What is the mortgage stress test in Canada?

The OSFI stress test (Guideline B-20) requires lenders to qualify you at the higher of: (1) your contract rate plus 2 percentage points, or (2) 5.25%. If your lender offers 5.00%, you must qualify at 7.00%. This means your actual maximum purchase price is lower than what a simple payment calculator shows.

How does an amortization schedule work?

Each payment covers interest (balance × monthly rate) plus principal (payment minus interest). Early payments are mostly interest; later payments are mostly principal. Canadian mortgages use semi-annual compounding by law: the effective monthly rate is (1 + r/2)^(1/6) − 1, not r/12. The amortization schedule shows the opening balance, principal paid, interest paid, and closing balance for each year.

How does accelerated bi-weekly payment work?

Accelerated bi-weekly means you pay half your monthly payment every two weeks — 26 payments per year instead of 24. This is equivalent to making one extra monthly payment per year. The extra principal chips away at your balance faster, reducing total interest and shortening your amortization by typically 2–4 years on a 25-year mortgage.

What is CMHC mortgage insurance?

If you put less than 20% down on a home priced under $1,500,000, your mortgage requires CMHC (Canada Mortgage and Housing Corporation) insurance. The premium ranges from 0.60% to 4.00% of the loan amount depending on your loan-to-value ratio (LTV). A 30-year amortization adds a 0.20% surcharge. The premium is added to your mortgage. Residents of Ontario, Quebec, and Saskatchewan also pay provincial sales tax on the premium in cash at closing.

Does a lump-sum prepayment really save a lot?

Yes — especially early in the amortization. On a $500,000 mortgage at 5%, adding $200/month extra saves approximately $50,000 in interest and cuts the amortization by about 4 years. A $10,000 lump sum applied in year 1 saves roughly $15,000 in interest over 25 years. Most lenders allow annual prepayments of 10–20% of the original mortgage without penalty.

Free Canadian Calculator

How Much House Can I Afford?

Three tools, one page: your maximum purchase price (GDS/TDS + stress test), a full year-by-year amortization schedule, and a prepayment savings calculator — all using correct Canadian semi-annual compounding and current CMHC rules.

All defaults are estimates — enter your own figures. The interest rate shown is a typical 5-year fixed rate as of July 2026. Rates change frequently; use the rate from your pre-approval or your lender's quote.

↓ Affordability|↓ Payment & Schedule|↓ Stress Test

Module 1 — What Can I Afford?

Your Finances

Annual Household Income

Total Monthly Debt Payments

Car loans, student loans, credit card minimums — exclude housing costs.

Down Payment

Mortgage Terms

Interest Rate(typical 5-yr fixed, July 2026 — enter your quoted rate)

Amortization

Monthly Housing Costs (Estimates)

Property Tax

Heat / Hydro

Condo Fees (if applicable)

50% of condo fees is included in GDS per CMHC guidelines.

Maximum Purchase Price

$572,000

Limited by GDS ratio at qualifying rate of 7.00%

At Contract Rate (5.00%)

Down Payment

$100,000

Mortgage (before CMHC)

$472,000

CMHC Premium

Added to mortgage — price is insured (< $1,500,000)

$13,216

Total Mortgage

$485,216

Monthly Payment

Principal + interest only, at contract rate

$2,822.04

Debt Ratios at Max Price

GDS Ratio

Should be ≤ 39% (at contract rate for display)

33.2%

TDS Ratio

Should be ≤ 44% (at contract rate for display)

33.2%

Qualifying Rate (stress test)

max(5.00% + 2%, 5.25%) — used to compute max price

7.00%

Min. Down Payment

Minimum required for this price

$32,200

Note: GDS/TDS ratios shown at the contract rate. Qualification uses the stress-test rate above. These are standard OSFI/CMHC insured guidelines — your lender may apply different thresholds.

Module 2 — Payment, Schedule & Prepayment

Mortgage Details

Home Price

Down Payment

Interest Rate(July 2026 estimate)

Amortization

Payment Frequency

Prepayment (Optional)

Lump-Sum Payment (Year 1)

Extra Per Payment

Applied in addition to your regular payment each period.

