpayment (as required) in our examples.
Income Needed To Buy An Average-Priced Homes In Canada’s Large Cities
There is no simple or blanket answer to the qualifying income amount across Canada, as each municipality in every province has its municipal property rate, which directly affects the answer we seek.
We’ve used the highest tax municipal rate on a regional basis to figure out the taxes on the average property price for any region that consists of multiple cities.
As you can see from the chart below, qualification income amounts are not always proportional to the property price, as some cities and regions have twice the municipal tax rate compared to others.
| CITY | Average Home Price |
Monthly Property Tax Amount |
Municipal Property Tax Rate (%) | Stress-Tested Mtg Payment 25-years | Gross Income Needed 25-year (39%) | Stress-Tested Mtg Payment 30-years | Gross Income Needed 30-years (35%) |
| Vancouver | $1,210,700 | $1,009 | 0.27% | $6,988.48 | $279,339 | $7,479 | $296,154 |
| Victoria | $887,900 | $740 | 0.45% | $5,125.19 | $185,080 | $5,485 | $218,564 |
| Kelowna | $691,700 | $576 | 0.43% | $3,992.68 | $145,203 | $4,273 | $171,404 |
| Calgary | $551,300 | $459 | 0.72% | $3,182.25 | $116,667 | $3,406 | $137,657 |
| Edmonton | $375,100 | $401 | 0.94% | $2,165.18 | $83,581 | $2,317 | $98,342 |
| Saskatoon | $384,200 | $379 | 1.25% | $2,217.71 | $84,499 | $2,373 | $100,270 |
| Regina | $319,200 | $379 | 1.42% | $1,842.51 | $72,955 | $1,972 | $85,726 |
| Winnipeg | $347,200 | $811 | 2.80% | $2,004.13 | $91,221 | $2,145 | $106,469 |
| Toronto | $1,161,200 | $968 | 0.63% | $6,702.75 | $268,129 | $7,173 | $284,256 |
| Hamilton-Burlington | $873,600 | $907 | 1.25% | $5,042.65 | $187,666 | $5,397 | $221,247 |
| Ottawa | $650,200 | $620 | 1.14% | $3,753.13 | $139,179 | $4,017 | $164,115 |
| Guelph | $852,000 | $840 | 1.18% | $4,917.97 | $181,799 | $5,263 | $214,409 |
| London | $612,800 | $726 | 1.42% | $3,537.25 | $135,802 | $3,785 | $159,833 |
| Mississauga | $1,141,500 | $951 | 0.83% | $6,589.04 | $263,667 | $7,051 | $279,521 |
| Kitchener-Waterloo | $765,000 | $728 | 1.14% | $4,415.78 | $162,871 | $4,726 | $192,109 |
| Montreal | $520,000 | $433 | 0.67% | $3,001.58 | $110,305 | $3,212 | $130,133 |
| Quebec City | $331,400 | $278 | 1.01% | $1,912.93 | $72,015 | $2,047 | $84,847 |
| Gatineau | $491,887 | $410 | 0.97% | $2,839.30 | $104,591 | $3,039 | $123,376 |
| Saint John | $293,800 | $556 | 2.27% | $1,695.90 | $73,910 | $1,815 | $86,438 |
| Moncton | $340,400 | $598 | 2.11% | $1,964.88 | $83,472 | $2,103 | $97,740 |
| Fredericton | $289,600 | $475 | 1.97% | $1,671.65 | $70,682 | $1,789 | $82,781 |
| Halifax-Dartmouth | $529,900 | $479 | 1.08% | $3,058.73 | $113,459 | $3,273 | $133,785 |
| St. John’s | $332,800 | $277 | 0.83% | $1,921.01 | $72,257 | $2,056 | $85,137 |
Insured qualifying criteria are limited to a 39% gross debt service (GDS) ratio and up to 25 years of amortization. For insured mortgage transaction calculations, we have used a 10% downpayment in our examples and excluded any mortgage default insurance (CMHC) premium.
