How does the stress test work?
When you apply, the lender works out your payments at the stress test rate, also called the minimum qualifying rate. It’s the higher of:
- the rate you’ve been offered plus 2%, or
- 5.25%
So on a 4.5% mortgage you must qualify at 6.5%, and on a 3% mortgage at 5.25%.
The stress test rate is the higher of your rate plus 2% or 5.25%.
The idea is to make sure you could still manage if rates went up when you renew.
What does the lender check?
At the stress test rate, your costs must fit within two limits. For mortgages with mortgage insurance (less than 20% down), CMHC sets them at:
- 39% of your gross income for housing (gross debt service, or GDS): the mortgage payment at the stress test rate, property tax, heating and half of any condo fees
- 44% for housing plus all your other debts (total debt service, or TDS), such as car loans, student loans and credit cards
On $100,000 a year, that’s up to $3,250 a month for housing. For mortgages without insurance, lenders set their own limits.
An example
You’re borrowing $500,000 over 25 years at 4.5%:
| Rate | Monthly payment | |
|---|---|---|
| What you’d actually pay | 4.5% | $2,767 |
| What you must qualify for | 6.5% | $3,349 |
The lender checks your budget could cover $3,349 a month, even though you’d pay $2,767.
How much less can I borrow?
Say you earn $100,000 a year, put 20% down, have no other debts, and are offered 4.5%. That’s close to the 4.49% banks charged on average for new 5-year fixed mortgages without insurance in July 2026. With property tax of 0.8% of the price and $100 a month for heating:
- With the stress test (qualifying at 6.5%), you could buy a home up to about $522,800.
- If you only had to qualify at your real rate, it would be about $618,300.
So the test lowers the price you can afford by about $95,500, or 15%. Your actual payment on the $522,800 home would be about $2,315 a month.
Who has to pass it?
- Banks and other federally regulated lenders must use it on every new mortgage, whether or not it has mortgage insurance. You also need to pass it to refinance or take out a home equity line of credit.
- Credit unions are regulated by their province, and the rules vary. In Quebec, the caisses must use the same test. Other provinces, such as Ontario and BC, leave credit unions to set their own buffer. But a mortgage with less than 20% down is insured under federal rules, which use the same qualifying rate.
Do I need to pass it again when I renew?
- Renewing with your current lender: no.
- Switching to another bank at renewal: no, as long as you don’t borrow more or lengthen the amortization (a “straight switch”). This changed on November 21, 2024 for mortgages without insurance. Insured mortgages didn’t need to requalify before that either.
- Borrowing more, or refinancing: yes.
Other rules that decide what you can buy
Minimum down payment
- 5% of the first $500,000
- 10% of the part from $500,000 to $1.5 million
- 20% if the home costs $1.5 million or more
So a $600,000 home needs at least $35,000 down.
Mortgage insurance. With less than 20% down, you pay a premium that’s added to your mortgage: 2.8% of the mortgage with 15% down, 3.1% with 10% down and 4% with 5% down. In Ontario, Quebec and Saskatchewan, you also pay provincial sales tax on the premium, at closing.
30-year amortizations. With less than 20% down, most buyers can spread the mortgage over at most 25 years. Since December 15, 2024, first-time buyers and buyers of newly built homes can take 30 years, for 0.2% more in premium. A longer amortization lowers the payment, so it can help you pass the stress test. You count as a first-time buyer if you’ve never bought a home in Canada, or haven’t lived in a home you or your partner owned in this calendar year or the previous four.
Work it out for your income
The mortgage stress test calculator shows your qualifying rate, your GDS and TDS ratios, and the most you could borrow. Our mortgage affordability calculator applies the stress test and the GDS and TDS limits to your income, debts and down payment. See the payment on any home, with the mortgage insurance, in our mortgage calculator.