Mortgage education
Understand Canadian mortgages before you sign
This guide explains the key concepts lenders look at in Canada: interest rates, amortization, CMHC insurance, and the GDS or TDS ratios that influence your approval chance. Use it alongside our calculator to test different scenarios.
1. Mortgage basics in Canada
A mortgage is a loan secured by your property. In Canada, most borrowers focus on the interest rate and monthly payment, but lenders also care about your income, your other debts, and your down payment.
- Principal: the amount you borrow to buy the home.
- Interest: the cost of borrowing the money.
- Term: the length of your current rate agreement, often 1 to 5 years.
- Amortization: total time to pay off the mortgage.
2. Fixed versus variable rates
Most Canadian mortgages are either fixed rate or variable rate. The right choice depends on your risk tolerance and your budget flexibility.
- Fixed rate: your interest rate and payment stay the same during the term.
- Variable rate: linked to the prime rate and moves when the Bank of Canada changes rates.
- Hybrid: some borrowers split between fixed and variable.
3. Down payment, CMHC insurance, and LTV
If your down payment is less than 20 percent, your mortgage is usually insured by CMHC or another insurer. Lenders look closely at the loan-to-value ratio (LTV) to judge risk.
- LTV: mortgage amount divided by property price.
- 5–20% down: insured or high-ratio mortgage.
- 20%+ down: conventional mortgage with no mandatory CMHC premium.
4. GDS, TDS, and lender guidelines
Our calculator uses GDS and TDS ratios plus LTV to estimate your approval probability. These ratios are central to lender decisions.
- GDS: housing costs divided by gross income.
- TDS: housing plus other debts divided by gross income.
- Many lenders treat ~39% GDS and ~44% TDS as upper guidelines.
Try the Mortgage Affordability & Approval Calculator
Use our calculator to estimate your monthly payment, check your GDS/TDS ratios, and see an estimated approval probability based on your income, down payment, and other debts.
You can adjust income, down payment, debts, and more to see how your approval chances move.