The Stress Test is a tool that lenders use to determine whether a borrower can afford their mortgage payments should interest rates rise in the future.

The lender uses a higher interest rate than the one being offered to calculate the borrower's mortgage payments to see if the payments at the higher rate are still affordable. If the borrower is deemed to be able to afford the payments using the higher rate, then they are deemed to be reducing their exposure to default.

There are some provincially regulated lenders that offer a mortgage qualification process that does not require the use of the stress test. As well, there are many other lenders in the Alternative Lending space that offer options where the Stress Test is not required. In many cases; this is a game changer as it will allow the borrower to qualify for a higher mortgage amount as payments are based strictly on the actual mortgage rate.