How much income do you need to buy a house in Canada?

The short answer

To buy a $500,000 home in Canada with the minimum $25,000 down, you need a gross household income of about $111,100 a year. For a $1,000,000 home with the minimum $75,000 down, it is about $213,900. Both figures assume no other debts, a 4.12% five-year rate, a 25-year amortization, property tax of 0.75% of the price a year and $100 a month for heating.

These are estimates of what a lender's rules allow, not what you should spend. Change any assumption and the answer moves, sometimes by tens of thousands of dollars. The rest of this guide shows by how much, and why.

How lenders turn a price into an income

Lenders don't start with a salary multiple. They start with your monthly costs and check them against two ratios, both measured against your gross (pre-tax) monthly income:

• Gross debt service (GDS): mortgage payment, property tax, heating and 50% of any condo fees must be no more than 39% of income.
• Total debt service (TDS): the same housing costs plus every other monthly debt payment must be no more than 44% of income.

The mortgage payment in those ratios is not your real payment. It is calculated at the stress-test qualifying rate: your contract rate plus 2 points, or 5.25% if that is higher. At a 4.12% rate you qualify at 6.12%. The same test applies to insured and uninsured mortgages.

So the income needed is simply the lowest income at which both ratios pass for the home you want. The income needed calculator does this search for you. Read GDS and TDS explained for what each ratio counts.

Income needed by home price

Each row uses the federal minimum down payment for that price, no other debts and the assumptions above. Below $1,500,000 with less than 20% down, the mortgage must be insured, and the insurance premium is added to the loan.

Two things stand out. First, at these assumptions a lender's limit works out to roughly 4.5 times income at $500,000; the multiple changes with rates, taxes and debts, so treat it as a check, not a rule. Second, at $1,500,000 and above the mortgage can't be insured, so the minimum down payment jumps to 20%. The bigger down payment means a smaller loan than a straight-line guess would suggest.

What salary do you need for a $1 million home?

With the minimum $75,000 down, about $213,900 of household income. With 20% down ($200,000), the loan is smaller and has no insurance premium, so the income needed falls to about $181,600. A first-time buyer who takes a 30-year insured amortization with the minimum down would need about $201,000, but would pay more interest over the life of the loan and a higher premium.

Most buyers at this price combine two incomes. That's fine: lenders add together the gross incomes of everyone on the mortgage.

What raises or lowers the income you need

Starting from the $500,000 home with $25,000 down (income needed: $111,100):

Debts

TDS allows 5 more points of income than GDS. At $111,100 of income that gap is about $463 a month, so a small debt payment can fit inside it without changing the answer, which is what happens with the $400 car payment above. Once your debts are larger than that gap, every extra dollar of monthly debt raises the income you need. The $800 example shows how fast it adds up.

Interest rate

A higher rate raises the qualifying rate by the same amount (as long as it stays above the 5.25% floor), which raises the stress-test payment on every dollar you borrow. If rates rise between your pre-approval and your purchase, the income you need rises with them. A rate hold on a pre-approval protects against that for a period set by the lender.

Amortization

Spreading the loan over 30 years lowers the qualifying payment, so you need less income. For insured mortgages this is only open to first-time buyers and buyers of new builds, and it adds 0.20 points to the insurance premium. See 30-year amortization.

Condo fees and property tax

Half of condo fees count as a housing cost, and so does the whole property-tax bill. Two homes at the same price can need very different incomes if one has high fees or sits in a high-tax area.

Buying with a partner, family member or co-borrower

Lenders add the gross incomes of everyone on the mortgage application, and they add everyone's debts too. Take a buyer earning $90,000 with $40,000 saved and no debts. Using the same assumptions, a lender's maximum would be about $420,700. Add a partner earning $40,000 with no debts and it rises to about $597,500. If that partner also has a $600 monthly car payment, the maximum is about $589,600, because the payment counts against the household in TDS.

At higher prices the down payment can become the limit before income does. If adding a co-borrower barely moves your number, check whether the minimum down payment for a higher price is the real constraint.

Each borrower is responsible for the whole mortgage, not just a share. For insured mortgages, at least one borrower needs a credit score of 600 or more. A guarantor or co-signer can help some applications, but they take on the full debt if payments stop, so it is a serious ask.

What counts as income

Lenders use gross income they can verify and expect to continue. In general terms:

• Salaried and hourly employees: usually confirmed with a recent pay stub and a letter of employment. Probation periods can matter.
• Overtime, bonuses and commission: usually counted only with a track record, and often averaged over past years rather than taken at this year's best figure.
• Self-employed: lenders generally look at income reported on your tax returns and notices of assessment, not gross business revenue.
• Rental, pension, support and other income: treatment varies by lender and insurer; some count all, some count part.

Each lender sets its own documentation rules within the insurer and regulator guidelines. If your income is irregular, ask a lender or broker how they would count it before you shop.

Lender maximum vs a comfortable income

Every figure on this page is the lowest income a lender's ratios would accept. Living at that limit means up to 39% of your gross pay goes to housing before you buy groceries, save for retirement, run a car or pay for childcare. Many households aim to keep housing costs well below the maximum, and to hold an emergency fund after closing.

Also remember that the rate you get today is fixed only for your term. At renewal your payment is reset at the rates of the day, so a budget that only just works now leaves little room if rates are higher then. Budget for maintenance, home insurance, utilities beyond heating, and the cash you need at closing; the closing costs guide covers those.

How to check your own number

1. Pick a realistic price and work out the minimum down payment with the down payment calculator.
2. List every monthly debt payment, including credit-card minimums and lines of credit.
3. Find the property tax for the area and any condo fees for the building.
4. Enter it all in the income needed calculator and compare the result with your household's gross income.
5. If you fall short, see ways to improve affordability, or turn it around and see how much house your income buys.