How to pass the mortgage stress test

Where does one household fall short?

Take a first-time buyer household earning $104,000 a year, with $52,000 saved for the down payment and $780 a month of other debt payments: a $520 car loan and $260 on credit cards. They're looking at homes around $470,000 and $495,000 with a 4.12% rate (the Bank of Canada average for new insured 5-year fixed loans, August 2026) over 25 years.

What would each lever take?

Our engine solves each lever on its own, holding everything else at the household's numbers. That shows what one change is worth before you combine them.

Two results surprise people. First, the gap between $470,000 and $495,000 looks small, but it changes which levers work: the 30-year amortization that clears $470,000 isn't enough for $495,000, and no contract rate at all gets $495,000 through. Second, the down payment needed for $495,000 lands at 20%, which makes the loan uninsured. Uninsured rates averaged 4.58% in August 2026, and at that rate the same household reaches 44.8% TDS and fails, so in practice they'd need about $109,200.

Is GDS or TDS stopping you?

Find this first, because it rules levers in or out. The stress test calculator names the binding ratio for your numbers, and the GDS and TDS calculator shows each line that goes into it.

• If TDS binds (you fail only once other debts are added), every dollar of monthly debt you remove counts in full. Debt payoff, a debt-free co-signer and a lower price all work. This household at $470,000 is here.
• If GDS binds (housing costs alone are over 39%), clearing debts does nothing for that price. With zero debts this household would still top out at $494,300, which is why the table says no debt cut reaches $495,000. Only levers that shrink the qualifying housing cost or raise income work: a lower price, a bigger down payment, a longer amortization, a lower rate above 3.25%, or added income.

For insured loans the two limits are fixed in federal regulation. For uninsured loans OSFI's Guideline B-20 lets each lender set its own ratio limits and method, so a household that sits right at the line can get different answers from different lenders.

Which lever should you try first?

Ranked by cost and certainty for this household. Your order may differ, so test each one on the stress test calculator.

1. Clear small revolving debts. Paying off the $8,700 card balance removes $260 a month and lifts the maximum to $482,500, enough for $470,000. Per dollar repaid, the cards free about $4.08 of buying power against $2.63 for the $18,000 car loan, because a lender counts a big monthly payment on a small card balance. The debt payoff ranker below, shows the same ranking.
2. Use a 30-year amortization if you're eligible. Insured loans can run 30 years only for first-time buyers and new builds; everyone else is held to 25. It lifts this household's maximum to $472,700, but the premium rises by 0.20 points of the loan and you pay interest for five more years.
3. Buy a little less. Free, certain, and it lowers your real payment too.
4. Save a bigger down payment. It works at both prices but takes $24,100 to $47,100 more cash. Each step down in loan-to-value also lowers the insurance premium.
5. Add a co-signer. A debt-free co-signer needs very little income here, but a co-signer with their own $1,000 of monthly payments needs far more, and they take on the whole debt. See how co-signers count in the stress test.
6. Find a lower rate. It helps only while your rate is above 3.25%, and only to a point (next section).
7. Use a lender outside the test. Last, because it needs 20% down and usually costs more.

Which debt should you clear first?

If TDS is your limit, not every payoff is worth the same. Enter your debts below: the ranker re-runs the full stress test for each payoff and ranks them by buying power per $1,000 repaid, once as if you paid with extra cash and once as if the money came out of your down payment. For this page's household, the credit cards ($8,700, counted at $260 a month) comes out ahead: about $4,080 of buying power per $1,000 repaid, against $2,628 for the car loan.

Why can't a lower rate get you past the floor?

The qualifying rate is the greater of your contract rate plus 2 points or 5.25%. Once your contract rate falls to 3.25%, the floor takes over: a 2.75% rate qualifies at 5.25%, the same as a 3.25% rate. A cheaper rate still lowers your real payment, but it stops helping you qualify.

That's why the table shows no rate for $495,000: the household would have to be tested at 4.79%, and the rules never test anyone below 5.25%. For $470,000, a rate of 3.45% would do it, about 67 basis points under the average. If you're shopping rates anyway, check whether an offer is a good rate.

Can you avoid the stress test with a different lender?

Only in narrow cases, and never with less than 20% down. Every insured mortgage has to pass the federal test, whatever the lender. With 20% or more down:

• Banks and federally regulated trust companies must apply OSFI's Guideline B-20. That includes lenders people call "B-lenders", such as Equitable Bank, Home Trust Company and Peoples Trust Company, which are on OSFI's list of regulated institutions. They may accept different income documentation, but the qualifying rate still applies. See B-lenders and the stress test.
• Credit unions follow their province. Saskatchewan's and Quebec's regulators prescribe the same formula, Alberta's last published guidance used an older version, and several provinces leave the buffer to each credit union. The province table has the details.
• Private lenders and mortgage investment corporations aren't federally regulated, so B-20 doesn't reach them. That's our reading of B-20's scope; OSFI doesn't name them. Expect higher rates and fees, and plan how you'll move back to a regular lender.

In this example, a lender qualifying at the 4.58% contract rate would pass the household at $495,000 with $99,000 down. A federally regulated lender at the same rate would need about $109,200 down. That $10,200 difference is all a lender outside the test buys this household, usually at a higher rate, so the debts are the cheaper fix.

What mistakes cost people a pass?

• Paying off debt with the down payment. It still helps here, but less: clearing the cards from savings outside the down payment adds $35,500 of buying power, while taking the same $8,700 out of the down payment adds only $24,200, because the loan grows and the premium with it. For the car loan the gap is wider: $47,300 against $27,400.
• Cutting debts when GDS is the problem. Above $494,300 this household fails on housing costs alone, so no amount of debt repayment helps at $495,000.
• Chasing a lower rate below 3.25%. The floor sets the test there. Shop for the rate because it lowers what you'll pay, not to qualify.
• Picking a co-signer for their salary alone. A lender that counts their income will usually count their debts. In the table, $1,000 a month of the co-signer's own payments raises the income they need from $4,600 to $31,900.
• Budgeting at the maximum. Passing at 6.12% means the lender thinks you could carry a higher payment, not that the real payment fits your life. Plan around the payment you'll make.