Gross Debt Service is the percentage of a borrower's gross income that housing costs consume. It adds together the mortgage principal and interest payment, property taxes, heating costs, and 50% of condo fees where applicable — often written as the acronym PITH. For CMHC-insured files the maximum GDS is 39%. Uninsured files are not bound by a single fixed regulatory number in the same way, but most lenders apply a comparable internal ceiling as a matter of prudent practice under OSFI's Guideline B-20 principles, so treat 39% as the number to test against by default even off an insured file.
Total Debt Service takes the same numerator as GDS and adds every other recurring debt obligation — credit cards, lines of credit, car loans, student loans, support payments — then divides by the same gross income. For insured files the maximum is 44%. The gap between GDS and TDS is, in effect, how much room a borrower has for debt beyond the house itself, and it is usually the ratio that kills a file GDS alone would have approved. Debt treatment by category — how a credit card balance or a car loan actually gets counted — is covered in the next module.
The stress test is not a rate the borrower ever pays; it is a rate the file must prove it could survive. OSFI's current formula for uninsured mortgages at federally regulated lenders is the greater of the borrower's contract rate plus 2%, or a floor of 5.25%. Insured mortgages qualify against the same minimum qualifying rate. In practice, whenever contract rates sit below roughly 3.25%, the 5.25% floor is the binding number; above that, the contract-plus-2% calculation takes over.
This single formula is worth memorizing exactly, because it is the number every debt-servicing calculation in this course actually runs against — not the rate on the commitment letter.
Effective 21 November 2024, OSFI removed the expectation that federally regulated lenders apply the prescribed minimum qualifying rate to a straight switch of an existing uninsured mortgage at renewal — moving the same loan to a new lender with no increase to the loan amount (beyond up to $3,000 in transaction costs) and no extension of the remaining amortization. Lenders are still expected to underwrite the file soundly under Guideline B-20's general principles, including realistic debt-service assessment, but the prescribed 5.25%/contract-plus-2% test no longer has to be reapplied purely because the client is moving lenders at maturity.
This does not touch insured mortgages, does not touch any transaction where the loan amount increases or the amortization extends, and does not touch a refinance. It applies narrowly, to the exact scenario its name describes.
A borrower earns $110,000 gross annually ($9,167/month) and is buying with a contract rate of 5.09% on an insured file. Their proposed PITH is $2,950/month and other debts total $450/month. GDS: $2,950 ÷ $9,167 = 32.2% — comfortably under 39%. TDS: ($2,950 + $450) ÷ $9,167 = 37.1% — under 44%. But both ratios must also be tested at the minimum qualifying rate, not 5.09%. Since 5.09% + 2% = 7.09%, which exceeds the 5.25% floor, 7.09% is the rate used to recompute PITH for the stress test — the number that ultimately decides whether the file clears, not the number on the rate sheet.
A client with an uninsured mortgage wants to switch lenders at renewal with the same loan amount and the same remaining amortization. Which qualifying rate applies?
This is precisely the straight-switch scenario OSFI exempted from the prescribed MQR effective 21 November 2024 — same loan amount, same amortization, moving between federally regulated lenders at renewal. The exemption is narrow, though: it removes the specific prescribed test, not the lender's underlying obligation to underwrite soundly under Guideline B-20. It is also wrong to say the stress test never applied to insured files at all — insured mortgages use the identical minimum qualifying rate formula at purchase.
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