# What is the OSFI mortgage stress test and how does it affect what I can borrow?

> The OSFI B-20 stress test requires all federally regulated lenders to qualify you at the higher of your contract rate + 2%, or 5.25% — whichever is greater. This typically reduces your maximum borrowing by 15-20% compared to qualifying at your actual contract rate.

Category: Qualification
Last verified: 2026-04-19
Source: https://ratellow.com/faqs/qualification/what-is-the-osfi-mortgage-stress-test-and-how-does-it-affect-what-i-can-borrow

## Answer
**The OSFI B-20 mortgage stress test is mandatory at all federally regulated lenders (banks, federal credit unions) and reduces how much you can borrow to ensure you can handle future rate increases.**

## The Stress Test Formula

**Qualifying Rate = MAX(Contract Rate + 2%, 5.25%)**

- If your contract rate is 4.5%: qualifying rate = 6.5% (4.5% + 2%)
- If your contract rate is 2.9%: qualifying rate = 5.25% (floor applies)
- If your contract rate is 3.9%: qualifying rate = 5.9% (3.9% + 2%)

Your lender calculates your GDS and TDS ratios using this higher qualifying rate — meaning your monthly payment is calculated as if rates are higher than they actually are.

## How Much Does It Reduce Borrowing?

At today's rates (~4.5-5%), the stress test at 6.5-7% typically reduces your maximum mortgage by **15-20%** compared to qualifying at the actual rate.

| Gross Income | Without Stress Test (max) | With Stress Test (max) | Reduction |
|---|---|---|---|
| $120,000 | ~$820,000 | ~$680,000 | ~17% |
| $200,000 | ~$1,370,000 | ~$1,130,000 | ~17% |

## Who Is Exempt?

- **Straight switch renewals (Nov 2024)**: Borrowers renewing with a new lender WITHOUT increasing loan amount or amortization are now exempt from the stress test — they qualify at actual contract rate.
- **Credit unions** (provincial): May not be subject to B-20; rules vary by province.
- **Private lenders**: Not federally regulated; set their own qualification standards.

### Your Next Steps
1. **Calculate your affordability** → [Affordability Calculator](/mortgages/affordability-calculator)
2. **Read the full guide** → [OSFI Stress Test Explained](/guides/osfi-stress-test-explained)
3. **Speak with a mortgage advisor** to confirm your qualification amount

## Related guide
- https://ratellow.com/guides/osfi-stress-test-explained

## Sources
- OSFI B-20 — Residential Mortgage Underwriting Practices — https://www.osfi-bsif.gc.ca/en/guidance/guidance-library/residential-mortgage-underwriting-practices-procedures-guideline-2017#1.0
- How to Qualify for a Mortgage — FCAC — https://www.canada.ca/en/financial-consumer-agency/services/mortgages/mortgage-qualifier.html