The stress test is a qualification rule, not a rate you pay. Its whole purpose is to check that you could still carry the mortgage if rates were higher than the one you signed at.
The arithmetic
Take your contract rate, add two percentage points, and compare that to 5.25 percent. Whichever is higher is your qualifying rate. Your payment is then calculated at that rate and tested against your income through the standard debt ratios.
Why it hits frontline files harder than it should
It does not, in principle. What happens in practice is that the test shrinks the borrowing room on whatever income is on the file, and frontline files routinely arrive with less income on them than the person actually earns. Shift premium buried in the regular wage line, paid duty presented as a side job, overtime dropped for want of two years of history: each omission gets amplified by the qualifying rate.
What actually moves the number
- Getting every contractual pay line documented and counted.
- Clearing the debt with the largest monthly payment rather than the largest balance.
- Choosing a lender whose treatment of variable pay suits your history.
- A longer amortisation, which lowers the tested payment, at the cost of more interest over time.
A private or provincially regulated lender is not bound by the same rule, but the pricing and terms are different enough that it is rarely the right first answer.
Sources
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