Uninsured qualifying criteria are limited to a 35% gross debt service (GDS) ratio and up to 30 years of amortization. For uninsured mortgage transaction calculations, we have used a 20% downpayment (as required) in our examples.
We’re curious…
Income Needed For Different Types of Mortgages
Income Needed To Qualify For Mortgage On Our Insured Fixed Rate
Income Needed To Qualify For Mortgage On Our Insured Variable Rate
Income Needed To Qualify For Mortgage On Our Uninsured Fixed Rate
Income Needed To Qualify For Mortgage On Our Uninsured Variable Rate
Income Needed To Qualify For Common Mortgage Balances
In this section, we will qualify some common mortgage amounts that borrowers show interest in. Typically, $100K, $200K, $300K, $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% Downpayment, 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% downpayment 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 A $100,000 Mortgage In Canada
How much income do you need to qualify for a $100,000 mortgage in Canada?
Qualifying on an insured rate with a 10% downpayment over a 25-year amortization:
Qualifying on an insured rate with a 20% downpayment over a 30-year amortization:
Income Needed For A $200,000 Mortgage In Canada
How much income do you need to qualify for a $200,000 mortgage in Canada?
Qualifying on an insured rate with a 10% downpayment over a 25-year amortization:
Qualifying on an insured rate with a 20% downpayment over a 30-year amortization:
Income Needed For A $300,000 Mortgage In Canada
How much income do you need to qualify for a $300,000 mortgage in Canada?
Qualifying on an insured rate with a 10% downpayment over a 25-year amortization:
Qualifying on an insured rate with a 20% downpayment over a 30-year amortization:
Income Needed For A $400,000 Mortgage In Canada
How much income do you need to qualify for a $400,000 mortgage in Canada?
Qualifying on an insured rate with a 10% downpayment over a 25-year amortization:
Qualifying on an insured rate with a 20% downpayment over a 30-year amortization:
Income Needed For A $500,000 Mortgage In Canada
How much income do you need to qualify for a $500,000 mortgage in Canada?
Qualifying on an insured rate with a 10% downpayment over a 25-year amortization:
Qualifying on an insured rate with a 20% downpayment over a 30-year amortization:
Income Needed For A $600,000 Mortgage In Canada
How much income do you need to qualify for a $600,000 mortgage in Canada?
Qualifying on an insured rate with a 10% downpayment over a 25-year amortization:
Qualifying on an insured rate with a 20% downpayment over a 30-year amortization:
Income Needed For A $700,000 Mortgage In Canada
How much income do you need to qualify for a $700,000 mortgage in Canada?
Qualifying on an insured rate with a 10% downpayment over a 25-year amortization:
Qualifying on an insured rate with a 20% downpayment over a 30-year amortization:
Income Needed For A $800,000 Mortgage In Canada
How much income do you need to qualify for an $800,000 mortgage in Canada?
Qualifying on an insured rate with a 10% downpayment over a 25-year amortization:
Qualifying on an insured rate with a 20% downpayment over a 30-year amortization:
Income Needed For A $900,000 Mortgage In Canada
How much income do you need to qualify for a $900,000 mortgage in Canada?
Qualifying on an insured rate with a 10% downpayment over a 25-year amortization does not apply on properties valued at $1 million or more:
Qualifying on an insured rate with a 20% downpayment over a 30-year amortization:
Income Needed For A $1 Million Mortgage In Canada
Properties valued at $1 million or more cannot be purchased in Canada with mortgage default insurance. Purchasing a property of $1 million dollars or more in valuation requires a downpayment of 20% or greater, calculated on the lower of the appraised value or purchase price. When the lender or appraiser assesses the subject property value to be $1 million or more, the mortgage rate used will always be the higher uninsured rate and not impacted by the amortization – up to 30 years allowable.
