How the mortgage stress test works
The stress test is a qualification rule, not a rate you pay. When a federally regulated lender (all big banks and most others) approves a mortgage, it recalculates your payment at the minimum qualifying rate (MQR) and checks that payment against your income. For uninsured mortgages the rule is OSFI Guideline B-20; for insured mortgages the Department of Finance applies the same formula. OSFI has kept the 5.25% floor in place since June 2021.
At today’s typical rates the “+2” leg always wins: 4.94% + 2 = 6.94% for a fixed rate and 3.95% + 2 = 5.95% for a variable. The 5.25% floor only bites when contract rates fall below 3.25%.
Example: a $500,000 mortgage
A $500,000 mortgage over 25 years at 4.94% costs $2,891 a month. For approval, the lender plugs in 6.94%: $3,484 a month, $593 more. Add property tax of $4,000 a year and $100 a month of heat, and the GDS ratio needs $121,000 of gross income — compared with $102,000 if you were tested at the real rate.
GDS and TDS: the two ratios
- Gross debt service (GDS) = (qualifying mortgage payment + property tax + heating + 50% of condo fees) ÷ gross income. CMHC maximum: 39%.
- Total debt service (TDS) = GDS costs + all other debt payments (car loans, credit cards at 3% of the balance, lines of credit, student loans) ÷ gross income. CMHC maximum: 44%.
Most lenders apply similar limits to uninsured loans. In practice, a buyer with no other debt hits the GDS limit first. Other debt payments only reduce what you can borrow once they exceed the 5-point gap between the two limits — 5% of gross income — so a $500-a-month car loan (6% of a $100,000 income) costs borrowing power at modest incomes but often none at high ones.
Maximum mortgage by income (stress-tested)
| Gross income | Fixed 4.94%, 25 yrs | Variable 3.95%, 25 yrs | Fixed, 30 yrs | Fixed + $500/mo debt |
|---|---|---|---|---|
| $60,000 | $218,000 | $238,000 | $232,000 | $182,000 |
| $80,000 | $311,000 | $340,000 | $331,000 | $287,000 |
| $100,000 | $404,000 | $442,000 | $430,000 | $392,000 |
| $120,000 | $498,000 | $544,000 | $529,000 | $498,000 |
| $150,000 | $638,000 | $697,000 | $678,000 | $638,000 |
| $200,000 | $871,000 | $953,000 | $927,000 | $871,000 |
Assumes property tax of $4,000 a year and $100/month heating, no condo fees. Lenders also check credit history, employment and the down payment.
Exceptions and recent changes
Since 21 November 2024 OSFI no longer requires the stress test when an uninsured borrower simply switches lenders at renewal without increasing the loan or amortization (a “straight switch”), so you can shop your renewal freely. Renewing with your existing lender has never required re-qualification. Credit unions regulated only by a province are not bound by B-20, though many apply a similar test. The stress test still applies to every new purchase and refinance.
How to pass the stress test
FAQ
What is the mortgage stress test rate in Canada?
The greater of 5.25% or your contract rate plus 2 percentage points. With a typical 4.94% 5-year fixed that is 6.94%; with a 3.95% variable it is 5.95%.
Does the stress test apply to insured mortgages?
Yes. Insured mortgages (less than 20% down) and uninsured mortgages from federally regulated lenders both qualify at the greater of 5.25% or the contract rate plus 2%.
How much income do I need to pass the stress test on a $500,000 mortgage?
About $121,000 with no other debts, assuming a 4.94% 25-year fixed, $4,000 property tax and $100/month heating, under the 39% GDS limit.
Do I have to pass the stress test when I renew?
No when you renew with your current lender. Since 21 November 2024 an uninsured straight switch to a new lender at renewal is also exempt, as long as the loan amount and amortization do not increase.
What are the GDS and TDS limits?
For insured mortgages CMHC allows a gross debt service ratio of up to 39% and a total debt service ratio of up to 44% of gross income, calculated with the stress-test payment.
Related mortgage articles
Assumptions & sources
- Bank of Canada raised the target for the overnight rate by 25 basis points to 2.50% on 28 October 2026 (Bank Rate 2.75%, deposit rate 2.45%); next decision 9 December 2026. Big-bank prime rose to 4.70% on 29 October 2026.
- Typical rates: 4.94% 5-year fixed and 3.95% 5-year variable are the median of the 17 lenders listed in Ratehub.ca’s rate tables updated 2 November 2026 (fixed range 4.44%–5.99%, variable 3.68%–4.70%). Insured (high-ratio) mortgages often get slightly lower rates than uninsured ones.
- Fixed-rate payments use Canadian semi-annual compounding (Interest Act); variable-rate payments use monthly compounding, which most lenders apply to variable mortgages. Rates are assumed constant for the whole amortization.
- CMHC homeowner premiums on the loan amount: 4.00% above 90% loan-to-value, 3.10% for 85.01–90%, 2.80% for 80.01–85%, plus 0.20% for amortizations over 25 years. Provincial sales tax on the premium in Ontario (8%), Quebec (9%) and Saskatchewan (6%) must be paid in cash at closing.
- Minimum down payment (Department of Finance rules from 15 December 2024): 5% of the first $500,000, 10% of the portion from $500,000 to $1.5 million; 20% at $1.5 million or more, where default insurance is not available. 30-year insured amortizations: first-time buyers and buyers of new builds.
- Stress test: qualify at the greater of 5.25% or the contract rate + 2 points (OSFI Guideline B-20; the same floor applies to insured loans). Income needed uses CMHC’s 39% GDS / 44% TDS limits, property tax of 1% of the price a year and $100/month heating. Take-home pay: 2026 Ontario, from our Canada salary after tax engine.
- National average price: CREA, September 2026 ($666,538, −1.6% year over year).