Your Toronto
Mortgage Guide

The mortgage stress test applies to most new federally regulated residential mortgages in Canada, including both insured and uninsured mortgages. The rule requires you to prove you can afford your payments at a rate higher than what you'll actually pay. Specifically, you must qualify at the higher of your contract rate plus 2%, or 5.25%.

In practice, with most lenders offering 5-year fixed rates in the 4.5% to 5.5% range in 2025, buyers must typically qualify at around 6.5% to 7.5%. This reduces the mortgage you qualify for compared to what you'd get without the test, which is exactly the point: protecting buyers from overextending if rates rise.

For Toronto buyers, the stress test has a meaningful impact on buying power. Here's what the math looks like on a $120,000 household income:

A mortgage pre-approval tells you how much a lender is willing to lend, at what rate, and locks in that rate for 90 to 120 days. In Toronto's competitive market, a pre-approval is not optional: most sellers won't take offers seriously from buyers who haven't confirmed their financing.

More importantly, knowing your ceiling before you shop saves you from falling in love with homes that are out of reach, or undershooting what you can actually afford. The pre-approval process is free, takes two to three business days, and puts you in a much stronger position when the right home comes along.

Here's what lenders typically ask for when you apply for pre-approval:

Your pre-approval also gives you a rate hold, which protects you if rates rise while you're shopping. If rates drop before you close, you typically get the lower rate. Use our Toronto mortgage calculators to model different scenarios before your pre-approval meeting.

The fixed vs. variable mortgage question comes up with every buyer, and the honest answer is: it depends on your risk tolerance, your timeline, and where rates are headed. Neither is universally better. Here's how to think through it.

A fixed rate locks in your interest rate for the entire term, usually 1 to 5 years. Your payment doesn't change. You have certainty. The trade-off is that if rates fall significantly during your term, you're stuck paying the higher rate (unless you break the mortgage, which typically carries a penalty).

A variable rate fluctuates with your lender's prime rate, which moves in response to the Bank of Canada's overnight rate decisions. When the Bank cuts rates, variable mortgage holders benefit. When rates rise, they pay more. Some variable mortgages have fixed payments but a variable portion going to principal vs. interest; others have payments that change with the rate.

Beyond fixed vs. variable, you'll also choose between open and closed mortgages. A closed mortgage has restrictions on how much extra you can pay down each year without penalty; an open mortgage has no restrictions but comes with a higher rate. Almost all buyers choose closed mortgages and use the prepayment privileges (typically 10% to 20% per year) to pay down principal faster when they can.

The term (typically 1 to 5 years) is separate from the amortization (typically 25 years). At the end of each term, you renew. Renewal is your chance to renegotiate your rate, switch lenders, or change your amortization. If you're buying in a high-rate environment and expect rates to fall, a shorter term gives you more flexibility at renewal.

This is one of the most common questions from Toronto buyers, and there's no wrong answer. Both routes can get you a mortgage. The real question is whether you want to shop the full market or work within one institution.

A mortgage broker is a licensed professional who has access to dozens of lenders: major banks, credit unions, monoline lenders, and alternative lenders. They do the shopping on your behalf, present you with options, and their service is typically free to you because lenders pay the broker a finder's fee. A good broker will also know which lender's policies work best for your situation — for example, if you're self-employed, have a recent job change, or are buying a non-standard property.

Going directly to your bank keeps things simple if you have a strong relationship, a straightforward file, and your bank is competitive on rate. Some banks offer loyalty discounts or bundle benefits for existing customers. The downside: you're only seeing one lender's rates and terms, and bank mortgage specialists are employees of that institution.

My suggestion to most buyers: get a pre-approval through a broker first to see the full range of options and rates, then check with your own bank. If your bank can match or beat what the broker found, you'll have confidence you're getting a fair deal. If they can't, you'll know.

As your Realtor®, I work with several experienced mortgage brokers in Toronto and can refer you to someone who fits your situation. Good timing and financing coordination are especially important in Toronto, where firm offer timelines can be short.