Stress test
You pay the contract rate. You qualify at the higher one.
The minimum qualifying rate is the single largest constraint on what most Canadians can borrow. It does not change your payment by a dollar — it changes how large a mortgage the lender is allowed to conclude you can carry.
Executive summary
Stress-test calculator
Set a comfortable monthly principal-and-interest payment and your expected contract rate. The calculator shows the maximum mortgage each rate supports and the reduction the qualifying rate imposes.
At your contract rate
At the qualifying rate
Reduction in maximum
Illustrative. Assumes a 25-year amortization and monthly payments, and excludes property tax, heat, condo fees and other debts, all of which reduce the amount further through your ratios.
The maths, step by step
Step 1. Determine the qualifying rate: max(contract + 2.00%, 5.25%).
Step 2. Compute the qualifying payment on the mortgage amount using the amortizing payment formula P = L × i ÷ (1 − (1 + i)−n), where i is the periodic rate derived from the qualifying rate and n is the number of payments in the amortization.
Step 3. Add property taxes, heating and, where applicable, half of condo fees. Divide by gross monthly income to get GDS.
Step 4. Add every other monthly debt obligation, including a percentage of revolving balances and the payment on the full limit of any line of credit. Divide by gross monthly income to get TDS.
Step 5. Compare both against the lender's limits. The lower of the two resulting maximum amounts is your ceiling. Full detail is in the debt-service ratio guide.
Worked example: what the test costs one household
Impact at different contract rates
| Contract rate | Qualifying rate | Max at contract | Max at qualifying | Reduction |
|---|---|---|---|---|
| 3.09% | 5.25% | $626,428 | $500,628 | 20.1% |
| 3.59% | 5.59% | $593,515 | $484,282 | 18.4% |
| 4.09% | 6.09% | $563,043 | $461,670 | 18.0% |
| 4.59% | 6.59% | $534,804 | $440,631 | 17.6% |
| 5.09% | 7.09% | $508,608 | $421,034 | 17.2% |
| 5.59% | 7.59% | $484,282 | $402,763 | 16.8% |
Note the shape: the proportional reduction is largest when rates are low, because two percentage points is a bigger relative change at 3% than at 6%. The 5.25% floor only binds when contract rates are below 3.25%.
Where the federal test does not apply
| Situation | Federal test applies? | What that means |
|---|---|---|
| Purchase at a federally regulated lender, insured or uninsured | Yes | The qualifying rate governs the payment used in your ratios. |
| Straight renewal with your existing federally regulated lender | Generally no re-qualification | Which is exactly why lenders rarely offer their best pricing on a first renewal letter. |
| Switching lenders at renewal | Treated as a new application at the new lender | Policy on how the test is applied to straight switches has varied; confirm with the lender before assuming. |
| Refinance | Yes | The larger mortgage must qualify at the qualifying rate, capped at 80% loan-to-value. |
| Provincially regulated credit union | Not bound by the federal framework | Each sets its own standard, which may or may not mirror the federal test. |
| Alternative or private lender | No | Flexibility is priced in through rate, fees and term length, and the exit plan matters more than the entry. |
Failure modes and recovery
| Failure | Recovery action |
|---|---|
| Short by a small amount on GDS | Increase the down payment, extend the amortization where the program allows, or target a property with lower taxes or condo fees. |
| Short on TDS because of revolving credit | Pay down or close lines of credit. Lenders count the payment on the full limit, so an unused $30,000 line still costs you capacity. |
| Passed the test but the appraisal changed the loan | Re-run the ratios on the revised loan amount before removing your financing condition. |
| Contract rate rose after the pre-approval | The qualifying rate rose with it. Confirm the maximum is still valid rather than assuming the original figure holds. |
| Declined at one lender and told 'nobody will approve this' | Ratio limits on uninsured files vary. A decline at one lender's threshold is not a market-wide decline. |
Written and reviewed by the Canadian Mortgage Compass Editorial Desk. This page is general information for Canadian readers and is not mortgage, legal, tax, or financial advice, and not an offer of credit. Rules, rates, and lender policies change; confirm your own situation with a licensed mortgage professional in your province. Editorial policy · Corrections