Most people think of car payments and mortgage payments as completely separate — one gets you from A to B, the other gives you a place to live. But when it comes to mortgage qualification, your car payment can dramatically reduce how much home you can afford.

Let’s break down exactly how that happens and why that $700 monthly payment could be costing you $160,000 or more in buying power.

The Math Behind It

Mortgage lenders qualify you based on something called the Total Debt Service (TDS) ratio — a percentage of your gross income that can go toward all your debts (including your mortgage, property taxes, heat, and other loans).

Here’s an example:

• Gross monthly income: $7,000
• Maximum TDS ratio: 44%
• Total allowable monthly debts: $7,000 × 44% = $3,080

Now let’s compare two scenarios.

🟢 Without a Car Payment

• Property taxes + heat: $400/month
• Remaining for mortgage: $3,080 – $400 = $2,680/month
• At 4.14% (25-year amortization) → Max Mortgage: ≈ $625,000

🔴 With a $700 Car Payment

• Property taxes + heat: $400/month
• Car payment: $700/month
• Remaining for mortgage: $3,080 – $400 – $700 = $1,980/month
• At 4.14% (25-year amortization) → Max Mortgage: ≈ $462,000

✅ Impact: $700/month in car payments reduces your home-buying power by roughly $160,000.

Why This Happens

Every lender uses debt ratios to assess risk and ensure you’re not overextended. They don’t just look at your total income — they focus on your ability to manage debt.

A car loan, even if it feels manageable, counts as a fixed debt against your income .So while you may think, “It’s just $700 a month,” the lender sees a tighter cash-flow picture and a smaller buffer for mortgage payments.

It’s Not Just the Payment — It’s the Timing

Here’s what many buyers don’t realize: If you pay off or refinance your vehicle loan before applying for your mortgage, that extra room in your ratios immediately boosts your buying power.

Even trading down to a more affordable vehicle, or leasing strategically with a lower payment, can make a big difference in your pre-approval amount.

Smart Moves Before You Buy a Home

If you’re planning to buy a home in the next 6–12 months, consider these steps:

1. Re-evaluate your car payment. Can you pay it off, refinance, or sell the vehicle to free up cash flow?
2. Avoid taking on new vehicle debt before mortgage qualification. Even if the dealer says, “You’re approved,” your lender might not agree.
3. Get pre-approved early. A pre-approval gives you a clear sense of what you can afford now — and how much more you could afford if you reduced your monthly debts.
4. Work with a mortgage professional. We can model your exact numbers and show you how changing your debts changes your buying power in real dollars.

The Bottom Line

Your car might look great in the driveway, but it could be keeping you from owning the driveway itself.

If you’re serious about buying a home, every monthly payment matters. That $700 car payment could be costing you your dream home — or the flexibility to buy in your preferred neighbourhood.

Let’s look at your numbers and see how to structure your debt so you can maximize your buying power when the time is right.

Canada's housing market isn't standing still, and that means opportunities may be opening for those who are ready. According to CMHC's Fall 2025 Housing Supply Report, the total number of new homes started in early 2025 remained consistent with levels seen in 2024. However, what's being built is beginning to shift. More rental units and ground-level homes are coming to market, while new condo activity is slowing down in many major cities.

Resale listings are also up nearly 9% year-over-year, giving potential buyers more choice and creating chances to enter or move within the market. Whether you're looking for flexibility, affordability, or a better fit for your lifestyle, this may be a smart time to revisit your goals and explore what's possible.

What About Rates and Affordability?

Affordability remains a top concern across Canada. Inflation continues to be influenced by factors like energy costs, tariffs, and government spending — all of which the Bank of Canada is watching closely. These pressures affect variable mortgage rates, and any potential future rate cuts will depend on how inflation and the broader economy evolve over the coming months.

Fixed mortgage rates work a little differently. They tend to move with government bond yields, which can shift quickly based on global markets and investor confidence. That means fixed rates can rise or fall with little notice.

What Could Happen if Rates Go Down or Up?

• If rates go down: Homeowners with variable-rate mortgages may see lower monthly payments, and buyers could find it easier to qualify for financing. Renewing borrowers might secure more competitive terms, and their overall affordability could improve.
• If rates go up: Borrowing costs rise. Variable-rate borrowers could face higher payments, renewing customers may encounter less favourable terms, and buyers could see their purchasing power reduced. Even small increases can make a meaningful difference, which is why planning matters.

It's so important to explore your options and consider securing a rate hold early. Locking in a rate can protect you from future increases, while still giving you the flexibility to adjust if rates go down before your mortgage closes. The right mortgage strategy can help you stay ahead, no matter which direction the market moves.

What Can a Mortgage Broker Help With?

Whether you are renewing your mortgage, planning a purchase, or just curious about how the latest market trends affect you, I can help you take the next step with clarity. This includes:

• Getting pre-approved so you can shop with confidence
• Securing a rate hold for up to 120 days
• Comparing a wide range of lenders and solutions tailored to your needs

You don't need to follow the market alone. I'll help you find the best strategy for your life, not just the best headline this week.

Let's talk about your goals and create a plan that works. Contact me today.

Yesterday’s update brings encouraging news for the housing market. The Bank of Canada lowered its benchmark interest rate by 0.25% to 2.5%, a move aimed at supporting growth and easing pressure on households.

Why The Bank Acted

• Slowing inflation: Prices are cooling, and the Bank sees less risk of inflation heating back up.
• Support for growth: A softer job market and trade uncertainty have weighed on the economy, but lower rates are designed to help Canadians weather those challenges.
• Housing strength: Consumption and housing activity have already shown resilience, and today's move may give the market an extra boost.

Governor Tiff Macklem noted the decision was made to "better balance the risks going forward," and many economists expect more cuts could be on the horizon later this year.

What This Means For You

• Renewals: Lower rates may create opportunities to save money or improve flexibility. Reviewing early could put you ahead.
• New buyers: Reduced borrowing costs can improve affordability and mortgage qualification, making it a great time to consider a purchase.
• Variable-rate mortgages: With rates trending downward, variable options may look more attractive again.
• Refinancing or investing: Now could be the right time to explore equity take-out, renovations, or investment opportunities.

A Brighter Outlook

While the Bank is cautious about global trade, the housing market continues to show strong fundamentals, such as population growth, demand for homes, and consumer spending, which remain supportive. Lower rates can help keep that momentum going.

Whether you're renewing, buying, or planning ahead, now is the time to explore your options. I can help you understand how today's cut could work in your favour. Reach out if you have questions.