The mortgage stress test, explained
What Canada's mortgage stress test is, how the qualifying rate is calculated, and how it affects how much you can borrow.
Key takeaways
- You must qualify at a higher rate than the one you're offered.
- The qualifying rate is the higher of 5.25% or your rate plus 2%.
- It reduces how much you can borrow, but you still pay your actual rate.
What the stress test is
The mortgage stress test is a rule that checks whether you could still afford your payments if rates went up. Lenders regulated by the federal government must apply it, which includes all the big banks.
How the qualifying rate works
You have to qualify at the higher of:
- 5.25%, or
- the rate you're offered, plus 2 percentage points.
Example: if you're offered 4.5%, you need to qualify at 6.5%. You still pay 4.5%. The test only changes how much you can borrow.
How it affects your budget
Because lenders calculate your payments at the higher rate, the stress test lowers the maximum mortgage you can qualify for. That's why your approved amount can be lower than you'd expect from your actual rate.
Does it apply at renewal?
If you renew with your current lender, you don't need to requalify. If you switch to a new lender at renewal with no changes to your mortgage, federally regulated lenders generally no longer need to apply the stress test either. Borrowing more or changing your mortgage usually means qualifying again.
Credit unions regulated by a province can follow different rules. Your broker will know which lenders apply what.
Ways to qualify for more
- Pay down other debts, like car loans or credit cards.
- Increase your down payment.
- Add a co-borrower with income.
- Ask a broker about lenders and products that fit your situation.
This guide is general information, not financial advice. Rules and products change, and every situation is different. A licensed mortgage broker can tell you what applies to you.