Canada's mortgage stress test generally uses 5.25% or your rate plus two percentage points, whichever is higher. Renewal rules and a $3.5M example.
This is for Toronto buyers, investors and owners who finance with a bank and want to know one thing: what rate will my lender actually test me at? The short answer: for a new mortgage at a federally regulated lender, you generally qualify at the higher of 5.25% or your mortgage contract rate plus two percentage points.
The formula applies to insured and uninsured mortgages, with exceptions for qualifying renewals.
The stress test can reduce the loan a buyer qualifies for. Below I explain how the test works, what changed for renewals, and how I run the numbers on a hypothetical $3,500,000 home.
What is the mortgage stress test in Canada?
The stress test is a qualifying rule. Your lender calculates whether you could afford your payments at a rate higher than the one you will actually pay. The official name is the minimum qualifying rate, or MQR.
For uninsured mortgages, the rule comes from OSFI Guideline B-20. OSFI (the Office of the Superintendent of Financial Institutions) is the federal regulator of banks and other federally regulated lenders. B-20 covers loans to individuals secured by one to four unit homes, including home equity lines of credit.
An uninsured mortgage has no mortgage default insurance. At a federally regulated lender, a home purchase mortgage generally requires insurance above 80% loan-to-value, meaning less than 20% down. Putting down at least 20% does not necessarily mean the mortgage is uninsured: lenders can also insure low-ratio loans.
What is the stress test rate for uninsured mortgages?
OSFI's current rule is the greater of the contract rate plus 2% or 5.25%. OSFI calls the 2% the buffer and the 5.25% the floor. It reviews both at least once a year.
When OSFI published its January 29, 2026 quarterly release, it stated that existing debt service expectations in B-20 would continue to complement its loan-to-income limits. As of September 15, 2026, the 5.25% floor and 2% buffer remain OSFI's published position.
Any contract rate above 3.25% produces a qualifying rate above 5.25%.
Does the stress test apply to insured mortgages?
Yes. The federal government sets the rule for insured mortgages (those with mortgage default insurance). It uses the same formula: the greater of the contract rate plus 2% or a 5.25% floor, in effect since June 2021. CMHC's underwriting guidance applies that qualifying rate to fixed, adjustable and variable mortgages.
For higher-priced purchases, high-ratio insurance is unavailable. Since December 15, 2024, the price cap for high-ratio insured mortgages has been $1.5 million. The purchase price must be below that amount. At $1.5 million or more, a purchase financed by a federally regulated lender generally needs at least 20% down and an uninsured loan.
Do you have to pass the stress test at renewal?
Generally, an ordinary renewal with your current lender does not require another prescribed stress test. Qualifying switches can also be exempt, although the new lender still assesses your application. The rules differ by mortgage type.
- Uninsured: since November 21, 2024, OSFI does not prescribe the MQR for qualifying stand-alone uninsured mortgages switched between federally regulated lenders at renewal. The remaining contractual amortization cannot increase. Stand-alone mortgages must be amortizing, not readvanceable, and outside combined loan plans. Up to $3,000 may be added for switching costs; no equity take-out is permitted.
- Low-ratio insurance: for mortgage insurance applications submitted on or after December 16, 2024, the MQR is no longer required on qualifying low-ratio straight switches at renewal, with loan-to-value up to 80%. The original mortgage must have been stress tested at a federally regulated lender, the amortization schedule must be unchanged, and the balance may rise by only $3,000 to cover switching costs.
Already-insured mortgages can also switch lenders at renewal without another prescribed stress test, as the federal government confirmed before the low-ratio change.
The caveat: taking out equity or extending contractual amortization falls outside these straight-switch exemptions. The new lender still underwrites the application and may use its own qualifying rate. An exemption from the prescribed rate does not guarantee approval.
How is qualifying income calculated?
Lenders compare your housing costs at the qualifying rate to your gross income.
Two ratios matter. GDS (gross debt service) is mortgage payment, property tax and heat divided by income. TDS (total debt service) adds your other debts. CMHC sets debt service limits of 39% GDS and 44% TDS. For uninsured loans, B-20 has each lender set its own maximums. Condo fees and ground rent can also enter these ratios where applicable.
