The mortgage stress test is one of the most important factors in determining how much home you can afford in Canada. Here's a clear, straightforward explanation of what it is and how to navigate it.
What Is It?
The stress test requires you to qualify at a higher interest rate than you'll actually pay. This ensures you can handle payments if rates rise.
The Qualifying Rate
You must qualify at the higher of:
- Your actual mortgage rate + 2%, OR
- The Bank of Canada's benchmark rate (currently ~5.25%)
Example:
If your mortgage rate is 5%, you must qualify as if paying 7%.
How It Affects Your Buying Power
The stress test reduces how much you can borrow by approximately 20% compared to qualifying at the actual rate.
That's roughly 20% less purchasing power.
See What You Actually Qualify For
Get pre-approved to see your stress-tested buying power before you start shopping.
Who Is Affected?
The stress test applies to:
- All insured mortgages (less than 20% down)
- Uninsured mortgages from federally regulated lenders
- Mortgage renewals when switching lenders
May have exceptions:
See Your Stress-Tested Buying Power
Get pre-approved to know exactly what you can afford.
Get Pre-Approved- Some credit unions (provincially regulated)
- Private lenders
- Renewals with your current lender (no switch)
Strategies to Maximize Approval
1. Reduce Other Debts
Paying off car loans and credit cards improves your debt service ratios.
2. Increase Down Payment
A larger down payment means a smaller mortgage needed.
3. Extend Amortization
30-year amortization (if available with 20%+ down) reduces monthly payments.
4. Add a Co-Borrower
Additional income can boost qualification. See our co-signer guide.
5. Consider Alternative Lenders
Some credit unions aren't federally regulated and may offer flexibility.
FAQ
Q: Does the stress test apply if I put 20% down?
A: Yes. All federally regulated lenders apply it regardless of down payment.
Q: Will the stress test ever be removed?
A: Unlikely. OSFI views it as permanent prudential policy.
Q: Do I pay the higher stress test rate?
A: No. You pay your contracted rate. The stress test only affects qualification.
Q: What about renewal with a different lender?
A: Switching lenders triggers a new application and stress test.
What's Next
Get pre-approved to see exactly what you qualify for under the stress test. Our team will explore every option to maximize your approval.
Ready to Get Started?
Contact us today for personalized mortgage advice and competitive rates.
