Say you borrow $500,000 at 4.99% over 25 years. The stress test rate comes out at 6.99%, so the payment used to qualify is $3,498.99 a month, even though the payment you would actually make is $2,905.18. Passing takes about $122,533 in income, which means $120,000 falls just short.
What the stress test checks
Federal rules tell lenders to confirm you could still pay if rates went up. You have to qualify at the higher of your contract rate plus 2 percentage points, or 5.25%. With a 4.99% contract rate, that gives 6.99%. Your real payment stays on the contract rate.
Who has to pass it
Insured and uninsured mortgages at federally regulated banks both face the test, and some other lenders follow it as well. Renewing with your current lender usually skips a new test. Switching to a different lender can bring it back, depending on the mortgage.
How the required income is found
Lenders look at two ratios. Housing costs (the payment at the test rate, property tax, heat and half of any condo fees) should stay under 39% of gross income. All your debt payments together should stay under 44%. The calculator works out the income each ratio demands and shows the higher of the two.
What moves the result
A lower contract rate only lowers the test rate while it is above 3.25%. Debts push the income you need up. A bigger down payment shrinks the loan and the payment. A co-borrower adds income to the test. Change one field at a time and you will see which lever matters most for your file.
Worked example at the default numbers
Start with the $500,000 mortgage. At the test rate the payment is $3,498.99, and that amount plus taxes and heat has to fit inside 39% of income. Then every debt must fit inside 44%. Try $125,000 of income in the form above and the result flips to a pass.
If you do not pass
You have options. Borrow less, pay off debts, bring in a co-borrower or shop for a cheaper home. A longer amortization helps on an insured mortgage, but only up to 30 years. Some borrowers turn to a lender outside the federal rules, though that usually means higher rates and other costs.
Why the rule exists
The test protects borrowers from taking on more than they can carry if rates climb, and it protects lenders too. Critics say it keeps some buyers out of the market. Supporters say it prevented many defaults when rates jumped. Whichever side you take, it sets how much you can borrow.
Extra limits from lenders
Some lenders add rules on top of the federal ones. They might cap total debt at a lower ratio, or ask for a bigger down payment on a rental property. Others accept a lower credit score in exchange for a higher rate. Shopping around shows what each one will accept.
Where to go next
Turn the result into a price range with the mortgage affordability calculator. To see the payment on one specific home, use the mortgage payment calculator. A lender’s pre-approval then confirms the final figure.
Frequently asked questions
What is the mortgage stress test rate?
The higher of your contract rate plus 2 points or 5.25%.
Do I need to pass the stress test to renew?
Usually not if you stay with your current lender. Switching lenders can trigger one.
What income do I need to pass?
Enough that housing costs stay under 39% of income and total debt under 44%, at the test rate.
Does the stress test change my actual payment?
No. It is a qualification check. You pay at your contract rate.
Does a co-borrower help?
Yes. Their income counts toward both ratios.
Are these limits fixed?
They are common guidelines. Lenders can use their own limits within the rules.
Sources and updates
Last reviewed: . Full disclaimer. How we build calculators. Editorial policy.
Estimate only. This calculator gives general information for planning. It is not tax, legal or financial advice, and it is not affiliated with the City of Toronto, MPAC or the Canada Revenue Agency. Results depend on the numbers you enter and may differ from official amounts. Check official sources or a qualified professional before you decide.