How the Mortgage Stress Test Actually Works

Since 2018, federally regulated lenders must qualify every mortgage applicant at the greater of their contract rate plus 2%, or a minimum benchmark rate. This is the 'stress test' — it exists to make sure you could still afford your payments if rates rose.

Your lender then checks two ratios against your qualifying payment: Gross Debt Service (GDS), which is housing costs divided by income and must generally stay under 39%, and Total Debt Service (TDS), which adds your other debts and must stay under 44%.

This means the price you qualify for is usually lower than what your actual (contract-rate) payment would suggest you can afford. It's a common source of surprise for first-time buyers — running the numbers before you shop can save a lot of disappointment at the pre-approval stage.