Lenders use two debt ratios to decide how much mortgage you can carry. GDS (Gross Debt Service) is your housing costs (mortgage + property tax + heating + half of condo fees) divided by gross income. CMHC caps this at 39%.

TDS (Total Debt Service) adds all other debt payments - car loans, student loans, credit card minimums - on top of housing costs. CMHC caps TDS at 44%.

Just because you qualify at 39/44% does not mean you should borrow that much. At those limits, you are house-poor. Aim for under 30% GDS so you can still save, invest, and enjoy life.

Your monthly mortgage payment is only part of the cost. Property tax adds $200-$600/month depending on the city. Home insurance runs $100-$200/month. Maintenance averages 1-2% of your home's value per year - on a $700K home, that is $580-$1,170/month.

Utilities, condo fees, and eventual major repairs (roof, furnace, windows) pile on more. A common rule: the true monthly cost of homeownership is roughly 1.5-2x the mortgage payment alone.

Before falling in love with a listing, add up all these costs. If the total exceeds 35% of your take-home pay, you are stretching too far.

The 5% rule is a rough shortcut popularized by Canadian financial educator Ben Felix. Multiply the home's value by 5% and divide by 12 to get the monthly cost of owning that you would NOT pay as a renter.

The 5% breaks down as: ~1% property tax, ~1% maintenance, and ~3% cost of capital (the mortgage interest plus the opportunity cost of your down payment not being invested).

Example: a $700,000 home. Annual non-recoverable cost: $700,000 x 5% = $35,000. Monthly: $2,917. If you can rent a comparable home for less than $2,917/month, renting is likely the better financial move - assuming you actually invest the savings.

The 5% rule is a STARTING POINT, not a final answer. It ignores principal repayment (which builds equity), potential home price appreciation, the psychological value of ownership, and the tax-free capital gain on a principal residence. But it quickly exposes situations where buying is financially worse than renting - which is common in Vancouver and Toronto where price-to-rent ratios are among the highest in the world.

The rent-vs-buy decision depends on how long you plan to stay. In the first 1-3 years, buying almost never wins because closing costs, CMHC insurance, and legal fees consume the equity you build.

A simplified break-even analysis on a $600,000 home in Ontario: - Down payment: $45,000 (7.5%) - CMHC insurance: ~$18,000 - Closing costs: ~$20,000 (including LTT) - Total cash out the door: ~$83,000

In year 1, your mortgage payments go mostly to interest. After paying property tax, maintenance, and insurance, your total non-recoverable housing cost is roughly $3,200/month. If renting a comparable place costs $2,500, you are paying $700/month more to own - plus you had $83,000 tied up.

The break-even point - where owning starts beating renting - is typically 5-7 years, assuming modest home price appreciation (2-3% per year) and consistent investing of rental savings.

IF YOU PLAN TO STAY 7+ YEARS: buying usually wins because you build equity, lock in housing costs, and eventually pay off the mortgage. The principal residence capital gains exemption adds significant long-term value.

IF YOU MIGHT MOVE IN 3-5 YEARS: renting and investing the difference is often better. Run the numbers before committing - the MyMoneyMap Rent vs Buy tool can help with your specific situation.