Frequently Asked Questions

The OSFI stress test qualifying rate is the greater of 5.25% or your contract rate plus 2%. At current rates of approximately 5.49%, the effective stress test rate is 7.49%. This means lenders qualify you at a higher rate than you'll actually pay — to ensure you could still afford payments if rates rise after you sign.

The stress test applies to all federally regulated lenders in Canada, including the Big 6 banks. It does not apply when renewing with your existing lender (as of November 2023). → Test your scenario on ClearKey

GDS (Gross Debt Service) is the percentage of your gross monthly income that goes toward housing costs — mortgage payment, property tax, heating, and 50% of condo fees. The maximum is 39%.

TDS (Total Debt Service) adds all other monthly debt obligations — car loans, credit cards, student loans, lines of credit — to your GDS figure. The maximum is 44%.

If either ratio exceeds these limits at the stress test rate, most lenders will not approve your application. → Check your GDS/TDS ratios on ClearKey

As of November 2023, the stress test no longer applies when you switch lenders at renewal on an uninsured mortgage. This is a significant change — it means you can shop for a better rate at renewal without being re-qualified at the stress test rate.

However, the stress test still applies if you are refinancing (changing the mortgage amount), purchasing a new property, or taking out a new insured mortgage. If you're renewing with your existing lender, the stress test has never applied.

For GDS calculations, lenders include 50% of monthly condo maintenance fees alongside your mortgage payment, property tax, and heating costs. For example, if your condo fees are $600/month, $300 is added to your monthly housing costs for qualification purposes.

This is why a condo with high maintenance fees can reduce how much mortgage you qualify for compared to a freehold property at the same purchase price. Always factor condo fees into your budget calculations before making an offer. → Include condo fees in your GDS/TDS calculation

Mortgage portability lets you transfer your existing mortgage — including its rate and remaining term — to a new property when you sell and buy simultaneously. This allows you to avoid the prepayment penalty that would otherwise apply for breaking your mortgage early.

Most lenders offer a 30-90 day portability window. If your new home costs more, lenders will typically blend your existing rate with a new rate for the additional amount. Always ask your lender about portability before listing your home — it can save you thousands in penalties. → Calculate your penalty on ClearKey

The minimum down payment in Ontario depends on the purchase price:

Up to $500,000: 5% minimum
$500,001 to $999,999: 5% on the first $500,000 + 10% on the remainder
$1,000,000 to $1,499,999: 10% minimum (CMHC insurable since Dec 2024)
$1,500,000 and above: 20% minimum — not CMHC insurable

For example, a $750,000 home requires a minimum down payment of $50,000 (5% of $500K = $25,000 + 10% of $250K = $25,000). → Calculate your down payment scenarios on ClearKey

CMHC insurance is required when your down payment is less than 20% of the purchase price. The premium is added to your mortgage — not paid upfront — and accrues interest over your amortization.

Premium rates:
5–9.99% down: 4.00% of the insured mortgage amount
10–14.99% down: 3.10%
15–19.99% down: 2.80%

On a $700,000 home with 10% down ($70,000), the CMHC premium would be $630,000 × 3.10% = $19,530, added to your mortgage balance. → Calculate your CMHC premium on ClearKey

The FHSA (First Home Savings Account) allows contributions of up to $8,000 per year with a $40,000 lifetime maximum. Contributions are tax-deductible and withdrawals for a first home purchase are completely tax-free with no repayment required.

The RRSP Home Buyers Plan allows a one-time withdrawal of up to $35,000 but requires repayment over 15 years — or the amount is added to your taxable income.

For most first-time buyers, the FHSA is the better choice since there is no repayment obligation. You can use both — withdraw from your FHSA first, then top up with the RRSP HBP if needed for a combined maximum of $75,000. → Plan your down payment savings on ClearKey

Lenders require that your down payment funds have been in your bank account for at least 90 days before closing. This rule exists to confirm the money is not borrowed — since borrowed down payments are not permitted on insured mortgages.

If you're receiving a gift from a family member, the funds should arrive in your account at least 90 days before your closing date, accompanied by a signed gift letter confirming no repayment is required. Planning ahead is essential — don't transfer large sums of money close to your closing date without understanding this rule.

Beyond your down payment, budget for:

Ontario Land Transfer Tax — 0.5% to 2.5% depending on price. On an $850,000 home, this is approximately $13,475.
Toronto Municipal LTT — if buying in the City of Toronto, an additional LTT with the same brackets applies, effectively doubling the tax.
Legal fees — $1,500–$2,500
Title insurance — $300–$500
Home inspection — $400–$600
Moving costs — $1,000–$3,000
HST on new builds — 13% HST applies to new construction, partially rebated

First-time buyers may receive Ontario LTT rebates of up to $4,000 and Toronto LTT rebates of up to $4,475. → Calculate your closing costs on ClearKey

For self-employed borrowers, lenders typically use the average of the last two years of net income as reported on your T1 General tax return (lines 13500–14300 for business/professional income). Two full years of self-employment history is generally required.

For incorporated business owners, lenders look at your T1 salary and dividend income (lines 10100 and 12000), averaged over two years. Retained earnings in the corporation are not included unless you have a letter from your accountant.

