The question I hear more than any other is simple: how much can I actually afford? Online mortgage calculators give you a number, but they rarely tell you the full story. Your maximum approval amount and the amount you should actually borrow are often two very different numbers. Here is how to figure out both.
How Lenders Determine Your Maximum Mortgage
Canadian lenders use two debt service ratios to calculate how much mortgage you qualify for. These are the core of every mortgage approval decision.
Gross Debt Service (GDS) Ratio
Your GDS ratio measures your housing costs as a percentage of your gross (pre-tax) household income. Housing costs include your mortgage payment, property taxes, heating costs, and 50% of any condo or HOA fees.
The limit: 39% of gross income.
Total Debt Service (TDS) Ratio
Your TDS ratio adds all of your other monthly debt payments on top of your housing costs. This includes car loans, credit card minimum payments, student loans, lines of credit, and any other recurring debt obligations.
The limit: 44% of gross income.
You must stay within both limits to qualify. In practice, the TDS ratio is usually the binding constraint because most buyers carry some form of existing debt.
The Stress Test Changes Everything
Here is where most online calculators mislead you. The mortgage stress test requires lenders to qualify you at the higher of your actual mortgage rate plus 2%, or 5.25%. This means even if your lender offers you a 4.5% rate, your affordability is calculated as if you are paying 6.5%.
This test reduces your purchasing power by roughly 18% to 22% compared to what you could afford at the actual rate. It was designed to ensure borrowers can withstand future rate increases, but it has a significant impact on what you qualify for today.
Real Income Scenarios for Calgary Buyers
Let me show you what different income levels can typically afford in Calgary, assuming a 5% down payment, 25-year amortization, no other debts, and current stress test rates.
Household income of $80,000/year:
- Maximum mortgage: approximately $350,000
- Maximum purchase price: approximately $368,000
Household income of $100,000/year:
- Maximum mortgage: approximately $440,000
- Maximum purchase price: approximately $463,000
Household income of $120,000/year:
- Maximum mortgage: approximately $530,000
- Maximum purchase price: approximately $558,000
Household income of $150,000/year:
- Maximum mortgage: approximately $660,000
- Maximum purchase price: approximately $695,000
These numbers assume no car payments, credit card balances, or other debts. The moment you add a $500/month car payment, your purchasing power drops by roughly $80,000 to $100,000.
How Existing Debt Destroys Your Purchasing Power
This is the part most buyers underestimate. Every dollar of monthly debt obligation reduces how much mortgage you can carry. Here is a rough breakdown of how common debts impact your maximum purchase price:
- $400/month car payment — reduces purchasing power by approximately $75,000
- $200/month student loan — reduces purchasing power by approximately $38,000
- $150/month credit card minimum — reduces purchasing power by approximately $28,000
- $300/month line of credit payment — reduces purchasing power by approximately $56,000
If you carry a $400 car payment and a $200 student loan payment, you have effectively given up over $100,000 in purchasing power. This is why I always recommend addressing high-interest debt before applying for a mortgage.
Strategic Debt Elimination
If you are 6 to 12 months away from buying, consider this approach:
- Pay off credit cards completely — this has the highest impact per dollar
- Consolidate smaller debts — a personal loan with a fixed end date counts differently than revolving credit
- Avoid new financing — do not take on a car lease or new credit card
- Keep existing credit lines open — closing accounts can temporarily hurt your credit score
What the Bank Approves vs. What You Can Actually Afford
Getting approved for a $500,000 mortgage does not mean you should borrow $500,000. The stress test ensures you can technically make the payments, but it does not account for your actual lifestyle, savings goals, or financial priorities.
The Real Affordability Test
After your mortgage payment, property taxes, insurance, and utilities, you should still be able to:
- Save at least 10% of your take-home income for emergencies and retirement
- Cover all regular expenses without relying on credit cards
- Handle unexpected costs like a furnace replacement or car repair (budget $200 to $300/month for home maintenance)
- Live comfortably without constant financial stress
A practical rule of thumb: keep your total housing costs (mortgage, taxes, insurance, utilities, maintenance) below 30% of your take-home pay. This is more conservative than the lender's 39% GDS rule, but it accounts for the real cost of homeownership.
Calgary-Specific Factors That Affect Affordability
Property Taxes
Calgary property taxes are moderate compared to other major Canadian cities. For a home assessed at $500,000, you can expect to pay roughly $3,200 to $3,800 per year in property taxes. This is factored into your GDS calculation, so it directly affects how much mortgage you qualify for.
Condo Fees
If you are considering a condo, be aware that condo fees can significantly impact your affordability. A $500/month condo fee means the lender adds $250 (50% of the fee) to your housing costs for GDS calculation purposes. High condo fees can reduce your maximum mortgage by $40,000 to $60,000.
Heating Costs
Lenders typically use a standard estimate of $100 to $150/month for heating costs in Calgary. If you are buying an older home or a larger property, actual heating costs may be higher — but this standard estimate is what goes into the qualification calculation.
No Land Transfer Tax
Unlike Ontario and BC, Alberta does not charge a land transfer tax. This means more of your savings can go toward your down payment rather than government fees. On a $500,000 home, this saves you roughly $6,000 to $8,000 compared to buying in Toronto.
Strategies to Qualify for More
If your affordability calculation is not reaching the price point you need, there are legitimate strategies to improve your position.
Increase Your Down Payment
A larger down payment means a smaller mortgage, which means lower monthly payments and an easier path to qualification. If you can reach 20% down, you also eliminate the need for mortgage default insurance, which saves you thousands over the life of the mortgage.
Extend Your Amortization
First-time buyers purchasing new builds can now access 30-year amortizations on insured mortgages. This reduces your monthly payment and improves your GDS/TDS ratios. On a $450,000 mortgage at 4.5%, going from 25 to 30 years saves approximately $230/month.
Add a Co-Borrower
Adding a spouse, partner, or family member as a co-borrower means their income is included in the qualification. This can dramatically increase your purchasing power. Just remember that the co-borrower is equally responsible for the mortgage.
Pay Down Existing Debt
As shown above, eliminating a car payment or credit card balance can add $75,000 or more to your purchasing power. Sometimes the best mortgage strategy is not about the mortgage at all — it is about clearing the debt that is holding you back.
A Practical Framework for Calgary Buyers
Here is the framework I use with every client:
- Calculate your gross household income — include all stable, provable income sources
- List every monthly debt payment — be honest and thorough
- Determine your available down payment — include FHSA, HBP, savings, and any gifted funds
- Run the numbers at stress-test rates — this gives you your maximum qualification
- Apply the 30% take-home rule — this gives you your comfortable affordability
- Choose the lower number — your target purchase price should be the more conservative of the two
The gap between what you can borrow and what you should borrow is where financial security lives. A mortgage broker does not just find you the best rate — they help you find the right balance between ambition and sustainability.
Next Steps
If you want a precise affordability calculation based on your actual income, debts, and down payment, a pre-approval takes about 15 minutes and costs you nothing. It gives you a real number to work with and locks in a rate for 90 to 120 days while you search.
The Calgary market moves fast, and knowing your exact budget before you start shopping puts you in a stronger position than buyers who are guessing.