Qualifying on an insured rate with a 10% downpayment over a 25-year amortization does not apply on properties valued at $1 million or more:
Qualifying on an insured rate with a 20% downpayment over a 30-year amortization:
Frequently Asked Questions
Welcome to our Frequently-Asked Questions (FAQ) section, where we answer the most popular questions designed and crafted by our in-house mortgage experts to help you make informed mortgage financing decisions.
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 you have an in-depth conversation with your realtor and mortgage expert before purchasing. Or simply just give us a call at nesto!
How many times my salary can I borrow for a mortgage in Canada?
You will qualify for about 3 to 4 times your income if you put less than 20% downpayment; conversely, you’ll qualify for approximately 3.5 to 4.2 times your income if you have saved more than 20% towards your downpayment. 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 population densities. 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 expert 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 combined gross (before taxes) household income between $30K and $36K annually to qualify for a mortgage balance of $100K. The assumption is based on stress testing of the current lowest rates at nesto and applying a range of gross debt ratios depending on factors such as the percentage of downpayment and credit score. As of September 28, 2023, our rates are 5-year fixed at
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.
Final Thoughts
Overall, we have seen that income is not the only factor that impacts your qualifications. Your downpayment 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, commission-free and friendly mortgage experts today. Reach out today to see how they can help guide you through the process and find the best mortgage solutions that meet your unique needs.
nesto is on a mission to offer a positive, empowering and transparent property financing experience, simplified from start to finish.
How nesto works
At nesto, all of our commission-free mortgage experts hold concurrent professional designations from one or more provinces. Our clients will receive the best advice and care when they speak with experts exceeding the industry status quo.
Unlike the industry norm, our agents are not commissioned but salaried employees. Our honest and transparent advice guarantees free, unbiased advice on the most suitable mortgage solution for your unique needs. Our advisors are measured on the satisfaction and quality of advice they provide to their clients.
nesto is working hard to change how the mortgage industry functions. We start with honest and transparent advice, followed by our best rates upfront. We can offer you these best rates by using technology by providing a virtual and 100% online process to reduce our overhead costs.
By working remotely across Canada, all our mortgage experts and staff spend less time commuting to work and more time with their friends and family. This makes for more dedicated employees and contributes to our success with happy and satisfied clients.
nesto is on a mission to offer a positive, empowering and transparent property financing experience, simplified from start to finish.
DISCLAIMER
Disclaimer: Qualified using nesto’s fixed 5-year insured and uninsured rates as advertised on our website on September 13, 2023. Home values collected from CREA are those presented as composite benchmark prices for each region/jurisdiction in August 2023.
Municipal tax rates are the most recently indicated on the applicable municipality’s website (1% used as default when unavailable). A $150 monthly heating cost is attributed to the total monthly stress-tested payment.
Insured qualifying criteria are limited to a 39% gross debt service (GDS) ratio and up to 25 years of amortization. For insured mortgage transaction calculations, we have used a 10% downpayment in our examples and excluded any mortgage default insurance (CMHC) premium.
Uninsured qualifying criteria are limited to a 35% gross debt service (GDS) ratio and up to 30 years of amortization. For uninsured mortgage transaction calculations, we have used a 20% downpayment (as required) in our examples.
Mortgage default insurance is not permitted on uninsured transactions that have valuations of $1 million or more, amortizations exceeding 25 years, or on refinance transactions.
All mortgage payments are calculated with 5.34% (5-year fixed insured rate), 5.95% (5-year variable insured rate), 6.14% (5-year fixed uninsured rate) and 6.80% (5-year variable uninsured rate) as advertised on nesto’s website on September 13, 2023.
All qualifying (stress-tested) mortgage payments are calculated with 7.34% (5-year fixed insured rate), 7.95% (5-year variable insured rate), 8.14% (5-year fixed uninsured rate) and 8.80% (5-year variable uninsured rate).
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