How Your Car Payment Affects Your Mortgage
Every dollar of monthly car payment reduces how much mortgage you qualify for. See the exact impact using CMHC stress test rules.
Your Financial Details
All fields in Canadian dollars. We use CMHC qualification rules: GDS max 39%, TDS max 44%, and the federal stress test rate.
The mortgage you didn't know you were spending
Enter your income and a prospective car payment to see how much home-purchase qualification that monthly amount removes from your borrowing power.
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Straight Answers
The Gross Debt Service (GDS) ratio measures the percentage of your gross monthly income needed to cover housing costs: mortgage payment, property taxes, and heating. Canadian lenders require GDS to be at or below 39%. If your housing costs exceed that threshold, you will not qualify for the mortgage amount.
The Total Debt Service (TDS) ratio adds all monthly debt obligations on top of housing costs: car payments, credit cards, student loans, and lines of credit. Canadian lenders cap TDS at 44%. A car payment directly increases your TDS, which lowers the maximum mortgage you can qualify for. This is usually the binding constraint for buyers with existing debt.
The federal mortgage stress test requires all Canadian borrowers to qualify at the higher of their contract rate plus 2% or the benchmark rate of 5.25%. Even if your actual mortgage rate is 4.5%, the lender calculates your qualification at 6.5%. This reduces how much you can borrow and protects against future rate increases. The stress test applies to both insured and uninsured mortgages.
At current stress test rates, a $400 monthly car payment can reduce your maximum mortgage qualification by approximately $60,000 to $80,000 depending on your income and other debts. The exact impact depends on whether TDS or GDS is your binding constraint, but for most buyers, even a moderate car payment has a significant effect on home buying power.
If you are planning to buy a home in the next one to two years and your car payment is reducing your qualification below the home price you need, paying off or paying down the car loan before your mortgage application can significantly increase your buying power. Even reducing the car payment by $200 per month can add tens of thousands in mortgage qualification. Discuss timing with your mortgage broker.
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You only buy a car every four to six years. They sell one every day.
Buying a home and a car? Sequence them right.
A Buyer’s Brief sequences the car purchase against your mortgage qualification window.