Is There a Stress Test for Mortgage Renewals?

With interest rates climbing and inflation making monthly budgets feel tighter, mortgage renewals have become a critical financial moment for many Canadian homeowners. If your fixed term is ending soon, or you’re part of the 2.2 million Canadians facing renewal in the next couple of years, you might be wondering: do I have to pass the stress test again?
Let’s walk through how the mortgage stress test works at renewal, whether it applies to you, and how to make sure you’re not caught off guard.

Understanding the Mortgage Stress Test

Introduced in 2018, the mortgage stress test was designed to ensure that borrowers can still afford their mortgage if interest rates rise.
In simple terms, lenders assess your mortgage application using a higher qualifying rate than what you’re actually being offered. Currently, the rule is: you must qualify at the greater of your contract rate + 2% or 5.25%.
So if your lender offers you a rate of 5.74%, your application will be tested at 7.74%.

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Does the Stress Test Apply at Renewal?

Here’s the good news: if you’re renewing with your current lender, you do not have to pass the stress test again.
This applies whether your mortgage is insured or uninsured, as long as you aren’t changing the principal amount or amortization period. It’s a straight renewal, and lenders aren’t required to reassess you.
However, if you’re planning to switch lenders, the stress test may apply.

When You Don’t Need to Requalify:

• You renew with your existing lender
• You’re switching to another federally regulated lender without changing the loan amount or amortization

When You Do Need to Requalify:

• You switch from a private/subprime lender to a prime/federally regulated lender
• You increase your mortgage amount or extend the amortization (this is considered a refinance)

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When Should You Start Comparing Renewal Rates?

Don’t wait for your lender’s renewal letter. Most lenders will send it 21 business days before your term ends, but that doesn’t give you much time to shop around.
Start comparing offers at least 120 days in advance. Many lenders can hold a rate for up to 4 months, giving you time to:

• See what other lenders offer
• Negotiate a better deal with your current lender
• Decide whether switching is worth the stress test and paperwork

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Should You Switch Lenders at Renewal?

Switching lenders can come with perks like a lower rate, better terms, or more flexible payment features. But you need to weigh those perks against the costs:

• Will you have to pass the stress test again?
• Will you need a home appraisal?
• Are there legal or administrative fees to switch?

Sometimes the savings are worth the hassle. Other times, it might be easier to negotiate with your current lender.
Tip: If you’re getting competitive quotes from other lenders, use them as leverage to push your current lender to give you a better deal.

“A big reason people ask about the stress test is because many are considering refinancing during their upcoming renewal.”

The Case for Staying with Your Current Lender

It might sound boring, but sticking with your current lender can make life easier:

• No stress test
• No new paperwork
• No legal fees or appraisals

Just remember: never accept their first offer. Renewal rates are often padded, assuming you won’t negotiate. Push back or get a broker to do it for you.

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Why Shopping Around Still Matters

Even if you end up staying with your lender, it pays to explore your options. Here’s why:

• You might save thousands: Even a 0.5% lower rate can save you thousands over a 5-year term.
• You may qualify for better mortgage features: Some lenders offer more flexibility with lump-sum payments or early payouts.
• You re-evaluate your financial goals: Life changes – maybe now you want to pay off your mortgage faster, or you’re considering refinancing.

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Key Things to Compare When Shopping for Renewals

When comparing lenders, don’t stop at the interest rate. Look at:

• Prepayment privileges
• Portability (can you move your mortgage if you sell?)
• Penalties for breaking early
• Flexibility in payment schedule (bi-weekly, accelerated, etc.)

And of course, consider customer service – because you’ll be stuck dealing with this lender for the next few years.

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When to Talk to a Mortgage Expert

Not sure whether to stay or switch? Confused about the stress test? A licensed mortgage broker can walk you through your options, compare multiple lenders, and help you decide what’s worth it based on your financial goals.
Especially in a high-interest environment, expert guidance can help you avoid costly mistakes or missed opportunities.

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Frequently Asked Questions

Do I need to pass a stress test to renew my mortgage?
Only if you’re switching lenders and they require it. Straight renewals with your current lender do not require requalification.
Is switching lenders worth the stress test hassle?
Sometimes, yes. If the rate or features are significantly better, it could be worth it. But you’ll need to go through a full application again.
How can I avoid the stress test altogether?
Stick with your current lender at renewal, or consider alternative lenders like credit unions that may have different qualification rules.
Can I increase my mortgage at renewal without a stress test?
No. Any increase in the loan amount or amortization period turns your renewal into a refinance, which requires full requalification.

“For those who can’t qualify to refinance or switch, mortgage deferrals are becoming a necessary fallback option.”

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Final Thoughts

The mortgage renewal process isn’t just about checking a box and signing on the dotted line. It’s your chance to reassess your goals, potentially lower your payments, and make sure your mortgage still fits your life.
Whether you’re staying put or switching lenders, understanding how the stress test fits into the picture helps you avoid surprises and make a smarter financial move.
If you’re staying with your current lender, the stress test usually doesn’t apply — but switching lenders could trigger it. Let’s review your renewal options so you don’t miss out on better rates or flexibility.
Talk to a Mortgage Renewal Expert Now