In short
Your borrowing capacity = the more restrictive of two ratios — GDS ~39% of gross income for housing, TDS ~44% housing + debts — computed at the stress-test rate (your rate + ~2 points). As an example: a $120,000 household income, with no other debts, qualifies for a loan of about $485,000 at 7%. And the column that kills files: every $500/mo of debts cuts ~$70,000 of capacity — the car comes after the house.
The mechanics: two ratios, one higher rate
Your borrowing capacity is not a banker's opinion: it is the result of two ratios applied at a higher rate. The GDS (gross debt service) caps your housing costs — mortgage payment, taxes, heating, half the condo fees — at about 39% of the household's gross income. The TDS (total debt service) adds all your other debts — car, credit lines, cards, student loans — and caps the whole at about 44%. The more restrictive of the two wins.
And the math is not done at your real rate: the stress test qualifies you at the higher of a regulatory floor and your rate plus about two points. As an example, a household earning $120,000 gross, with no other debts and typical taxes and heating, qualifies for a loan of about $485,000 at a 7% test rate — i.e., with 20% down, a property around $605,000. The calculator below runs the math with your numbers.
Interactive tool
Your borrowing capacity, in 20 seconds
Enter the household income, your monthly debts and your down payment: the calculator estimates the possible loan and the reachable price.
Assumptions: GDS 39%, TDS 44%, 25-year amortization. Indicative estimate — every lender applies its grid, and the down payment must meet the minimums (5%/10%/20% by price). Have it confirmed with a pre-approval.
What kills capacity: every monthly debt is expensive
The most underestimated line is not income — it is the debt column. Under our example's parameters, every $500 of monthly payments (a financed car, card minimums, a drawn credit line) cuts about $70,000 of borrowing capacity. Two cars at $500 each: $140,000 less house. A little-known detail: even a barely used credit line can be counted by some lenders based on its limit, and a car lease weighs as much as a loan.
The practical consequence fits in one sentence: buy the car after the house, not before. And in the months before a pre-approval, every debt you close is worth tens of thousands of dollars of home budget.
Six levers to increase it
1. Close or reduce debts — the fastest lever, quantified above. 2. Extend the amortization: 30 years instead of 25 lowers the qualifying payment (available on insured loans for first-time buyers and new builds, for a 0.20-point surcharge). 3. A co-borrower: their income is added — their debts too. 4. Documented extra income: bonuses and overtime regularized over two years, rental income from a unit — every lender has its grid. 5. A bigger down payment (via HBP + FHSA for a first purchase): it does not change the loan capacity, but it raises the reachable price. 6. The right lender: the 39/44 ratios are the insured norm — some conventional lenders accept more for strong files, and knowing which ones is a broker's job.
For the self-employed, all of this applies with one extra layer: it is the two-year average net income that enters the ratios — a full pillar covers that case.
Frequently asked questions
How much can I borrow with my salary?
Quick rule: at a 7% stress test, with typical taxes and heating and no other debts, a $120,000 household income gives a capacity of about $485,000 of loan (39% GDS ratio). Every file varies — this page's calculator estimates it with your numbers, and only a lender can confirm.
What are the GDS and TDS ratios?
The GDS caps your housing costs (payment, taxes, heating, 50% of condo fees) at ~39% of gross income. The TDS adds all your other debts and caps the whole at ~44%. The math is done at the stress-test rate (your rate + ~2 points), not your real rate.
Do my debts really reduce my borrowing power?
Massively: under our parameters, every $500 of monthly payments cuts about $70,000 of capacity. A car financed before buying a house is often the most expensive mistake in the file. Close or reduce debts before the pre-approval.
How can I increase my borrowing capacity?
In order of impact: close monthly debts, extend the amortization (insured 30-year for first-time buyers/new builds), add a co-borrower, document extra income, grow the down payment (HBP + FHSA), and above all place the file with the right lender — grids vary.
Ratios and qualifying floor in force in 2026 — they evolve: confirm the parameters with a licensed professional.
Go further
Turn this estimate into a pre-approval
The calculator frames the budget; the pre-approval confirms it and makes your offers credible. Payotte verifies only one mortgage broker per sector, on facts.
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