How the Canadian Mortgage Stress Test Works
Since January 2018, all federally regulated lenders in Canada must qualify mortgage applicants at the higher of: their contract rate plus 2%, or the Bank of Canada's qualifying rate (currently 5.25%). This is called the mortgage stress test.
The stress test ensures you can afford your mortgage even if rates rise. It typically reduces your maximum qualifying amount by 15–20% compared to what you'd qualify for without it.
Example: If you're getting a mortgage at 6.25%, the stress test qualifies you at 8.25% (6.25% + 2%). A household with $120,000 income qualifies for significantly less than they would at the contract rate alone.
GDS and TDS Ratios Explained
Canadian lenders use two debt ratios to determine how much mortgage you can carry:
- Gross Debt Service (GDS): (Monthly mortgage payment + property taxes + heating) ÷ gross monthly income. Maximum: 39%.
- Total Debt Service (TDS): GDS + all other monthly debt payments ÷ gross monthly income. Maximum: 44%.
If either ratio exceeds its limit, you won't qualify for the full amount. Our calculator tests both and shows you whichever is the binding constraint.
How Much Can I Afford with $100,000 Income?
With $100,000 household income, $80,000 down, no existing debts, and a 6.25% mortgage rate over 25 years, you'd typically qualify for a home price in the range of $475,000–$520,000 under the stress test. Results vary based on property taxes in your area, existing debts, and lender policies.
Ways to Increase Your Affordability
- Save a larger down payment: More down means a smaller mortgage and lower GDS/TDS ratios.
- Pay down existing debts: Eliminating car loans or student loans before applying improves your TDS ratio.
- Increase household income: Adding a co-borrower or income raises the ceiling on both ratios.
- Choose a longer amortization: A 30-year amortization lowers monthly payments, but only applies to uninsured mortgages (20%+ down).
- Wait for rate decreases: A lower rate reduces both the qualifying amount and monthly payments.