The mortgage stress test sounds scary—but it’s just a safety check. It doesn’t change your actual payments; it just makes sure you could still afford your home if rates went up. Since 2018, it has helped protect Canadian buyers from payment shock during rate hikes, such as the ones seen in 2022–2024.

However, it also makes qualifying more challenging, especially for first-time applicants. In this guide, you’ll get the facts you need: who must pass it, how it’s calculated, what changed in 2025-26, and how to prepare. Knowledge is your best tool. Let’s get started.

What Is the Mortgage Stress Test?

The mortgage stress test is a rule that requires you to qualify for a mortgage using a higher “test” interest rate than the one your lender is actually offering you.

In 2025, lenders use the greater of

• The Bank of Canada’s benchmark rate (5.25%)

• Your contracted mortgage rate plus 2%.​

• For example, if a lender offers 4%, you’ll be tested at 6%. If offered 5%, you must qualify at 7% — a financial cushion that ensures long-term affordability.

Important: This test does not change your real monthly payment. It only affects how much you’re approved to borrow.

Who Needs to Pass the Stress Test?

You’ll need to pass the stress test if you’re:

• Buying a home (with a federally regulated lender)

• Refinancing your mortg

• Switching lenders and borrowing more money

• Applying for a home equity line of credit (HELOC)

You do NOT need to pass it if you’re:

• Simply renewing your mortgage with the same lender

• Doing a “straight switch” in 2024–2025 (more on this below)

Note: The stress test applies to both insured (down payment < 20%) and uninsured (down payment ≥ 20%) mortgages.

What Changed in 2024–2025?

• Straight-switch exemption (September 2024):

  If you have an uninsured mortgage and are switching to a new lender without increasing your loan amount or changing your amortization, you do NOT need to retake the stress test.

• Renewing with a new lender?

  The straight-switch rule cover

  you—no stress test required, as long as you’re not borrowing extra.

• Borrowing more?

  If you want to refinance or take out additional funds (e.g., for renovations), the stress test still applies.

• New LTI cap (early 2025):

  OSFI introduced a portfolio-level Loan-to-Income (LTI) cap, requiring lenders to ensure the average loan-to-income ratio across their new uninsured mortgage portfolio remains at or below 4.5 times income.

• LTI applies to lenders, not you directly:

  This rule affects how banks manage their overall lending—not your individual application.

• Stress test still in place for buyers:

  As of October 2025, new homebuyers (and those refinancing) must still pass the individual stress test using the 5.25% minimum qualifying rate.

• Review coming in 2026:

  OSFI will evaluate whether to retain both rules, replace the stress test with the LTI cap, or use them in conjunction.

How Is the Stress Test Calculated?

Lenders use two key ratios to decide if you qualify:

1. Gross Debt Service (GDS) Ratio
   Your housing costs (mortgage, property tax, heat, 50% of condo fees) must be ≤ 39% of your gross (pre-tax) income.

2. Total Debt Service (TDS) Ratio
   All your debt payments (mortgage + car loan + credit cards + student loans) must be ≤ 44% of your gross income.

“But here’s the catch: these ratios are calculated using the stress test rate (5.25% or higher)—not your actual rate.”

For Example, if you have $70,000 Salary
Gross monthly income: $5,833
Max GDS (39%): $2,275/month

At 5.25% over 25 years, that qualifies you for roughly a $420,000 mortgage (assuming a 20% down payment and $200/month in property tax and heat). Without the stress test, you may qualify for $ 500,000 or more. That’s why many buyers feel “priced out.”

How to Pass the Mortgage Stress Test

If you’re close to qualifying—or falling short—here are five practical steps:

• Increase your down payment

  Even 5% more can lower your loan amount and improve your ratios.

• Pay down credit card or car debt

  Reducing non-mortgage debt lowers your TDS—often the easiest fix.

• Add a co-borrower

  A partner or family member with a steady income can boost your qualifying power.

• Choose a less expensive home.

  Use a mortgage affordability calculator to test scenarios before falling in love with a property.

• Get pre-approved early

  Know your real budget before you shop—so you don’t waste time on homes you can’t afford.

Insured vs. Uninsured Mortgages: What’s the Difference?

Why do insured mortgages have lower rates?

Because the insurer covers the lender in the event of default, the lender takes on less risk.

Final Thoughts

The mortgage stress test is one of the biggest hurdles for Canadian homebuyers today—but it’s not impossible to navigate. By understanding how it works, knowing your numbers, and planning, you can position yourself for approval without overextending.

At RealtyCourse, informed buyers make confident decisions. Whether you’re saving for your first down payment or preparing to renew, knowing the rules gives you control in an uncertain market.