Test mortgage affordability at the qualifying rate.
Max affordable home price
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Qualifying rate
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Max monthly payment (GDS 32%)
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Your breakdown
Updates live as you type| Step | Value (CAD) |
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Worked example
Take a household earning $150,000, putting $80,000 down, looking at a 25-year amortisation and a 5.5 percent contract rate. The stress test ignores that 5.5 percent and qualifies the borrower at the higher of the 5.25 percent benchmark floor or the contract rate plus 2 percent. Here 5.5 plus 2 is 7.5 percent, which beats the floor, so 7.5 percent is the qualifying rate. The Gross Debt Service rule limits the mortgage payment to 32 percent of monthly income, and $150,000 divided by twelve times 0.32 is $4,000 a month. Discounting that $4,000 payment over 300 months at 7.5 percent gives a maximum loan of about $541,278. Adding the $80,000 down payment, the household qualifies for a home of roughly $621,278. The point of the exercise is that the buyer must prove they could carry payments at 7.5 percent even though they will actually pay 5.5, which protects them against a jump at renewal.
How it is calculated
The mortgage stress test is the OSFI B-20 rule that every federally regulated Canadian lender must apply. It sets a qualifying rate equal to the higher of a 5.25 percent benchmark or your contract rate plus two percentage points, and you must be able to afford the payment at that higher rate. The tool first computes the qualifying rate from your contract rate, then caps the monthly payment at 32 percent of gross income using the Gross Debt Service ratio. It converts that capped payment into a maximum loan by discounting it as an ordinary annuity over your amortisation period at the qualifying rate, and finally adds your down payment to give a maximum purchase price. Because the loan is sized at the stressed rate rather than the rate you will actually pay, the qualifying amount is smaller than a naive payment calculation would suggest. This simplified version uses GDS only; a full lender assessment also runs the Total Debt Service ratio and counts property tax, heat, and condo fees, so confirm with a mortgage broker before relying on the figure.