The stress test tells your lender if you have the income and assets needed to afford your mortgage payments, even if interest rates go up. Your results are based on how much you could pay in a “worst case” scenario.

Depending on whether or not you need mortgage default insurance (which you will if you have less than 20% as a down payment), your lender will calculate your mortgage payments based on the higher interest rate of either:

the Bank of Canada’s conventional five-year mortgage rate; and

If you need loan insurance, the interest rate you negotiate with your lender

OR

If not, the interest rate you negotiate with your lender plus 2%.

You could also try a credit union or another lender not regulated by the Government of Canada. These lenders are not required to use a stress test. How to prepare for getting a mortgage.

Showing Proof of Income

Self-employed or changed jobs recently? Getting a mortgage may take you longer than usual.

How long you have to have a job to get a mortgage in Canada depends on your lender. If you’re self-employed, a bank may ask for proof your company has been in business two or more years. And if you’ve recently accepted a new job, you may have to wait to complete your probation before you can apply.

That’s because your lender usually wants three or more pay stubs, or other proof you can afford a mortgage. They may ask for a letter of employment from your boss to confirm you have passed your probation.

Pro tip: Wait until your mortgage is final before applying to a new employer. Your lender could revoke a pre-approved mortgage if you change jobs before then. Complain if a mortgage broker wronged you while getting a mortgage.

Calculating Your Debts

How much can you borrow?

Generally, up to 39% of your gross debt service (GDS) can be spent on housing costs. Your GDS includes mortgage payments, plus heat and property taxes. That means any mortgage you are approved for cannot have monthly mortgage payments that, when added to your monthly heat and property tax payments, exceed 39% of your monthly income.

In addition, your total debt-to-income ratio, or total debt service, cannot exceed 44%. That means that your total debt payments, including your housing costs, car or credit card payments and other debts, cannot exceed 44% of your gross annual income.

Some lenders may give you a mortgage if your debt exceeds these amounts. It just means you are taking a bigger risk, as is the lender, and your interest rate will likely be higher.

Providing a Down Payment

Unless you are buying a home for under $1 million, your lender will ask for a 20% or more down payment and lend you the difference through one or more mortgages. Get a single mortgage if you can. Interest rates are higher if you need a second or more mortgages because your credit is poor.

You must take the down payment from your own resources. Your family and friends may help you with it, but you won’t be able to borrow the down payment if you need a CMHC-insured mortgage.

High ratio mortgages, guaranteed by Canada Mortgage and Housing Corporation (CMHC). Sagen™. or Canada Guaranty are available with 5% down. Down payments go up to 10% for any amount over $500,000, up to $1 million. Homes over $1 million require 20% down. Any bank, credit union or other lender can help you apply, and calculate your mortgage default insurance premium.

Deciding on Your Mortgage Term

Your loan will be based on a term, typically from six months to 10 years. The term you choose depends on how much you can afford for monthly mortgage payments, interest rates, and personal preference. Your long-term goals also affect your term. Do you plan to keep your home or is it a short-term investment?

At the end of the term, you can pay out the loan in full or part or, provided your credit is good, renew it. If you have credit problems getting a mortgage, you may have to shop around or use a mortgage broker to find a new lender.

Amortizing Your Loan

Your loan amortization period is the number of years it will take to pay off the loan after getting a mortgage. A long amortization period, such as 25 years, can reduce your monthly payments. You will pay more monthly for a shorter amortization period, but less in interest because your loan is paid off quicker.

Pick an amortization period that:

fits your budget, and
suits your plans – how long you hope to keep your home.

Why You Need a Real Estate Lawyer

Axess Law has virtual lawyers for real estate closings anywhere you are in Ontario. Our flat rate fees offer timely legal services, for less than you would typically pay for traditional lawyer services. Hiring a lawyer when you buy or sell real estate.

Documents you need for your Axess Law real estate lawyer appointment.

Our licenced legal team reviews your offer to purchase for clauses that protect your interests, and your good faith deposit. We add terms that allow you to cancel by mutual consent or, if you’re the seller, accept a higher offer. Lawyers for first time home buyers (Ontario).

You can discharge existing mortgages via virtual video conference with an Axess Law lawyer anywhere in Ontario. We liaise with your lender to arrange for you to sign new mortgage loan documents, and witness your signature using secure, confidential remote conferencing technology.

Axess Law transfers title to a new build home or resale property to your name. We search for construction liens or financial claims that can delay your purchase, and ensure you have your Tarion warranty in hand when you buy a pre-construction property.

Affordable Real Estate Lawyers, Anywhere You Are

Access lawyers for less in Greater Toronto Area, Ottawa, or anywhere in Ontario when you buy, sell, or transfer property. Axess Law’s flat fee real estate lawyers are affordable, and our rates are all inclusive (excluding taxes, disbursements, and third-party charges). Axess Law offers you only the legal services you absolutely need. Your final invoice includes no surprises or hidden charges. Your itemized statement of adjustments is explained when we deliver it, and we answer any questions you have about it.

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Book Online or By Phone Today

Find a remote real estate lawyer anywhere in Ontario, 7 days a week. Book your own appointments online, or call our 647-479-0118 lawyer line, toll free to 1-877-402-4207, for assistance. We have a virtual real estate lawyer near you for day or evening appointments. Meet in person with a real estate lawyer at any of our conveniently located Ottawa or Greater Toronto Area law offices. Call ahead or drop in to make appointments.

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