How much house can you afford on variable comp?

The standard mortgage rule of thumb assumes a steady paycheque. If a big slice of your income is bonuses, RSUs, overtime, or consulting revenue, that rule gets dangerous — because the bank will happily count comp that can evaporate in a bad year, and the mortgage payment won’t.

Ask the right question

Don’t ask:

~~“How much will the bank approve?”~~

Ask:

“What housing cost can this household carry if variable comp is weak for a year or two?”

The bank’s number tells you the ceiling. The stress-test number tells you what you can actually live with. They’re rarely the same.

Why technical comp is exposed

You can look wealthy on paper while carrying real uncertainty:

RSUs depend on both vesting and the share price — a 40% stock drop cuts their value at exactly the wrong moment.
Bonuses depend on company performance and can be cut firm-wide.
Consulting income is lumpy and can gap between contracts.
Overtime and field allowances aren’t guaranteed to continue.

An “average year” is a poor anchor for a fixed monthly obligation.

The base-salary anchor

The durable approach for variable earners:

Anchor affordability on base salary — the part that arrives whether or not the year goes well.
Treat variable comp as a buffer, not a requirement for the payment.
Confirm a weak-comp year is survivable without panic-selling stock or raiding reserves.

Then let variable comp do what it’s good at — accelerating goals rather than enabling fragility:

Use variable comp for ✅	Don’t use it for ❌
Building the down payment faster	Qualifying for the maximum mortgage
Lump-sum mortgage prepayments	Covering the baseline monthly payment
Renovations and furnishing	A payment that needs everything to go right
Topping up RRSP/TFSA/RESP	Lifestyle creep priced into the budget

Sanity-check against the lending ratios

Lenders use GDS (housing costs ÷ gross income, target ~32–39%) and TDS (all debt ÷ gross income, target ~40–44%). Run those ratios using base salary only. If the house only fits when you stuff bonuses and RSUs into the income line, that’s the warning light — you’re relying on the volatile part to make a fixed payment work.

What else belongs in the model

Childcare and future family plans (and any upcoming parental leave income dip)
Home-maintenance reserves — budget ~1% of the home’s value per year
Property tax, insurance, and condo fees
Concentration risk — if your RSUs already tie much of your net worth to one employer, your house shouldn’t depend on that same employer’s stock too

Checklist

Stress-test the payment on base salary, not best-case total comp.
Treat bonuses and RSUs as variable, even if they’ve been steady for years.
Run GDS/TDS ratios using base income only.
Include maintenance (~1%/yr), taxes, insurance, and future family costs.
Avoid a mortgage that requires everything to go right.
Use variable comp to accelerate goals, not to justify fragility.