Question 1

What is the Canadian mortgage stress test?

Accepted Answer

All federally regulated lenders (banks, most credit unions) must qualify you at the higher of your contract rate + 2%, or 5.25%. This ensures you can afford your payments if rates rise. For example, if your contract rate is 5.0%, you'll be qualified at 7.0%.

Question 2

Does the stress test apply to mortgage renewals?

Accepted Answer

When renewing with your existing lender, the stress test typically does not apply — you're simply renewing, not taking on new debt. If you switch to a new lender at renewal, the stress test does apply.

Question 3

What is the GDS ratio?

Accepted Answer

Gross Debt Service (GDS) = (mortgage payment + property tax + heating + 50% of condo fees) ÷ gross monthly income. It must be ≤ 39% to qualify with most lenders.

Question 4

What is the TDS ratio?

Accepted Answer

Total Debt Service (TDS) = all housing costs (GDS) + all other monthly debts (car loan, student loan, credit card minimums, etc.) ÷ gross monthly income. Maximum is 44%.

Question 5

I'm self-employed — can I get a mortgage?

Accepted Answer

Yes. Self-employed borrowers can qualify using Notice of Assessment income, business income averaging over 2 years, or stated income programs with certain lenders. A mortgage broker has access to lenders who specialize in self-employed borrowers.

Question 6

What is the minimum down payment in Canada?

Accepted Answer

5% on the first $500,000, 10% on the portion between $500,000 and $1,500,000, and 20% on homes above $1,500,000. A home priced at $700,000 requires a minimum down of $45,000 (5% of $500K + 10% of $200K).

Question 7

What is CMHC mortgage insurance?

Accepted Answer

When your down payment is under 20%, lenders require mortgage default insurance (CMHC, Sagen, or Canada Guaranty). It protects the lender — not you — if you default. The premium (2.40%–4.00% of the mortgage) is added to your mortgage balance.

Question 8

Can I use a gifted down payment?

Accepted Answer

Yes. Most lenders accept gifted funds from immediate family members (parents, siblings, etc.). You'll need a gift letter stating the funds are a true gift, not a loan.

Question 9

Can I use my RRSP for a down payment?

Accepted Answer

Yes — through the Home Buyers' Plan (HBP), first-time buyers can withdraw up to $60,000 per person from their RRSP ($120,000 for a couple) tax-free, and repay it over 15 years.

Question 10

What is the First Home Savings Account (FHSA)?

Accepted Answer

A registered account that lets first-time buyers save up to $8,000/year (lifetime max $40,000) with tax-deductible contributions and tax-free withdrawals for a qualifying home purchase.

Question 11

Should I choose a fixed or variable rate mortgage?

Accepted Answer

Fixed rates give certainty — your payment never changes. Variable rates move with the Bank of Canada's policy rate and have historically been lower over time, but carry more risk. Your choice depends on your risk tolerance and how long you plan to keep the mortgage.

Question 12

What is a mortgage term vs. amortization?

Accepted Answer

Amortization is the full period to pay off your mortgage (typically 25 years). Term is how long your current rate is locked in (typically 5 years). At the end of your term, you renew at current rates.

Question 13

What is an open vs. closed mortgage?

Accepted Answer

A closed mortgage locks you into the term — breaking it early incurs a prepayment penalty. An open mortgage allows you to pay it off or refinance at any time without penalty, but carries a higher rate.

Question 14

What happens at mortgage renewal?

Accepted Answer

When your term ends, you can renew with your lender (usually at posted rates) or shop the market through a broker. You're not obligated to stay with your current lender at renewal — switching is easy and often saves thousands.

Question 15

How does a mortgage agent differ from a bank?

Accepted Answer

A bank's advisor can only offer their institution's products. A mortgage agent works with 40+ lenders and finds the best product for your specific situation — at no cost to you.

Question 16

How is a mortgage agent paid?

Accepted Answer

By the lender, after your mortgage closes. You pay nothing. This is the same model used by most insurance and real estate professionals — the service provider is compensated by the company that benefits from the transaction.

Question 17

How long does mortgage pre-approval take?

Accepted Answer

With complete documents, a pre-approval can often be issued within 24–48 hours. Full approval after an accepted offer typically takes 3–5 business days depending on the lender.

Question 18

What documents do I need for a mortgage?

Accepted Answer

Typically: 2 years of T4s and NOAs, recent pay stubs, 90-day bank statements, government ID, and a signed purchase agreement (for approval). Self-employed clients also need business financials.

Mortgage FAQ

Qualifying & Stress Test

Down Payment & CMHC

Mortgage Types & Rates

Working with a Mortgage Agent

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