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Qualification

Qualifying rate

Definition

The stress-test rate you must qualify at: the greater of your contract rate plus 2% or 5.25%.

Doesn't change what you actually pay — only whether you qualify.

Think of the qualifying rate as the 'what-if' rate. If your contract rate is 4.59%, the lender tests your GDS and TDS ratios at 6.59% to make sure you could absorb higher rates at renewal. You still pay 4.59%.

Because the qualifying rate is higher than your real rate, your maximum mortgage is smaller than your actual payment could support; in the GDS example in this glossary, qualifying at 6.00% instead of 4.00% cuts the maximum by roughly 18%. That gap is a big reason buyers qualify for less than they expect.

The rule applies to federally regulated lenders (and to all insured mortgages). Uninsured straight switches at renewal have been exempt since November 21, 2024. Provincially regulated credit unions and private lenders set their own qualifying policies, which can occasionally help a file that's just over the federal limit.

Sources

  1. Minimum qualifying rate for uninsured mortgages (OSFI)
  2. OSFI exempts uninsured mortgage straight switches from the prescribed MQR (effective Nov 21, 2024) (OSFI)
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Co-signer

A creditworthy individual (often a parent) who agrees to be equally liable for the mortgage so the primary applicant qualifies. The co-signer's income is added to the application; their credit is fully exposed.

Credit score

A 300–900 score from Equifax or TransUnion summarizing your credit history. Roughly 680+ opens the widest range of A-lender options; CMHC-insured mortgages need at least one borrower at 600 or higher; lower scores usually route to alternative (B) lenders.

Debt service ratio

The percentage of your gross income that goes to housing (GDS) or to housing plus all other monthly debt payments (TDS). On insured mortgages, CMHC caps GDS at 39% and TDS at 44%; the ratios are calculated at the stress-test qualifying rate.

Down payment

The cash you put toward the purchase. Minimums: 5% on the first $500K and 10% on the portion from $500K to $1.5M; at $1.5M or more, 20%. Below 20% requires CMHC, Sagen, or Canada Guaranty insurance.

GDS

Gross Debt Service ratio

Gross Debt Service ratio: your monthly housing costs (mortgage principal and interest, property tax, heating, and 50% of condo fees) divided by your gross monthly income. CMHC caps GDS at 39% on insured mortgages; uninsured and alternative lenders set their own limits.

Stress test

The check that you could still afford your mortgage at a higher "qualifying rate": the greater of your contract rate + 2% or 5.25%. OSFI sets it for uninsured mortgages at federally regulated lenders, and the federal government applies the same test to insured mortgages. It limits how much you can borrow, not what you pay.