Understanding Mortgage Stress Tests in Canada
You’ve found the perfect home. You’re ready to apply for a mortgage. But then — you hear about something called a mortgage stress test. What is it? Why does it matter? And how does it impact how much home you can afford?
In this blog, we’ll break down exactly what the mortgage stress test is, how it works in Canada, and how to prepare for it — especially if you're planning to buy, refinance, or switch lenders.
What is the Mortgage Stress Test?
The mortgage stress test is a government-mandated rule designed to make sure Canadians can still afford their mortgage payments if interest rates rise in the future.
It’s not a physical test — but it can feel like a financial one. Lenders assess whether you can still carry your mortgage if your interest rate was significantly higher than what you’re being offered today.
The goal is simple: protect borrowers from future rate hikes and reduce the risk of mortgage defaults.
How Does the Stress Test Work?
Whether you're applying for a new mortgage, refinancing, or switching lenders, you must qualify at the higher of:
- The current Bank of Canada benchmark rate (currently 5.25%)
- Or your actual mortgage rate + 2%
Example:
Let’s say your lender offers you a 5-year fixed mortgage at 4.5%.
Under the stress test, you need to qualify as if your rate were 6.5% (4.5% + 2%).
This doesn't mean you'll pay that higher amount — but you need to prove that you could.
Who Has to Pass the Stress Test?
Most borrowers do. This includes:
- First-time homebuyers
- Existing homeowners who want to refinance
- Borrowers switching to a new lender at renewal
The only major exception? If you're renewing your mortgage with the same lender, you may not need to re-qualify under the stress test — depending on your lender’s policies.
Why Is the Stress Test Important?
Because it directly affects how much you can borrow.
If you’re making $100,000 per year, you might qualify for a $600,000 mortgage at your contract rate. But under the stress test, you may only qualify for $525,000. That’s a significant gap that can influence your home-buying options.
The stress test ensures that if interest rates go up (and they often do), your payments don’t suddenly become unaffordable. It’s a buffer. A safety net. And while it can be frustrating, it’s also designed to keep your finances stable.
How to Improve Your Chances of Passing
If you're nervous about passing the stress test, here are some steps that can help:
1. Increase Your Down Payment
A larger down payment means a smaller loan — and that makes it easier to qualify.
2. Pay Down Debts
Your overall debt load is factored into your mortgage approval. Reducing your credit card or car loan balances can improve your debt ratios and give you more breathing room.
3. Improve Your Credit Score
Better credit = better interest rates = easier qualification. Even a 20-point improvement can make a difference.
4. Consider a Longer Amortization
Stretching your mortgage to 30 years (if you’re putting down 20% or more) can lower your monthly payments, helping you meet the stress-tested amount.
5. Work with a Mortgage Broker
A broker can assess your full financial picture and present your application to lenders most likely to approve it. We also explore alternative lending solutions if traditional banks say no.
Final Thoughts
The mortgage stress test isn’t meant to block your path to homeownership — it’s meant to ensure you're financially equipped for the journey. It may reduce how much you can borrow, but it also helps prevent future surprises when rates rise.
At Anton Mortgage, we’ve helped hundreds of Canadians navigate this exact challenge. We’ll help you understand your numbers, increase your approval odds, and secure a mortgage that fits your life now — and later.
Need help understanding your stress-tested affordability?
Let’s talk. We’ll break it down clearly and show you real options based on your income, credit, and goals.
Contact Anton Mortgage Today — serving Ontario families with smart mortgage solutions.