If you are hoping to buy a home or already own one, the mortgage stress test is something you can’t ignore. It is one of the biggest factors that decides how much you are allowed to borrow in Canada. Most times, it is very tough to pass.

Even if a prospective home buyer’s income looks good and with a down payment ready, the stress test can still lower their approval amount.

So, how does the mortgage stress test work in 2025? You might also be curious about what has changed and how to understand the mortgage qualification rules. In the following, we will cover all these details and walk you through everything, step by step.

What is the mortgage stress test?

The mortgage stress test is a federal rule set by the Office of the Superintendent of Financial Institutions (OSFI). As one of Canada’s mortgage qualification rules, it checks if you can afford payments if interest rates rise.

To pass, you must qualify at your actual mortgage rate plus 2%, or the Bank of Canada’s minimum qualifying rate (whichever is greater). For example, if a mortgage lender offers 5.25%, you will get tested at 7.25%.

It doesn’t matter how ready you feel. Your mortgage approval still depends on this calculation. In most cases, it means qualifying for less than you expected. The essence of the rule is to protect buyers from financial stress. If rates rise later, you will still be able to manage payments.

2025 Updates to the Mortgage Stress Test

Earlier this year, the Bank of Canada held its key interest rate steady at 2.75%. After a few earlier cuts this year, it looked like good news for borrowers. Unfortunately, lenders are not loosening up.

The mortgage stress test rules haven’t changed. You still have to qualify at a rate much higher than what you will pay. It is a tough filter, and it is still in full effect. This is because rates are still unpredictable. The market is adjusting, and banks want protection in case borrowing costs swing back up.

How CMHC Limits Factor Into Approval

If your down payment is under 20%, your mortgage must be insured by the Canada Mortgage and Housing Corporation (CMHC). However with this insurance comes tough rules. These are called CMHC limits, and they directly affect how much you can borrow.

Here is what they focus on:

  • Gross Debt Service (GDS): This is the portion of your income that goes to housing costs.
  • Total Debt Service (TDS): This is the portion that covers all your monthly debts (credit cards, car loans, etc.).
  • Your income, home price, and mortgage size.

Even if you pass the stress test, you still need to meet these CMHC limits, as they act as very strict layers of approval.

What This Means for Buyers in 2025

For buyers in 2025, these mortgage qualification rules shape what you can afford, plain and simple.

If you earn $80,000 a year, have strong credit, and a solid down payment, the mortgage stress test and qualification rules can still shrink your approval amount. You may think that you are ready for a $600,000 home. On paper, though, the numbers could bring you closer to $480,000.

Fortunately, there is some good news, too. The CMHC now insures homes up to $1.5 million (up from $1 million), even with less than 20% down. This change gives buyers more room, especially in high-priced areas like Ontario.

Also, first-time buyers can now access 30-year amortizations, not just on new builds. This can lower monthly payments and offer more breathing room.

Northwood Mortgage Understands the Stress Test

Passing the stress test and other mortgage qualification rules isn’t just about numbers but more about strategy. At Northwood Mortgage, we explain the stress test, CMHC limits, and other rules to help you understand what lenders want to see.

Our services extend to shopping the market for the best mortgage rates and loan terms that fit your income and plans. We also guide you through renewals or refinancing when better options appear.

Being the go-to mortgage broker in Ontario, mortgage approval and peace of mind for all our clients are a priority. Call us today at 888-495-4825 or contact us online to get personalized service and take the stress out of your mortgage process.