Add up the monthly bills
Start with a payment you can afford alongside your other bills.
- Include mortgage payments, property tax, insurance, utilities and any strata fees.
- Leave money for repairs and regular savings.
More on add up the monthly bills
Ask your lender to check the borrowing amount separately.
Put your cash into three groups
Give each dollar a job before you start viewing homes.
- Set aside the deposit and remaining purchase funds, counting the deposit only once.
- List closing expenses and the dates you must pay them.
More on put your cash into three groups
Keep a separate reserve for repairs and unexpected expenses.
The basics
Two budgets, not one
Buying a home asks two separate money questions. The first is monthly: what can your household carry every month once you own the place? The second is cash: how much money must be ready on specific dates before and at completion? A lender answers part of the first question. Only you can decide what feels comfortable, because only you know your other plans.
Lenders in Canada use two ratios to test the monthly side. The gross debt service ratio, or GDS, compares housing costs with income before tax. The Financial Consumer Agency of Canada (the Government of Canada) says housing costs should not be more than 39% of gross household income. The total debt service ratio, or TDS, adds every other debt payment, and the Government of Canada puts that ceiling at 44%.
For GDS, the Government of Canada counts mortgage payments, property taxes, heating, and half of any condo fees. That is the lender’s view. Your own budget should also include home insurance, electricity, internet, repairs and the savings goals you already have.
Why it matters
Why the lender’s maximum is not your target
Banks must also run a stress test. They qualify you at the higher of 5.25% or your negotiated rate plus 2%. So your approval already assumes a higher payment than you may start with. Even so, a large approval can leave little room for childcare, a car, travel or a job change. Buyers who plan from their real monthly life, not the ceiling, have choices later.
How it works
Build your budget in six moves
Start with take-home pay
Write down what actually lands in your account each month. Lenders work from gross income, but you pay bills from net income. Planning from net pay shows you what is truly left over.
List the full ownership month
Add the mortgage payment, property tax, insurance, heat, hydro and strata fees if any. Use the mortgage payment calculator to test a few prices and rates side by side.
Keep your savings line
Leave room for retirement saving, an emergency cushion and a home repair fund. If those lines vanish once housing is added, the price range is too high for now.
Check the two ratios
Divide housing costs by gross monthly income for GDS. Add other debt payments and divide again for TDS. Compare the results with the 39% and 44% guidance.
Count the cash separately
Your down payment, deposit and closing costs come from savings, not monthly income. The Government of Canada suggests preparing for closing costs of 1.5% to 4% of the purchase price.
Test it for two months
Before you shop, move the gap between your rent and the new housing cost into savings each month. If that feels tight, you have learned something cheaply.
Avoid these
Budget traps to avoid
Shopping at the approval ceiling
The approval shows the most a lender may offer, not what suits your household. Set your own top price first, then check that it fits inside the approval.
Forgetting strata and tax
A condo with a low price can carry high monthly strata fees. Ask for the fee and the annual property tax on every listing before you fall for it.
Spending the reserve on the deposit
The deposit is part of your down payment, so count it once. Keep a separate reserve for moving, repairs and surprises after you get the keys.
Taking on new debt mid-purchase
A new car loan or credit line changes your TDS. Talk to your lender before you borrow anything between approval and completion.
Example
A ratio check
This is a hypothetical household with round numbers. It shows how the two ratios work. It is not a qualification decision; only a lender can make that.
| Gross household income | $120,000 a year ÷ 12 = $10,000 a month |
|---|---|
| Mortgage payment (assumed) | $3,000 |
| Property tax, monthly share | $300 |
| Heating | $100 |
| Half of $500 strata fee | $250 |
| Housing costs (GDS side) | $3,000 + $300 + $100 + $250 = $3,650 |
| GDS | $3,650 ÷ $10,000 = 36.5% (guide: 39%) |
| Car loan payment | $500 |
| Total debt (TDS side) | $3,650 + $500 = $4,150 |
| TDS | $4,150 ÷ $10,000 = 41.5% (guide: 44%) |
Both ratios fit the Government of Canada guidance here, yet this household still has to cover insurance, hydro, food and savings from net pay. Lenders calculate the payment at the stress-test rate, so ask yours to run the real numbers.
Questions to ask
Questions that sharpen your number
Your lender or mortgage broker
- What payment did you use for the stress test, and at what rate?
- Which of my debts did you count, and at what monthly amount?
- How would a smaller down payment change my approval?
- What cash must I show, and by when?
Yourself and your household
- What monthly amount lets us keep saving?
- Which costs would rise if a child, parent or pet joined the home?
- How long could we cover the payment if one income stopped?
FAQ
Common questions
What is the 39% and 44% rule?
These are the Government of Canada guidelines for debt ratios. Housing costs should stay at or below 39% of gross income. Housing plus all other debt payments should stay at or below 44%. Lenders may apply their own policies on top of these.
Do I qualify at my actual mortgage rate?
Not with a bank. Federally regulated lenders must test you at the higher of 5.25% or your contract rate plus 2%. Other lenders may also apply it. Ask which rate your lender used.
How much cash do I need besides the down payment?
The Government of Canada suggests planning for closing costs of 1.5% to 4% of the purchase price. Our closing costs guide lists the common items in BC.
What is the minimum down payment?
It depends on price. The Government of Canada sets 5% on the first $500,000, 10% on the portion from $500,000 to $1.5 million, and 20% at $1.5 million or more. Try the down payment calculator.
Should I count strata fees in full?
For your own budget, yes, every dollar. The lender’s GDS formula counts only half of condo fees, which is one reason your real budget may feel tighter than the ratio suggests.
A practical example
Try a monthly ownership rehearsal
Before narrowing the property search, write a sample month with the proposed home costs included.
- Keep your ordinary spending and savings priorities in the same view.
- If the month only works when every expense is unusually low, revisit the assumptions.
A smaller search range can be more useful than a larger one that leaves no room for the life you want to live.
A detail to keep in mind
A pre-approval amount and a comfortable household budget answer different questions. Bring both to the discussion.
Official information
Start with these resources, then confirm the details for your property and circumstances.
BC Financial Services Authority: buying a homeGovernment of Canada: Preparing to get a mortgageGovernment of Canada: Buying a homeGovernment of Canada: How much you need for a down paymentBC Financial Services Authority: Are you ready to purchase?Reference review: October 6, 2026