Canadian Mortgage Stress Test

What this means

No waffle. Just the number and how it was worked out.

Formula used

Calculates the qualifying rate (contract rate +2% or 5.25% BoC benchmark, whichever is higher), then computes monthly payments and checks the GDS (≤39%) and TDS (≤44%) ratios against CMHC guidelines.

Worked example

C$120,000 income, C$650,000 mortgage at 5.5% over 25 years, C$4,800 taxes, C$150 heating: qualifying rate 7.5%, monthly payment ~C$4,750, GDS ~52% — fails the stress test.

Common questions

What is the Canadian mortgage stress test?
The stress test requires borrowers to qualify at the higher of their contract rate plus 2%, or the Bank of Canada's minimum qualifying rate (currently 5.25%). This proves you could still afford the mortgage if rates rose after you locked in.

What are GDS and TDS ratios?
GDS (Gross Debt Service) is your monthly housing costs — mortgage payment, property taxes, and heating — as a share of gross monthly income. The limit is 39%. TDS (Total Debt Service) adds all other debts. The limit is 44%. Both must pass.

Does the stress test apply to renewals?
From November 2024, federally regulated lenders no longer require an uninsured borrower to pass the stress test when switching lenders at renewal on a straight renewal (no new money). But new purchases and refinances still require it.

Can credit unions avoid the stress test?
Provincially regulated lenders like credit unions are not subject to OSFI's stress test rules, though many apply similar criteria voluntarily. Private lenders are also exempt but typically charge higher rates.