A Smart Homebuyer’s Guide to Affordability, Planning, and Confidence
Buying a home is one of the biggest financial milestones in your life, and in today’s Canadian housing market, it is also one of the most complex. Between changing mortgage rates, regional price differences, and evolving affordability rules, knowing how much home you can truly afford is more important than ever.
As of September 2025, the average home price in Canada sits at $676,154, while mortgage rates range between 3.79% and 6.5%. The good news is that with the right tools, such as Pegasus’s Affordability Calculator and Down Payment Calculator, you can plan with clarity and confidence.
Understanding Home Affordability: It’s More Than Just the Price Tag
Many homebuyers focus solely on the listing price, but affordability includes everything from your income and debt levels to interest rates, property taxes, and insurance costs.
Even a small change in interest rates can have a big impact. For example, at 3.79%, your monthly payment on a $600,000 mortgage could be nearly $500 less than at 6.5%.
| Factor | Impact on Affordability |
| Income and Debts | Determines your borrowing limit through GDS and TDS ratios |
| Down Payment | Affects insurance costs and initial equity |
| Interest Rate | Changes your monthly payment significantly |
| Location | Prices vary widely between provinces |
| Property Taxes, Insurance, and Utilities | Ongoing costs that affect long-term affordability |
Lending Basics: The GDS and TDS Ratios
Every Canadian lender uses two key ratios to assess affordability.
| Ratio | Definition | Ideal Threshold |
| GDS (Gross Debt Service) | Percentage of monthly income spent on housing (mortgage, taxes, heating, and 50% condo fees) | 32% or less |
| TDS (Total Debt Service) | Percentage of monthly income covering all debts (housing, loans, and credit cards) | 40% or less |
Example:
If your gross monthly income is $7,000, lenders typically cap:
- Housing costs (GDS): $2,240 per month
- All debts (TDS): $2,800 per month
These limits ensure you can manage payments comfortably and protect you from overextending financially.
Mortgage Stress Test: Your Financial Safety Net
Since 2018, all borrowers must qualify at the higher of:
- Their mortgage rate plus 2%, or
- The benchmark rate of 5.25%
So, if you are offered a 4% mortgage, you must qualify as if it were 6%.
It may seem restrictive, but this rule helps shield homeowners from future rate increases and ensures long-term affordability, especially during periods of market volatility or inflationary pressure.
Down Payment Rules and Smart Strategies
Your down payment plays a major role in your purchasing power.
| Home Price Range | Minimum Down Payment | Notes |
| Up to $500,000 | 5% | Eligible for mortgage insurance |
| $500,000–$999,999 | 5% on first $500,000 and 10% on the remainder | Partial insurance cost |
| $1 million and above | 20% | No CMHC insurance available |
Putting 20% down eliminates insurance premiums and boosts your negotiating leverage.
For example, on a $670,000 home, that means saving $134,000. Even smaller down payments, however, can get you started faster with the right support programs.
Regional Affordability Snapshot (2025)
Housing prices vary significantly across Canada. Your dollar goes much further in some regions than others.
| Region | Average Home Price (2025) | Approx. Monthly Payment (5%, 25 yrs @ 5%) |
| Greater Vancouver | $1,142,100 | $6,650 |
| Greater Toronto Area | $1,052,000 | $6,125 |
| Ottawa | $660,000 | $3,840 |
| Calgary | $559,000 | $3,255 |
| Halifax | $515,000 | $3,000 |
| Saskatoon | $415,000 | $2,415 |
Source: CREA Housing Market Stats, September 2025
These differences highlight why location strategy is key to affordability planning. Moving just one province away could lower your monthly costs by more than $2,000.
Beyond the Mortgage: What Ownership Really Costs
Owning a home involves ongoing expenses that go beyond your mortgage payment.
| Expense Type | Typical Range (Annual) |
| Property Taxes | 0.5% to 1.5% of home value |
| Home Insurance | $1,000 to $3,000 |
| Utilities (Hydro, Water, Gas) | $3,600 to $6,000 |
| Maintenance and Repairs | 1% to 3% of property value |
| Condo Fees (if applicable) | $200 to $800 per month |
When you use Pegasus’s Affordability Calculator, these costs are factored into your projected budget, giving you a realistic view of total ownership costs before you buy.
Down Payment Help: Programs and Tools for Canadians
Homebuyers today have multiple ways to make ownership more attainable.
| Program | Key Benefits |
| First Home Savings Account (FHSA) | Contribute up to $8,000 per year (tax-free growth, tax-deductible contributions) |
| Home Buyers’ Plan (HBP) | Withdraw up to $35,000 from RRSPs tax-free, with 15 years to repay |
| Provincial Incentives | Land transfer rebates and shared equity programs |
| Family Gifts | Allowed with a signed gift letter confirming it is not repayable |
Combined with the Pegasus Down Payment Calculator, these tools simplify your saving strategy and show how much closer you are to your goal.
Market Snapshot: Fall 2025 Outlook
The housing landscape is stabilizing after a turbulent few years. CREA projects 473,093 home sales nationwide in 2025, with average prices dipping 1.4% before rebounding 3.2% in 2026.
Meanwhile, recent Bank of Canada rate adjustments have slightly improved affordability, especially for first-time buyers.
Takeaway: Buyers who plan carefully, lock in lower rates, and maximize savings may find this period an ideal entry point.
Your Smart Buyer Checklist
- Check Your Credit Score – Aim for 680 or higher to qualify for better rates.
- Reduce Debts – Lower credit card and loan balances improve your TDS ratio.
- Save Strategically – Automate deposits into your FHSA or high-yield savings account.
- Get Pre-Approved – Strengthens your offer and defines your budget ceiling.
- Use the Pegasus Affordability Calculator – Model different down payments, rates, and terms.
- Plan for the Long Term – Choose a home that fits both your current and future lifestyle.
The Bottom Line: Buy Smart, Not Just Big
The goal is not to buy the most expensive home you qualify for. It is to buy the one that aligns with your financial goals and quality of life.
With the median after-tax family income at $70,500 and average mortgage payments near $2,880, housing already takes up nearly half of Canadians’ income.
That is why using tools like Pegasus’s Affordability Calculator and Down Payment Calculator is essential. They take the guesswork out of planning and help you make decisions with confidence.
Take the Next Step
Whether you are buying your first home or upgrading, understanding your true affordability is the foundation of smart homeownership.
Use Pegasus’s online tools to estimate your budget, explore mortgage options, and connect with a professional who can tailor solutions to your needs.
Your homeownership journey starts with knowledge, and Pegasus Lending is here to help you every step of the way.
Connect with Pegasus Mortgage for expert insights and tailored financing solutions.