Monthly Payment

$2,791.70

Total interest: $357,511

Loan (before CMHC)

$480,000

Total Mortgage

$480,000

Monthly Payment

$2,791.70

Total Paid

$837,511

Total Interest

$357,511

Year-by-Year Amortization Schedule

Year	Opening Balance	Principal	Interest	Closing Balance	Cum. Interest
1	$480,000	$9,971	$23,530	$470,029	$23,530
2	$470,029	$10,476	$23,025	$459,554	$46,554
3	$459,554	$11,006	$22,495	$448,548	$69,049
4	$448,548	$11,563	$21,937	$436,985	$90,986
5	$436,985	$12,148	$21,352	$424,836	$112,338
6	$424,836	$12,764	$20,737	$412,073	$133,075
7	$412,073	$13,410	$20,091	$398,663	$153,166
8	$398,663	$14,089	$19,412	$384,574	$172,578
9	$384,574	$14,802	$18,699	$369,773	$191,277
10	$369,773	$15,551	$17,949	$354,221	$209,226
11	$354,221	$16,338	$17,162	$337,883	$226,388
12	$337,883	$17,165	$16,335	$320,718	$242,723
13	$320,718	$18,035	$15,466	$302,683	$258,189
14	$302,683	$18,947	$14,553	$283,736	$272,742
15	$283,736	$19,907	$13,594	$263,829	$286,336
16	$263,829	$20,914	$12,586	$242,914	$298,922
17	$242,914	$21,973	$11,527	$220,941	$310,449
18	$220,941	$23,086	$10,415	$197,855	$320,863
19	$197,855	$24,254	$9,246	$173,601	$330,110
20	$173,601	$25,482	$8,018	$148,119	$338,128
21	$148,119	$26,772	$6,728	$121,346	$344,856
22	$121,346	$28,128	$5,373	$93,219	$350,229
23	$93,219	$29,552	$3,949	$63,667	$354,177
24	$63,667	$31,048	$2,453	$32,619	$356,630
25	$32,619	$32,619	$881	$0	$357,511

Canadian semi-annual compounding (as required by law for fixed-rate mortgages). Values rounded to nearest dollar.

Module 3 — Stress Test Check

Will you pass the OSFI mortgage stress test? Enter your details to see your GDS/TDS ratios at the qualifying rate and the maximum mortgage you'd qualify for.

Annual Household Income

Monthly Non-Housing Debts

Home Price

Down Payment

Contract Rate(July 2026 estimate)

Amortization

Est. Property Tax (monthly)

Est. Heat / Hydro (monthly)

✓ Likely Passes

Stress-test qualifying rate: 7.00%

At Qualifying Rate (7.00%)

Monthly Payment (at MQR)

$3,362.00

GDS Ratio

Must be ≤ 39%

38.6%

TDS Ratio

Must be ≤ 44%

43.6%

Max Qualifying

Max Mortgage at MQR

$485,426

Max Purchase Price

$605,426

This is an estimate using standard OSFI B-20 GDS/TDS thresholds (39%/44%). Your lender may apply different criteria. “Likely passes” means you meet the ratio thresholds — your lender will also assess credit score, employment history, and other factors.

How lenders calculate what you can afford

Canadian mortgage lenders use two debt-service ratios to set the ceiling on your borrowing:

Gross Debt Service (GDS) — must be ≤ 39%

GDS = (mortgage P+I + property tax + heat + ½ condo fees) ÷ gross monthly income

The property-tax and heat figures are estimates — the calculator pre-fills typical amounts that you should adjust to your target area.

Total Debt Service (TDS) — must be ≤ 44%

TDS = GDS numerator + all other monthly debt payments

Car loans, student loans, credit card minimums, lines of credit — everything that shows on a credit bureau. Do not include the mortgage you're applying for.

The binding constraint is whichever ratio produces the lower maximum payment. Most buyers without existing debt are bound by GDS; those with car or student loans are often bound by TDS.