Some lenders offer a 15% gross-up on qualifying income for insured deals through Sagen's self-employed program, which can meaningfully increase your qualifying amount. → Calculate your qualifying income on ClearKey

Yes — but how lenders count it depends on whether your base salary is stable.

Stable base salary: Qualifying income = base salary + average of last 2 years of overtime/bonuses. If you earned $10,000 in OT last year and $8,000 the year before, lenders add $9,000 to your base salary.

Variable base salary: Lenders use last year's base + the lesser of the 2-year overtime average or current year overtime. This is more conservative.

Documentation required includes 2 years of T4s, 2 years of Notice of Assessments, and recent pay stubs confirming current base salary. → Calculate your qualifying income on ClearKey

Lenders apply a 50% offset to gross rental income when calculating GDS and TDS ratios. This means if you receive $2,000/month in rent, $1,000 is added to your qualifying income and used to offset housing obligations.

The rental property's mortgage payment, tax, and heating costs are still included in your TDS calculation — the 50% rental income offsets these costs. If the rental income exceeds 50% of the property's carrying costs, it effectively reduces your TDS ratio and helps you qualify for more. → Model rental income in your GDS/TDS on ClearKey

Yes. The rules vary by immigration status:

Permanent Residents: Treated the same as Canadian citizens. Minimum 5% down, CMHC insurable, standard qualification rules.

Work Permit Holders: Minimum 10% down, at least 12 months remaining on permit, Canadian employer required, CMHC insurable.

Study Permit Holders: Very limited options — typically 35% down or a Canadian co-signer required, not CMHC insurable.

Programs like CMHC Newcomer, Sagen New to Canada, Scotiabank StartRight, and others are specifically designed for newcomers without Canadian credit history. → Check newcomer mortgage rules on ClearKey

Canadian lenders accept a wide range of income types, each with specific rules:

Salaried / guaranteed hourly — 100% of gross income
Overtime & bonuses — 2-year average
Self-employed / commission — 2-year T1 average
Incorporated salary + dividends — 2-year T1 average
Seasonal employment + EI — 2-year average combined
Support payments received — 70% of court-ordered amount
RRIF income — lesser of last year's withdrawal or balance ÷ 10
Rental income — 50% of gross rent

Foreign income is generally not accepted by major lenders. → Qualify your income type on ClearKey

The Bank of Canada overnight rate is the interest rate at which major financial institutions borrow and lend one-day funds among themselves. Canadian banks set their prime rate at the overnight rate plus 2.70%.

Variable rate mortgages are priced as prime rate minus a discount — so when the BOC cuts rates, your payment or amortization improves immediately. When rates rise, the opposite happens.

Fixed rate mortgages are tied to Government of Canada bond yields, not the overnight rate. Fixed rates can move independently of BOC decisions. → Track live BOC rates on ClearKey

This depends on your personal situation and risk tolerance. Here's the honest breakdown:

Fixed rate is better if: you need payment certainty, you are at your maximum borrowing limit, or you believe rates will rise before your renewal.

Variable rate is better if: you have financial flexibility to absorb payment changes, you expect rates to fall, or you may need to break your mortgage early (variable penalties are always 3 months interest vs potentially $20,000+ IRD on fixed).

Historically, variable rates have outperformed fixed over full amortization periods — but past performance is not a guarantee. Always consult a licensed mortgage professional for advice specific to your situation. → Explore fixed vs variable on ClearKey Rate Tracker

A prepayment penalty is charged when you break your mortgage before the term ends — when selling, refinancing, or switching lenders mid-term.

Variable rate: Always 3 months interest. Simple and predictable — typically $3,000–$8,000 on a typical Ontario mortgage.

Fixed rate: The greater of 3 months interest OR the Interest Rate Differential (IRD). IRD penalties from Big 6 banks can be $15,000–$40,000+ due to their posted rate calculation method. Monoline lenders use a more transparent formula that typically produces smaller penalties.

Always calculate your penalty before breaking your mortgage — it may not be worth refinancing even at a lower rate. → Calculate your penalty on ClearKey

For insured mortgages (down payment under 20%):
— 30 years for first-time buyers purchasing a newly built home (as of August 2024)
— 25 years for all other insured purchases

For uninsured mortgages (20% or more down), lenders can offer up to 30 years, with some offering 35 years for conventional deals.

A longer amortization reduces your monthly payment but significantly increases total interest paid. On a $600,000 mortgage at 5.49%, extending from 25 to 30 years saves approximately $350/month but costs an additional $85,000+ in total interest. → Compare amortization periods on ClearKey

Posted rates are the rates officially advertised by banks on their websites — these are rarely what anyone actually pays. They are used as reference points for calculating IRD penalties.

Discounted rates are the actual rates offered to borrowers after negotiation. The gap between posted and discounted rates is typically 1.5–2.5% at major banks.

This gap matters enormously for penalties: if you got a 2% discount at origination and rates have since fallen, your IRD penalty is calculated using that full discount — which is why Big 6 bank penalties are often so much larger than monoline penalties for the same mortgage.