- You must qualify at the higher of 5.25% or your rate plus 2%.
- Lenders cap GDS at 39% and TDS at 44% of gross income.
- Paying down other debt raises your qualifying amount.
Federally regulated lenders must check that you could still make your payments if interest rates rise. This is the mortgage stress test, set out in the Office of the Superintendent of Financial Institutions (OSFI) Guideline B-20. It limits the size of the mortgage you can get, regardless of the rate you are actually offered.
How the qualifying rate works
You must qualify at the higher of 5.25% or your contract rate plus 2%. At a contract rate of 4.50%, the qualifying rate is 6.50%. You still pay the contract rate; the higher rate is only used to test affordability.
GDS and TDS limits
Lenders also look at two ratios, calculated on your gross monthly income:
- Gross Debt Service (GDS) is mortgage payment, property tax, heating and half of condo (strata) fees. The maximum is 39% for insured mortgages.
- Total Debt Service (TDS) adds all other debts, such as car loans and credit cards. The maximum is 44%.
Example: $150,000 household income
Take a household with $150,000 of income, $500 a month in other debt and a $150,000 down payment, borrowing at 4.50% over 25 years. Monthly income is $12,500, so the GDS limit allows about $4,308 a month for the mortgage and housing costs. After the default property tax ($5,000 a year) and heating ($1,800 a year) used by the calculator, that works out to a maximum purchase price near $750,000, with a mortgage of about $600,000 including any CMHC premium.
At the 4.50% contract rate the payment on that mortgage would be about $3,321 a month, but the lender qualifies you on the higher stress-test payment, about $4,019 a month for the mortgage alone.
Insured and uninsured mortgages
Insured mortgages have a down payment under 20%, so mortgage default insurance from CMHC, Sagen or Canada Guaranty applies, with premiums of 4.00%, 3.10% or 2.80% depending on the down payment. Unlike Ontario, BC charges no PST on the premium. Insured mortgages are available for homes up to $1,500,000. The minimum down payment is 5% on the first $500,000 and 10% on the portion above that.
Ways to raise your qualifying amount
- Pay down or consolidate car loans and credit cards before applying: the TDS counts them.
- Increase the down payment, which lowers the mortgage and the insurance premium.
- Add a co-borrower's income.
- Choose a longer amortization (up to 30 years for eligible first-time buyers and new builds), which lowers the payment but increases lifetime interest.
Run your own numbers in the mortgage affordability calculator.
Find your maximum home price →
Frequently asked questions
Does the stress test change my actual interest rate?
No. It only affects how much a lender will approve.
Do credit unions use the stress test?
Provincially regulated lenders, including BC credit unions, are not bound by OSFI's B-20, though many apply similar tests.
What is the GDS ratio?
The share of gross income spent on housing costs: mortgage, property tax, heating and half of strata fees.
What is the TDS ratio?
GDS plus all other debt payments, as a share of gross income.