Residential furnaces work best when they are properly sized. A furnace that is too large will cycle on and off quickly, with some inefficiencies of operation. This can lead to rooms furthest from the furnace remaining cool or to furnace chimneys deteriorating due to excessive condensation. As well, some of the furnace controls or parts may break down sooner than expected due to a high cycling frequency.  Residential furnaces that are undersized may not keep the house at a comfortable temperature in the coldest parts of the winter. 

It will take much longer for an undersized furnace to bring a house back up to temperature after the thermostat has been turned down for a period (e. g.  night setback, vacation). There is a Canadian Standards Association (CSA) standard on how to properly size furnaces.  It is called "Determining the Required Capacity of Residential Space Heating and Cooling Appliances", CAN/CSA F280-M90 (R1998).  It provides a procedure to calculate house heat losses for the "design temperature" for the location of the house.  The standard lists the design temperature for most Canadian communities. The design temperature is equivalent to one of the coldest temperatures a community is expected to experience in any given winter.  The standard specifies that the heating system shall be no more than 40 per cent larger than the heat required for the house at that design temperature. The 40 per cent allowance provides some margin for error in the calculation and also permits some oversizing to bring a house back up to temperature.  Basically, this sizing calculation will recommend a furnace that runs at least 35-40 minutes every hour on the coldest day of the year