The mortgage stress test is a federally mandated rule that requires lenders to qualify borrowers at a higher interest rate than the actual rate of their mortgage. This ensures that borrowers could still afford their mortgage payments if interest rates were to rise in the future.

How It Works

When applying for a mortgage, your debt service ratios (GDS and TDS) are not calculated using your contract rate (the rate you’ll actually pay). Instead, they are tested at the greater of:

• The benchmark qualifying rate (currently 5.25%), OR
• The contract rate + 2%

Example:

You are offered a 4.50% mortgage but to qualify, we assume a 6.50% mortgage. This means you qualify for a smaller mortgage.