The mortgage stress test in Canada

The short answer

The mortgage stress test is a rule that makes you qualify for a mortgage at a rate higher than the one you will actually pay. Lenders must check that you could still afford the payments at the qualifying rate: the greater of your contract rate plus 2 percentage points, or 5.25%.

You never pay the qualifying rate. It is only used to test your GDS and TDS ratios. If your lender offers 4.12%, your payment is based on 4.12%, but the lender checks your ratios as if the rate were 6.12%. On a $400,000 mortgage over 25 years, that is the difference between a $2,130 payment and a $2,588 test payment.

The formula

Qualifying rate = the greater of (contract rate + 2%) or 5.25%.

That is the whole formula. It applies to fixed, variable and adjustable-rate mortgages. The lender then runs the usual affordability tests with the payment at that rate:

• GDS: mortgage payment at the qualifying rate, plus property tax, heating and 50% of condo fees, divided by gross monthly income. Insurers cap it at 39%.
• TDS: the same housing costs plus all other monthly debt payments, divided by gross monthly income. Insurers cap it at 44%.

Because the 5.25% floor is fixed, the floor only matters when your contract rate is below 3.25%. At 3.25% the two sides are equal. Above it, the qualifying rate is simply your rate plus 2 points.

Insured vs uninsured: who sets the rule

Two different federal authorities set the stress test, depending on your down payment. Today they use the same formula.

For an insured mortgage, the rule is part of the government's conditions for mortgage default insurance, so it applies whichever lender you use. For an uninsured mortgage, OSFI's Guideline B-20 sets a minimum qualifying rate for federally regulated financial institutions, such as the big banks. OSFI says it reviews that rate at least once a year.

The same test catches buyers with large down payments too. A household earning $160,000 with $200,000 down and the same other assumptions would have an uninsured mortgage. It is still tested at 6.12%, and the maximum works out to about $901,200.

Credit unions and other provincially regulated lenders

OSFI's guideline covers federally regulated lenders. Most credit unions are regulated by their province, not by OSFI. For uninsured mortgages, a provincially regulated lender may follow its own regulator's rules and its own policy, which may not match B-20 exactly. Insured mortgages still follow the federal insurance rules. If you're comparing a credit union with a bank, ask each one directly what rate it qualifies you at.

Examples at different rates

The table shows the qualifying rate at several contract rates, the payment on a $400,000 mortgage over 25 years, and the maximum price for our example household: $100,000 income, $50,000 down, $400 a month of other debts, Ontario, 0.75% property tax and $100 a month for heat.

Look at the first two rows. At 2.75% and at 3.25%, the qualifying rate is the same 5.25%, so the maximum price is the same in both rows: $507,100. Below 3.25%, a lower rate makes your real payment cheaper but does not help you qualify for more. Above it, every extra point on your rate also raises the qualifying rate by a point.

How much buying power the stress test removes

For the example household at 4.12%, the most the mortgage payment can be under the ratio limits is about $2,851 a month. At the qualifying rate of 6.12%, that payment supports a mortgage of about $440,753. If lenders tested at the contract rate instead, the same payment would support about $535,443.

That is roughly $94,691 less borrowing, or about 18%. This is an estimate: it holds the payment room fixed and ignores that a bigger loan would also mean a bigger insurance premium and higher property tax. The real gap in price is somewhat smaller, but the order of size is right.

Note what the stress test does not do. It does not change the rate you pay or the payment on your mortgage. It only limits how large a mortgage you can get.

Renewals and switching lenders

The stress test is mostly a purchase-time rule, but it can come up at renewal if you change lenders.

• Uninsured straight switch (since November 21, 2024). If you move an uninsured mortgage from one federally regulated lender to another at renewal, OSFI no longer prescribes the minimum qualifying rate, as long as you don't increase the loan amount or the remaining amortization. OSFI allows the balance to rise by up to $3,000 to cover costs such as fees or penalties. Taking equity out is not allowed under the exemption.
• Insured mortgages. Since the federal government's December 2023 statement, insured borrowers switching lenders at renewal do not have to requalify under the stress test.
• Anything more than a straight switch. If you borrow more, extend the amortization or refinance, expect the lender to qualify you again at the qualifying rate.

The new lender can still apply its own credit checks and policies. The exemption removes the prescribed rate test, not the lender's judgment.

OSFI's loan-to-income limits

Since the start of each lender's 2025 fiscal year, OSFI has also limited how many new uninsured mortgages a federally regulated lender can make above 4.5 times the borrower's gross income. This is a limit on the lender's portfolio, not on you. OSFI says plainly that the limits do not apply to individual borrowers or transactions.

In practice, a loan above 4.5× income can still be approved, but the lender has only a limited share of those loans to give out. For scale, the example household's mortgage of $440,753 is about 4.41× its income. Our calculators do not cap anyone at 4.5× because the rule doesn't work that way.

How to pass the stress test

You can't change the formula, but you can change the inputs. Using the example household:

• Pay down monthly debts. Debt payments count in TDS. For this household, housing costs (GDS) are the tighter limit, so clearing the $400 a month of debt leaves the maximum unchanged at $477,500. For buyers with larger car or loan payments, TDS is usually the limit and paying debts down helps a lot more. Check yours in the GDS/TDS calculator.
• Add to the down payment. $20,000 more down raises the maximum from $477,500 to $495,700, because you borrow less and may drop into a cheaper insurance premium band.
• Consider a longer amortization if you're eligible. First-time buyers and buyers of new builds can get a 30-year insured amortization. In the example that raises the maximum to $501,800, but you pay more interest over time and a higher insurance premium.
• Add a co-borrower's income. Lenders count the gross income of everyone on the mortgage, and everyone on it is responsible for the debt.
• Choose a home with lower carrying costs. Property tax, heating and half of condo fees count in GDS, so a lower-fee condo or a lower-tax area leaves more room for the mortgage.
• Lower the price target. The simplest fix. The stress test calculator shows the payment you'll be tested on for any price.

A lower contract rate helps only when your rate is above 3.25%. Below that, the 5.25% floor decides.

Next steps

1. Find your qualifying rate: your offered rate plus 2 points, or 5.25% if that is higher.
2. Run your numbers in the affordability calculator, which applies the stress test automatically.
3. If you're close to the limit, test the levers above one at a time to see which one moves your number most.
4. Get a pre-approval so a lender confirms the result with your real documents.