What is a mortgage stress test and how does it affect me?
Quick Answer
Short answer: Lenders qualify you at the greater of 5.25% or contract rate + 2%, shrinking maximum borrowing power by ~15%.
Detailed Explanation
OSFI's stress-test rule ensures you can handle future rate hikes. If your contracted five-year fixed rate is 4.5%, the qualifying rate becomes 6.5%. Debt-service ratios (GDS/TDS) are run at that higher figure, often trimming approved mortgage size compared with the 'sticker' rate.
Variable-rate applicants are also tested at prime + 2%.
- Paying off car loans boosts your ratios
- Rental income counts at 50-80% depending on lender
- Co-signers can help qualify for larger amounts
Disclaimer: This page is for general information only and does not constitute legal, financial, or real estate advice. Always verify details with a licensed Alberta REALTOR®, mortgage professional, or lawyer before making decisions. Buy in Edmonton assumes no liability for actions taken based on this content.
Tim Grover, RE/MAX Excellence • 780-288-5144 • 5607 199 Street NW, Edmonton, AB
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