Affordability rules of thumb, tested against Canadian rules

The short answer

At today's example rate (4.12%, the Bank of Canada's average for new insured 5-year-plus fixed mortgages in 2026-08), Canadian lending rules let a household with no other debts borrow about 4.3 times gross income. That's close to the popular "4 to 4.5 times income" rule, but only in that narrow case. Add a car loan, condo fees or a higher rate and the real number drops fast, and the stress test, not the multiple, is what decides.

Rule 1: "You can borrow 4 to 4.5 times your income"

We ran the calculator for seven incomes with no other debts, a down payment of 1.5 times income (large enough that the down payment rules never bind), 25 years, Ontario and 0.75% property tax:

The multiple barely moves with income because GDS scales with income. What moves it is everything else. With $800 a month of car and student-loan payments, the $100,000 household's maximum drops from $580,700 to $526,700. Two points more on the rate takes it to $516,700. $650 of condo fees takes it to $534,900.

OSFI watches the same idea from the lender's side: since 2025 each federally regulated lender limits the share of its new uninsured mortgages above 4.5 times income. That's a portfolio limit, not a cap on you.

Rule 2: "Spend no more than 30% of income on housing"

This one comes from CMHC itself: housing is considered affordable when it costs less than 30% of before-tax household income. It is much stricter than the lender limit. At the lender maximum, the $100,000 household would spend about 33% of gross income on housing at its actual rate; the 30% line is about $537,500.

Rule 3: "28/36" (and why Canada uses 39/44)

"28/36" is a US guideline: 28% of income for housing, 36% for all debts. Canadian insured mortgages use GDS 39% and TDS 44%, but they are tested at the qualifying rate, which is at least 5.25%. So the Canadian limits look looser and behave tighter. Many uninsured lenders apply their own, lower limits.

Rule 4: "Buy a home worth 3 times your income"

Income and down payment are separate limits, and either can bind. With a $100,000 income and a $30,000 down payment, the maximum is $455,800, set by GDS (housing costs); the minimum down payment rules alone would allow up to $550,000 (5% of the first $500,000, 10% above). With only $20,000 down, the limit drops to $400,000, set by the minimum down payment. Remember the down payment isn't all the cash you need: closing costs come on top. "3 times income" ($300,000 here) is a conservative buffer: it sits well under both the lender maximum and the CMHC-style comfortable price ($537,500 for this income).

A better rule: run your own numbers

1. Open the affordability calculator and enter your real debts, condo fees and city.
2. Read both budgets: the lender maximum and the comfortable price.
3. Use "What limits you" to see which rule binds, then "What would it take" for the price you want.
4. Check the renewal table: can you carry the payment if rates are two points higher in five years?