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Qualification

Stress test

Definition

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.

The test doesn't change your rate; it changes what you're allowed to borrow. The lender calculates your GDS and TDS ratios using the payment at the qualifying rate, so your approved amount is smaller than your actual payment would suggest.

It applies at federally regulated lenders to purchases, refinances, and to switches or renewals that add money or lengthen the amortization. Since November 21, 2024, OSFI no longer expects lenders to apply it to an uninsured straight switch at renewal (same balance, no longer amortization), and insured straight switches are exempt as well. A renewal with your current lender doesn't require re-qualifying.

Provincially regulated credit unions and private lenders set their own qualifying policies. If the test is what limits you, the levers are a larger down payment, paying down other debts, or adding a co-applicant. Run your numbers on our stress-test calculator before you make an offer.

Worked example

Illustrative: a $500,000 mortgage, 25-year amortization, at an assumed contract rate of 4.00%. The qualifying rate is 6.00% (4.00% + 2%, which is higher than the 5.25% floor).

Actual payment at 4.00%: about $2,630/month. Payment used to test your ratios at 6.00%: about $3,199/month. If your contract rate were 3.00%, the 5.25% floor would apply instead (3.00% + 2% = 5.00%).

Illustrative figures only, rounded; not a quote or current rate. See today’s rates on our live board.

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)
  3. “Straight switches” and portfolio insurance (Dec 2024) (Department of Finance Canada)
  4. Guideline B-20: Residential Mortgage Underwriting Practices and Procedures (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.

Qualifying rate

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.