Ontario Mortgage Stress Test: The Rate, the Inputs and the Exceptions

The mortgage stress test uses a qualifying interest rate to assess borrowing capacity. That rate can be higher than the rate charged on your mortgage. For a Burlington or Hamilton purchase, it is one part of the calculation alongside verified income, debts and the property's costs.

Which qualifying rate applies?

OSFI's current rule for most newly underwritten uninsured mortgages at federally regulated lenders is the greater of the contract rate plus two percentage points or 5.25%. The scope matters: this is not a claim that every Canadian mortgage transaction follows identical rules.

CMHC Purchase also uses the greater of contract plus two percentage points or 5.25% when calculating debt service. Confirm the applicable insurer and lender requirements for the product proposed.

Hypothetical examples: a 4.20% contract rate gives a 6.20% qualifying rate under that formula. A 3.00% contract rate gives 5.25%, because the floor is higher than 5.00%. These illustrate the rule; they are not current rate quotes.

Why income alone cannot give you a purchase limit

A household earning $130,000 does not have one universal mortgage limit. The result changes with accepted income, other debt payments, property taxes, heating, condo fees where applicable, the amortisation and the amount financed, including any insurance premium.

Ask for a breakdown showing each input. Comparing two qualification estimates is only useful when they use the same assumptions. Keep a separate household budget based on take-home pay and a payment you can carry comfortably.

Down payment and insurance are separate questions

For an eligible one- or two-unit owner-occupied purchase under the general CMHC rules, the minimum is 5% of the first $500,000 plus 10% of the remainder. On a $900,000 purchase, that is $65,000, not 5% of the whole price. The insured purchase price must be below $1,500,000; exactly $1,500,000 is outside that limit.

Insurance premiums depend on the actual product and conditions. Confirm the insurer, loan-to-value ratio, amortisation and any tax payable separately. If the premium is financed, include it in the mortgage balance used for qualification.

What changes the calculation?

• A larger down payment: this reduces the base loan. Check whether it also changes the applicable insurance premium, while retaining enough cash for closing.
• Lower other debt payments: ask how the lender calculates each obligation before choosing which balance to repay. The effect is file-specific.
• Accurate income documents: identify guaranteed pay, variable pay, business income and any permitted adjustments separately.
• The repayment period: at the same balance and interest rate, a shorter amortisation increases the payment. It should not be presented as an automatic way to improve borrowing capacity. A longer amortisation requires eligibility and increases repayment time.
• A co-borrower: review accepted income and existing debts together, plus the ownership and legal obligations. Adding a name does not automatically solve qualification.

Credit unions are not a universal exemption

Canada has both federal and provincial credit unions. The FCAC list of regulated entities confirms federal credit unions exist. Do not assume the words credit union establish a lower qualifying rate. Ask about that institution's rules for the specific insured or uninsured product.

Renewing and switching is different from buying

OSFI's uninsured straight-switch exemption covers eligible stand-alone amortising, non-readvanceable mortgages transferred between federally regulated institutions at renewal. Remaining amortisation cannot increase; the letter permits up to $3,000 added for transaction costs, with no equity take-out. The incoming lender must still assess the borrower.

A refinance, cash withdrawal or extended amortisation is a different transaction. Confirm whether the exemption applies before assuming a move to another lender will be assessed like a purchase or like a simple renewal.

Bring the inputs, then compare

Bring your income records, debt statements, down payment source and target property's taxes and fees to Craig for a file review. Ask which rule applies, what amount is supported and what conditions remain. A calculation is useful preparation; the lender's approval is a separate step.

Rules and source links checked October 10, 2026. General information, not a rate quote or approval. Lender, insurer, borrower and property conditions apply.