Short answer: As a rough guide, with 5% down, few other debts and a 25 year amortization at about a 4.5% rate (so a 6.5% stress test rate), you need roughly $105,000 of household income for a $450,000 home and about $145,000 for a $650,000 home. Car payments, credit card balances, condo fees and higher property taxes raise the income needed. Use the affordability calculator with your own numbers.
What Sets the Limit
Lenders check two ratios at the stress test rate (the higher of 5.25% or your rate plus 2%):
- GDS: mortgage payment, property tax, heat and half of condo fees, up to about 39% of gross income
- TDS: all of the above plus other debt payments, up to about 44%
Rough Examples
Assumptions: minimum down payment, insured mortgage, 25 year amortization, qualifying at 6.5%, $400 a month for property tax and heat, no other debts. These are estimates, not approvals.
| Home price | Mortgage (incl. insurance) | Approx. household income needed |
|---|---|---|
| $400,000 | about $395,000 | about $95,000 |
| $450,000 | about $445,000 | about $105,000 |
| $550,000 | about $541,000 | about $125,000 |
| $650,000 | about $634,000 | about $145,000 |
Add $1,000 a month of other debt payments, such as a car loan and card minimums, and the income needed rises by roughly $15,000.
Ways to Buy With Less Income
- A larger down payment
- Paying off car loans and cards before you apply
- A 30 year amortization if you’re a first time buyer
- A co-borrower
- A home with lower condo fees or property tax
Income Lenders Count
Salary and hourly pay, bonus and overtime with history, self employment income averaged over two years, rental income, pension, and documented support payments. Self employed and new to Canada buyers have specific rules.
How We Help
We run your real income, debts and down payment against current lender rules so you know your number before you shop. Start with a call.
This article is general information, not personal financial advice. Rates, rules and programs change. Talk to a licensed mortgage broker about your situation. Lacroix Mortgage Group is licensed through Mortgage Connection Inc.