Mortgage stress test

The mortgage stress test is a affordability check that federally regulated lenders run before approving a mortgage in Canada. Instead of qualifying a borrower at the rate in the contract, the lender calculates whether the household could still make payments if the rate were higher. The qualifying rate is the greater of the contract rate plus two percentage points or a floor set by the federal regulator, OSFI, which is currently 5.25 percent.

The test applies to insured and uninsured mortgages from banks, federally regulated trust companies and credit unions that fall under federal rules. Provincially regulated lenders, private lenders and many alternative lenders have their own criteria, so the test does not always apply to them in the same way.

Why it matters: the stress test caps the size of a mortgage a buyer can get, which in turn shapes how much a household can put toward a purchase. For people in rent to own arrangements in Ontario, where the aim is usually to qualify for a conventional mortgage at the end of the lease term, the test can decide whether the buyer is ready to take over the home. A higher qualifying rate means a smaller approved loan for the same income and debts, even when the actual payment would be lower.

The test is one piece of a broader set of mortgage rules, not a separate product. Anyone reviewing their options can get a clearer picture from a mortgage and credit support provider listed in this directory.

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