In 2018 it became a requirement for all Canadian buyers to undergo a Mortgage Stress Test and that also includes buyers who have 20% or more as a down payment. From a lender's perspective a stress test tells them how you and your financial situations might be affected by an unforeseen situation that impacts your finances. Each home buyer will need to show the lender that they will be able to afford their mortgage payments using the lenders minimum “qualifying rate”.

• How much do you have saved for a down payment?

• Determine what Interest rate you qualify for?

• What kind of monthly mortgage payment can you afford?

• Will you be able to afford a rate increase of 2% or a rate of 5.25%?

• What is your gross debt service ratio (GDS)?

• What is your total debt service ratio (TDS)?

• Do you have any outstanding debt you can pay off before applying for a mortgage?

• Is it a good idea to apply for the maximum amount you qualify for?

Can you avoid a stress test?

The short answer is yes. The stress test is designed for federally regulated banks and lenders. Some lenders, like private lenders or provincially regulated lenders, are not under the OSFI’s jurisdiction. Keep in mind that alternative subprime lenders may approve you with fewer hoops to jump through, but due to new housing regulations alternative lenders are now able to charge even more for their services so it could cost you more in the end. If you have any further questions about the stress test requirements, please don’t hesitate to give us a call. We look forward to hearing from you.