Use the calculator
Try the Mortgage Payment Calculator to put these concepts into practice.
Key takeaways
- ✓You must qualify at the higher of your actual rate + 2%, or the Bank of Canada benchmark (5.25%)
- ✓The stress test typically reduces maximum loan size by 15–20%
- ✓All federally regulated lenders must apply the stress test
- ✓Credit unions in some provinces may not be subject to the federal stress test
- ✓Longer amortization periods and larger down payments can improve your qualifying amount
How the stress test rate is calculated
OSFI requires federally regulated lenders to qualify borrowers at the higher of:
1. The borrower's actual contracted rate + 2% 2. The Bank of Canada's 5-year benchmark rate (currently 5.25% as of 2024)
If your actual rate is 5.0%, you must qualify at 7.0%. If your rate is 4.0%, you qualify at 6.0% — still above the 5.25% floor.
The qualifying rate is used only to determine affordability — your actual mortgage payments are based on your real contracted rate.
How much does the stress test reduce borrowing power?
Significantly. Example:
Actual rate 5.5%, qualifying at 7.5%. Income: CA$150,000/year. Maximum qualifying payment: CA$3,375/month (27% GDS ratio). Maximum loan at 7.5% (25 years): ~CA$453,000.
Without stress test at actual 5.5%: Maximum loan ~CA$567,000.
The stress test reduces maximum borrowing by ~CA$114,000 in this example — a meaningful reduction in expensive markets.
💡 Tip: Use the Mortgage Payment Calculator to model payments at both the stress test rate and your actual rate. This shows how much room you have if rates rise at renewal.
Strategies to qualify for more
Larger down payment: Reduces the required loan amount, making it easier to pass the stress test.
Longer amortization with CMHC: First-time buyers purchasing new builds can qualify on 30-year amortization (as of August 2024). Lower monthly payment = easier to qualify.
Joint application: Adding a spouse, partner, or co-signer adds their income, potentially significantly increasing maximum borrowing.
Reduce other debt: GDS and TDS ratios are central to qualification. Paying down credit cards and car loans before applying improves your ratios.
Credit unions: Some provincial credit unions are not subject to the federal stress test — particularly in Ontario, BC, and Alberta.
Stress test for renewals and switches
The stress test applies to new mortgages and refinances — but not to straight renewals with your existing lender.
This "renewal trap" means some borrowers find they can no longer qualify with a new lender at renewal if their financial situation has changed — leaving them dependent on their existing lender's offer, which may not be competitive.
At straight renewal with the same lender, OSFI has clarified the stress test does not apply for most borrowers — you simply renew at the offered rate without requalifying.
Frequently Asked Questions
Calculators mentioned in this guide
Disclaimer: Calculations are estimates for informational purposes only and do not constitute financial advice. Mortgage rules, taxes, and CMHC insurance requirements vary by province. Consult a licensed mortgage broker before making financial decisions.