The stress test

On top of the ratios, OSFI's stress test (Guideline B-20) requires lenders to qualify you at a rate higher than your contract rate. The qualifying rate is the greater of:

Your contract rate plus 2 percentage points, or
The 5.25% floor (in effect since January 2026)

If your lender offers 5.00%, you qualify at 7.00%. This is why the maximum price from an affordability calculator is always lower than what a simple payment calculator suggests at the contract rate alone.

Worked example

$120,000 income, $100,000 down, 5.00% rate, 25-yr amortization, $350/mo property tax, $150/mo heat:

Qualifying rate = max(5.00% + 2%, 5.25%) = 7.00%
GDS budget = 0.39 × ($120k/12) − $350 − $150 = $3,900 − $500 = $3,400/mo
Max total loan at 7.00% / 25yr ≈ $487,000 (principal + CMHC)
Loan base (before CMHC) ≈ $487,000 ÷ 1.028 ≈ $473,000 (CMHC ~2.80% at this LTV)
Max price ≈ $473,000 + $100,000 = $572,000 (rounded to nearest $1,000)

How Canadian mortgage math works

Unlike US mortgages (monthly compounding), Canadian law requires fixed-rate mortgages to use semi-annual compounding. The effective monthly rate is:

i = (1 + r / 2)^1/6 − 1

where r is the annual nominal rate. At 5.00%, this gives i = 0.4124% per month — slightly lower than 5/12 = 0.4167%. The difference compounds over 25 years and results in meaningfully different totals from US-style calculations.

Prepayments

Every dollar of prepayment reduces your outstanding balance, which reduces every future interest charge. Because interest is calculated on the remaining balance, prepayments made early in the amortization have the most impact. The prepayment explorer shows you exactly how much you'd save in total interest and how many months sooner you'd be mortgage-free.

Most closed mortgages allow annual lump-sum prepayments of 10–20% of the original principal without penalty. Check your mortgage agreement for your specific privilege.

Worked example — $500,000 at 5.00% / 25 years monthly

Effective monthly rate: (1 + 0.05/2)^1/6 − 1 = 0.41240% (not 0.41667%)
Monthly payment: ≈ $2,908/mo
Total paid: $2,908 × 300 = $872,400
Total interest: $872,400 − $500,000 = $372,400
Adding $200/mo extra → saves ≈ $53,000 in interest, finishes ≈ 4 years early

Frequently Asked Questions

How much house can I afford in Canada?

Use the GDS/TDS ratios (39%/44%) combined with the OSFI stress test. Your maximum is determined by whichever constraint binds first. As a rule of thumb, most buyers can afford roughly 4–5× their annual income depending on their down payment and debt load.

What is the minimum down payment in Canada?

For homes up to $500,000: 5%. For $500,001–$1,499,999: 5% on the first $500k plus 10% on the remainder. For $1,500,000+: 20% (insured mortgages not available). These rules have been in effect since December 2024.

What is CMHC insurance and when do I need it?

CMHC mortgage loan insurance is required when your down payment is less than 20% and the purchase price is under $1,500,000. The premium (0.60%–4.00% of the loan) is added to your mortgage. A 30-year amortization costs an extra 0.20%. You pay provincial sales tax on the premium in cash at closing if you're in Ontario, Quebec, or Saskatchewan.

Does the stress test apply to mortgage renewals?

If you're renewing with the same lender, the stress test does not apply as of 2024. If you switch lenders at renewal, the stress test applies again. This is a significant benefit of staying with your current lender at renewal even if a better rate is available elsewhere.

How accurate is this calculator?

It uses the correct Canadian semi-annual compounding formula, current CMHC premium tiers, and the official OSFI stress-test rate. It is a planning tool — actual approval depends on your credit score, employment history, property type, and the specific lender's criteria. Always verify with a licensed mortgage professional.

Related tools and guides

Mortgage Calculator

CMHC, stress test, PST — payment breakdown for a specific property.

Land Transfer Tax Calculator

Closing cost you can't add to the mortgage — calculate it before you make an offer.

Buy a Home Guide

Pre-approval to close — everything you need to know about buying in Canada.

Sources

Last reviewed: July 2026. Figures verified against official sources. Not financial or legal advice.