The Canadian Mortgage Stress Test Explained

Lenders check that you could afford your mortgage at a higher "qualifying rate": the greater of 5.25% or your contract rate plus 2 percentage points. Your housing costs at that rate are then compared with the GDS (39%) and TDS (44%) limits.

Example: a 4.29% contract rate is tested at 6.29%.

Written with AI assistance · Reviewed by the Talreon team · Updated 24 October 2026 · Figures log · Educational, not financial advice

The stress test is the minimum qualifying rate set by OSFI for uninsured mortgages at federally regulated lenders, with the same approach used for insured mortgages. It does not change the rate you pay; it changes how much you can borrow.

Step 1: the qualifying rate

Qualifying rate = max(5.25%, contract rate + 2%)

Contract 3.00% → tested at 5.25% (the floor).
Contract 4.29% → tested at 6.29%.

Step 2: the debt service ratios

GDS (gross debt service): mortgage payment at the qualifying rate, property tax, heating and half of condo fees, divided by gross income. Limit 39%.
TDS (total debt service): GDS costs plus all other debt payments. Limit 44%.

Worked example

Household income $120,000 a year ($10,000 a month). GDS limit: $3,900 a month for the mortgage payment, property tax and heating together. If tax and heating are $500, the stress-tested mortgage payment can be up to $3,400. With $600 of car and card payments, TDS allows $4,400 − $1,100 = $3,300, so TDS is the tighter limit here and caps the payment at $3,300 at the qualifying rate.

Who has to pass the stress test

For uninsured mortgages, usually where you put down 20% or more, OSFI's Guideline B-20 expects federally regulated lenders such as the big banks to qualify borrowers at the minimum qualifying rate. Insured (high-ratio) mortgages, where you put down less than 20%, must also be qualified at the greater of the contract rate plus 2% or 5.25% under the federal mortgage insurance rules. In practice almost every new purchase or refinance at a federally regulated lender is tested.

Provincially regulated lenders, such as many credit unions, are not covered by OSFI's guideline, although many apply a similar test. Ask your lender which rule it uses.

When you don't need to pass it again

Renewing with the same lender. No new stress test is required at renewal.
Straight switches at renewal. Since 21 November 2024, OSFI no longer expects the minimum qualifying rate to be applied when you move an uninsured mortgage to another federally regulated lender at renewal, as long as the loan amount (apart from up to $3,000 for transaction costs) and the remaining amortization don't increase. The federal government made the same change for insured mortgages from 16 December 2024.
Refinancing or borrowing more is treated as new lending, so the test applies again.

How the test changes what you can borrow

Because the payment is worked out at the higher rate, the test lowers the largest loan you can qualify for. As a rough guide, adding two percentage points to the rate raises the payment on a 25-year mortgage by roughly a fifth to a quarter, so the maximum loan falls by a similar share. Use the calculator for your own numbers rather than relying on this rule of thumb.

Ways to improve your result

Pay down or close other debts first. Car and card payments count in TDS.
Increase your down payment, which reduces the loan and may avoid insurance premiums.
Choose a home with lower property tax or condo fees, which count in GDS.
Add a co-borrower's income, if they also take on the debt.

Down payment and insurance

With less than 20% down you need mortgage loan insurance. Minimum down payment is 5% of the first $500,000 and 10% of the part above, for homes under $1.5 million; 20% at $1.5 million or more. CMHC premiums range from 0.60% to 4.00% of the loan.

Run your numbers

The Talreon stress test calculator works out the qualifying rate, payment, ratios and premium.

Frequently asked questions

What is the mortgage stress test rate in Canada?

The greater of 5.25% or your contract rate plus 2 percentage points.

What GDS and TDS ratios do lenders use?

Typically a maximum of 39% GDS and 44% TDS, calculated at the qualifying rate.

Does the stress test change my interest rate?

No. You pay your contract rate; the test only limits how much you can borrow.

Sources

Related calculators

Educational information only; not financial, tax, legal, or investment advice. Rules and rates change; confirm current figures with the official source or a qualified adviser.

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