Question 1

What is the mortgage stress test?

Accepted Answer

Canada's mortgage stress test, introduced by OSFI, requires that all federally regulated lenders qualify borrowers at the higher of the Bank of Canada's minimum qualifying rate (currently 5.25%) or your contract rate plus 2%. This ensures you could still afford payments if rates rise.

Question 2

What is the qualifying rate?

Accepted Answer

The qualifying rate is the rate used to calculate whether you can afford your mortgage — it's always higher than your actual contract rate. Currently the floor is 5.25%, but if your contract rate + 2% is higher, that's used instead. For example, if your contract rate is 4.89%, your qualifying rate would be 6.89%.

Question 3

Does the stress test apply to renewals?

Accepted Answer

As of late 2024, OSFI no longer requires the stress test when you renew with a different federally regulated lender (a straight renewal). However, if you increase your mortgage amount or change your amortization at renewal, the stress test applies. Credit unions and private lenders have their own policies.

Question 4

What if I fail the stress test?

Accepted Answer

If you don't qualify at the stress test rate, you have several options: increase your down payment to reduce the loan amount, extend your amortization, pay down other debts to lower your TDS ratio, add a co-borrower, or explore credit unions and provincially regulated lenders who may apply different qualification rules.

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