Here's a question that keeps most aspiring homebuyers up at night:
"How much house can I actually afford?"
Maybe you've been scrolling through listings, mentally decorating that beautiful home in Westboro—until you see the price tag and think, "There's no way I can afford that... right?"
Or maybe you're on the opposite end: you got pre-approved for a certain amount, and now you're wondering if you should actually spend that much. (Spoiler alert: probably not.)
Here's what I want you to understand right from the start: what the bank says you can afford and what you can comfortably afford are often two very different numbers.
Your lender will approve you for the maximum amount you qualify for based on their formulas. But their formula doesn't know about your student loans that aren't in default yet, your dream of traveling twice a year, or the fact that you want to actually enjoy your life—not just survive month-to-month making mortgage payments.
So let's break down the real math. Not just what gets you approved, but what lets you sleep soundly at night knowing you can handle your mortgage and still live the life you want.
The Formulas Lenders Use (And What They Mean)
When you apply for a mortgage, lenders evaluate your application using two key ratios. These aren't arbitrary—they're designed to ensure you can actually afford your mortgage without defaulting.
1. Gross Debt Service (GDS) Ratio
This measures how much of your gross monthly income goes toward housing costs.
The Formula:
GDS = (Mortgage Payment + Property Taxes + Heating + 50% of Condo Fees) ÷ Gross Monthly Income
The Limit: Most lenders want your GDS ratio to be 32% or less.
What This Means: If your gross monthly income is $6,000, your total housing costs should ideally stay under $1,920/month.
2. Total Debt Service (TDS) Ratio
This measures how much of your gross monthly income goes toward all your debt—not just housing.
The Formula:
TDS = (Housing Costs + All Other Debt Payments) ÷ Gross Monthly Income
The Limit: Most lenders want your TDS ratio to be 40% or less.
What This Means: Using the same $6,000 monthly income example, your total debt payments (mortgage, car loan, credit cards, student loans, etc.) should stay under $2,400/month.
Why These Ratios Matter
Lenders use these ratios to protect themselves (and you) from default. If too much of your income is going toward debt, you're at higher risk of missing payments when life throws you a curveball—and it will.
But here's the thing: just because you qualify for a certain amount doesn't mean you should borrow it all.
The Real Affordability Formula (The One That Lets You Sleep at Night)
Let's talk about what lenders don't consider when they approve you:
Your lifestyle and personal spending habits
Your savings goals
Your desire to travel, pursue hobbies, or go out to dinner
Unexpected expenses (and trust me, they always come up)
Your stress tolerance when money is tight
This is why I recommend using a more conservative approach to determine your comfortable affordability range.
The 28% Rule (Your True Comfort Zone)
Instead of maxing out at 32% GDS, aim for 28% or less of your gross income going toward housing costs.
Example:
Gross Monthly Income: $6,000
28% of Income: $1,680
Comfortable Housing Budget: $1,680/month or less
This gives you breathing room for:
Saving for emergencies
Contributing to retirement
Maintaining your lifestyle
Handling unexpected home repairs
Working Backward to Your Home Price
Once you know your comfortable monthly housing budget, you can work backward to figure out your maximum purchase price.
Here's the simplified calculation:
Let's say you have $1,680/month available for housing costs. Assume:
Property taxes: ~$300/month
Heating: ~$150/month
Home insurance: ~$150/month
That leaves you with roughly $1,080/month for your mortgage payment.
At current interest rates (let's say around 5%), a $1,080/month mortgage payment would support a loan of approximately $200,000 over 25 years.
If you have a 10% down payment saved ($22,000), your total home purchase price would be around $220,000.
Important: These are rough examples. Your actual numbers will depend on:
Current interest rates when you buy
Your down payment amount
Your specific property tax rate
Your actual heating and insurance costs
The Down Payment Factor
Your down payment has a massive impact on what you can afford—and not just because it reduces your mortgage amount.
Minimum Down Payment Requirements in Canada:
5% down: Homes under $500,000
5% on the first $500K + 10% on the portion above: Homes between $500K-$1M
20% down: Homes over $1 million
The CMHC Insurance Impact
If you put down less than 20%, you'll need mortgage default insurance (often called CMHC insurance). This protects the lender if you default.
The premium ranges from 0.6% to 4% of your mortgage amount, depending on your down payment size. This premium gets added to your mortgage, increasing your monthly payment.
Example:
Home price: $500,000
Down payment (10%): $50,000
Mortgage: $450,000
CMHC Premium (3.10%): ~$13,950
New Total Mortgage: $463,950
That insurance premium just increased your mortgage payment by roughly $70/month. It's not huge, but it's something to factor in.
The 20% Sweet Spot
If you can swing a 20% down payment:
No CMHC insurance required
Lower monthly payments
More negotiating power with sellers
Better interest rates from some lenders
But don't delay buying for years just to hit 20% if it doesn't make sense. Sometimes it's better to enter the market sooner with 10% down—especially if home prices are rising faster than you can save.
Hidden Costs That Impact Affordability
Most first-time buyers focus entirely on the mortgage payment. But your monthly housing costs include much more.
Beyond the Mortgage:
Property Taxes: In Ottawa, expect to pay roughly 1% of your home's value annually. A $500,000 home means about $5,000/year or ~$415/month in property taxes.
Home Insurance: Budget $100-$200/month depending on your home's value and coverage.
Utilities: Heat, water, electricity, internet—these can easily run $300-$500/month, especially in winter.