Here is a hypothetical $3,500,000 Toronto detached home with 30% down, so a $2,450,000 uninsured mortgage on a 25-year amortization. I assume a 4.35% contract rate for illustration. Your own rate will differ.
| Item | At contract rate | At qualifying rate |
|---|---|---|
| Interest rate | 4.35% | 6.35% |
| Monthly payment | $13,357 | $16,189 |
| Annual payments | $160,278 | $194,263 |
| Property tax (assumed) | $19,950 | $19,950 |
| Heating (assumed) | $3,000 | $3,000 |
| Total housing cost | $183,229 | $217,213 |
| Illustrative income at 39% GDS | about $469,800 | about $557,000 |
Assumptions: payments are calculated with semi-annual compounding. Property tax applies Toronto's 2026 residential rate of 0.767311% to an assumed assessed value of $2,600,000. Heating is assumed at $250 a month. There are no other debts. The 39% GDS ratio is an illustrative assumption for this uninsured loan, not a required lender limit.
The result: using the assumed 39% GDS limit, the stress test adds roughly $87,000 to the illustrative income requirement. Because 6.35% is above 5.25%, the buffer, not the floor, sets the qualifying rate here.
Where loan-to-income limits fit
Since each lender's 2025 fiscal year, OSFI has also applied loan-to-income limits. Each lender must manage how many new uninsured loans exceed 4.5 times the borrower's income. It is a portfolio limit, not a personal cap. In my example, $2,450,000 against $557,000 is about 4.4 times, which sits close to that line.
How I help plan a purchase around the stress test
I run the qualifying rate first and the purchase price second. With clients, I start from verified income (lenders want documents such as Notices of Assessment) and work backward to a loan amount at the higher of 5.25% or the contract rate plus two percentage points.
A larger down payment reduces the mortgage payment that gets stress tested, with other assumptions unchanged. Paying off a car loan or a line of credit before applying can also improve TDS.
One risk I flag every time: passing the test does not mean the payment is comfortable. The test uses gross income, while you pay with after-tax dollars. I would rather a client clear the test with room than at the limit. If income comes through a corporation or trust, involve your accountant early.
What this means for you
- Luxury buyer: at $1.5 million or more, plan on an uninsured purchase mortgage at a federally regulated lender. Budget at the higher of 5.25% or your expected contract rate plus two percentage points, and expect the lender to look closely at how your income is documented. My note on the condo-to-freehold spread covers the upsizing side of that decision.
- Investor: B-20 tells lenders to apply rigorous diligence to loans that depend on rental income. Do not assume projected rent will carry a one to four unit purchase through qualification.
- Rental owner: at renewal, a straight switch can now be a real option, so compare lenders rather than signing the first renewal letter. For five or more units, financing sits outside B-20's one to four unit definition; see my multifamily analysis.
- Anyone renewing: rates at renewal can still move against you. My piece on what the bond market signals for fixed rates explains why.
Frequently asked questions
Is the stress test rate 5.25%?
Only when your contract rate is 3.25% or lower. Otherwise, it is your contract rate plus 2%.
Does the stress test apply to variable-rate mortgages?
Yes. CMHC's guidance applies the same qualifying rate to fixed, adjustable and variable mortgages, and OSFI's MQR applies to most new uninsured mortgages at federally regulated lenders, including variable-rate loans.
Do I need to requalify if I renew with my current bank?
Generally, an ordinary renewal does not require another prescribed stress test. Qualifying switches can also be exempt. Taking out equity or extending contractual amortization falls outside the straight-switch exemptions, and the lender still assesses your application.
Has OSFI changed the stress test in 2026?
As of September 15, 2026, OSFI's published MQR remains the higher of 5.25% or the contract rate plus two percentage points. Its MQR page was last modified on January 29, 2026.
Sources
- Minimum qualifying rate for uninsured mortgages, Office of the Superintendent of Financial Institutions
- Guideline B-20: Residential mortgage underwriting practices and procedures, Office of the Superintendent of Financial Institutions
- OSFI exempts uninsured mortgage straight switches from the prescribed MQR, Office of the Superintendent of Financial Institutions
- OSFI's Quarterly Release, January 29, 2026, Office of the Superintendent of Financial Institutions
- Loan-to-income limits for uninsured mortgage portfolios, Office of the Superintendent of Financial Institutions
- Statement on the Canadian housing market, December 17, 2021, Department of Finance Canada
- Straight switches and portfolio insurance, Department of Finance Canada
- Boldest mortgage reforms in decades come into force today, Department of Finance Canada
- Calculating GDS / TDS, Canada Mortgage and Housing Corporation
- Insurable Housing Loan Regulations, Department of Justice Canada
- Property tax rates and fees, City of Toronto