Ontario · updated August 2026

Why the bank approves less than a mortgage calculator says

A bank website asks for your income and shows a big, encouraging number. A real lender tests you at a rate roughly two percentage points above the one you were quoted, then runs two ratios (GDS and TDS) counting your property tax, your heating, half of any condo fee and every debt you carry. The gap is usually tens of thousands of dollars, and it has nothing to do with your credit score.

First, three words you need

• Amortization is how many years it takes to pay the mortgage to zero. It is not the term, which is only how long your current rate is locked in (often five years).
• Insured mortgage means you put down less than 20 percent, so the lender is protected by mortgage default insurance. You pay the premium, the lender is insured, and it is added to your loan rather than paid in cash. See the CMHC insurance guide.
• Stress test is the rule that you must prove you could afford a payment at a higher rate than you are charged. It is federal, identical in every province.

The qualifying rate: you are tested at a rate you will not pay

Your file has to pass at the greater of your contract rate plus 2 percentage points, or 5.25 percent. In 2026 the first always applies. Take a $650,000 purchase with the minimum down payment of $40,000 (5 percent of the first $500,000 plus 10 percent of the rest), which after the insurance premium leaves a mortgage of $635,620. At a 4.04 percent contract rate over 30 years the real payment is about $3,037 a month. At the qualifying rate of 6.04 percent the tested payment is about $3,797. You must show you could carry roughly $760 a month you will never be billed.

One piece of good news sits inside that example: since 15 December 2024, first-time buyers can take a 30-year amortization on an insured mortgage, resale homes included. That is the easiest structural way to pass the test.

GDS, line by line

GDS is the gross debt service ratio: the share of your income before tax that goes to running the home itself. Four things go on top, and only four: principal and interest at the qualifying rate (not your real rate), property tax divided by twelve, heat as estimated by the lender, and half of the condo fee if there is one. Divide the total by your gross monthly income, before tax and before deductions. Here is the same $650,000 example with two incomes of $120,000 and $40,000, a $450 condo fee and property tax at roughly 0.40 percent of price.

That is a GDS of 32.6 percent, against an insured-mortgage limit of 39 percent.

TDS: everything else you owe

TDS is the total debt service ratio: the GDS number plus every other monthly obligation on your credit report, meaning car loans and leases, lines of credit, student loans, support payments and a notional payment on credit cards. Same household with a $10,000 card balance and a $300 car payment: $4,348 plus $300 plus $300 is $4,948, or 37.1 percent. The limit is 44 percent, so it passes too.

Both tests must pass, and the one that runs out first is what really caps you. Here it is GDS, even though TDS looks tighter against its own ceiling. Knowing which one binds is the difference between fixing the right problem and the wrong one, which is why the Doorstone calculator names the constraint that stopped you.

Why a credit card balance is so expensive

Lenders count a credit card at 3 percent of the outstanding balance every month, whatever the card actually demands. A 0 percent promotional balance still counts. A $30 minimum payment still counts as 3 percent. So $10,000 on a card is a $300 monthly obligation, and $300 a month at the 6.04 percent qualifying rate over 30 years supports about $50,200 of mortgage, roughly $53,000 of purchase price. Every $1,000 on a card costs about $5,000 of house.

The honest caveat: that gain is only real when TDS is the limit that binds. A single buyer earning $110,000 with a $500 car payment is capped by GDS at roughly $506,000 of mortgage and by TDS, with the card, at about $449,000. Clearing the $10,000 lifts TDS to about $499,000, a genuine $50,000 gain. For the two-income household above, GDS was already binding, so paying the same card off would have changed nothing. Check which limit binds before draining your savings.

What counts as income

Everything above uses gross income, before tax. Not all of it is treated equally, and this is where files get quietly downgraded.

• Salaried base pay on a permanent full-time job counts in full. A new job or a probation period may not count at all with some lenders.
• Variable income (bonus, commission, overtime, tips) is normally averaged over about two years using tax documents. One strong year rarely counts alone.
• Self-employment is assessed on what you declared to the CRA, not what the business grossed. Writing your income down for tax writes your mortgage down too.
• Rental income, child benefits and part-time work are treated inconsistently, which is a real reason to see a broker rather than one branch.

How the heat estimate works

Nobody asks for your gas bill. Lenders plug in a standard monthly heating figure, sometimes scaled by property size, and it enters GDS whether it matches reality or not. Two things follow. It is heat only: hydro, water and internet are excluded from the ratios even though you will certainly pay them. And condo fees often include heat, with half the fee already counted, so a condo apartment carries a small heat line plus a hydro bill outside the test entirely. The true monthly cost by property type guide covers what you actually pay rather than what the lender measures.

Which levers actually move the approval

Ranked by effect, at the 6.04 percent qualifying rate over 30 years.

• Qualifying income, biggest by far. A second income of $40,000 adds about $1,300 a month of GDS room, roughly $218,000 of extra mortgage. Nothing else is close, and nothing is slower to arrange.
• The purchase price. Not a way to borrow more, but the fastest route to an approval: a lower price cuts the payment, the property tax and often the condo fee at once, working on three GDS lines simultaneously.
• Clearing revolving balances, when TDS binds. About $50,200 of mortgage per $10,000 of card balance, and nothing at all when GDS is the binding limit.
• Amortization from 25 to 30 years. Worth about 7.5 percent more mortgage, not the 20 percent people expect. It also costs a great deal of interest, plus a 0.20 percentage point surcharge on the insurance premium.
• A lower-fee property. Quietly useful and free. Because half the fee counts, every $100 a month of condo fee costs about $8,370 of mortgage: a $900 fee rather than $400 is roughly $42,000 of borrowing power gone.

Rather than guessing, change one input at a time in the affordability calculator and watch the binding limit move. The ratios are only half the job: you also need cash on closing day, covered in cash to close in Ontario and combined with this side in how much house you can afford in the GTA.