Maintenance: The 1% rule: budget 1% of your home's value annually for repairs and upkeep. For a $500,000 home, that's $5,000/year or ~$415/month.
Condo Fees (if applicable): These can range from $200-$600+/month depending on the building and amenities.
The True Monthly Cost Example:
Let's say you buy a $500,000 home with 10% down:
Mortgage payment (incl. CMHC): ~$2,350/month
Property taxes: ~$415/month
Insurance: ~$150/month
Utilities: ~$350/month
Maintenance fund: ~$415/month
Total Monthly Cost: ~$3,680/month
Can you comfortably afford that? If your gross household income is $10,500/month or higher, yes—you're right around that 35% mark. But if you're earning $8,000/month gross, you'd be at 46%, which is financially stressful.
The Ottawa Market Reality Check
Let's talk about what homes actually cost in Ottawa's different neighbourhoods, so you can set realistic expectations.
Ottawa Price Ranges by Area (General 2026 Estimates):
Entry-Level Neighbourhoods:
Orléans, South Keys, Vanier: $400,000-$550,000 (condos/townhomes)
Mid-Range Neighbourhoods:
Kanata, Barrhaven, Stittsville: $550,000-$750,000 (detached homes)
Premium Neighbourhoods:
Westboro, The Glebe, Old Ottawa South: $750,000-$1.2M+ (detached homes)
Luxury Market:
Rockcliffe Park, certain Glebe properties: $1.5M-$5M+
If you're a first-time buyer earning a combined household income of $100,000/year ($8,333/month gross), here's your realistic range:
Comfortable Budget: ~$450,000-$500,000
Maximum Qualification: ~$600,000 (but you'd be stretched thin)
This typically means looking at condos or townhomes in more affordable areas, or smaller detached homes in up-and-coming neighbourhoods.
And that's okay. Your first home doesn't have to be your forever home. It's a stepping stone—a way to enter the market, build equity, and upgrade later.
Quick Affordability Calculator
Use this simple formula to get a rough estimate:
Step 1: Calculate your gross monthly income Step 2: Multiply by 28% (your comfortable housing budget) Step 3: Subtract property taxes, insurance, utilities (~$700-$900/month typical) Step 4: What's left is your comfortable mortgage payment Step 5: Use an online mortgage calculator to see what loan amount that payment supports at current rates Step 6: Add your down payment to that loan amount = your comfortable purchase price
Example:
Gross monthly income: $7,500
28% = $2,100 comfortable housing budget
Minus $800 (taxes, insurance, utilities) = $1,300 mortgage payment
$1,300/month supports ~$240,000 mortgage (at 5% over 25 years)
Plus $25,000 down payment (10%)
Comfortable Purchase Price: ~$265,000-$280,000
Is this exact? No. But it's a much more realistic starting point than just going with whatever your bank approves you for.
The Bottom Line: Buy What You Can Afford, Not What You Qualify For
Here's my advice after working with hundreds of Ottawa buyers:
The happiest homeowners aren't the ones with the biggest houses—they're the ones who can comfortably afford their homes while still enjoying their lives.
I've seen buyers stretch themselves to the absolute limit to afford their "dream home," only to become house-poor—eating ramen, skipping vacations, and stressing about every utility bill.
I've also seen buyers purchase below their maximum approval, build equity comfortably, and upgrade to their true dream home five years later—without the financial stress.
Which story do you want to be?
Get a Personalized Affordability Assessment
The formulas and examples in this post give you a great starting point, but your situation is unique. Your income, debts, down payment, and goals are all different from the next buyer.
That's why it's worth sitting down with both a mortgage professional and a real estate agent who can help you:
Run the actual numbers based on your specific finances
Show you what's realistically available in your price range
Create a strategic plan to maximize your buying power
Ensure you're making a decision you'll feel good about for years to come
You don't have to figure this out alone. The right guidance makes all the difference between buying with confidence and buying with regret.
About the Author
Ruby Xue is the Broker of Record & Owner of KW ICON Realty and Team Leader of the Ruby Xue Real Estate Team, serving buyers and sellers across Ottawa. Since launching her real estate career in 2014, Ruby has been recognized as one of Ottawa's top-performing realtors, earning "Rookie of the Year" in her first year and building a reputation for exceptional client service and strategic expertise.
Originally from China, Ruby came to Canada in 2002 as an international student at Carleton University. Her journey from ambitious newcomer to award-winning real estate leader reflects her core belief: with the right support, vision, and commitment, anyone can achieve extraordinary things.
In 2025, Ruby founded KW ICON Realty with a powerful mission—to create an environment where real estate agents can thrive with world-class training, proven systems, and a culture of collaboration. Her brokerage's success is measured by the success of the agents and clients it serves.
Ruby's approach to real estate is rooted in empowerment, not pressure. She believes that buying or selling a home should be a strategic, informed decision—and that every client deserves a bespoke experience backed by data, expertise, and unwavering support.
When she's not helping clients navigate Ottawa's real estate market, Ruby is a devoted mom to two daughters, a wife, and a passionate traveler and opera enthusiast. Her guiding principle in life and business is simple: "God, Family, then Business."
With over 100 Google Reviews and a track record of success across Ottawa's most sought-after neighbourhoods—from Orléans to The Glebe, Kanata to Westboro—Ruby and her team are committed to making your real estate journey as seamless and rewarding as possible.
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