Mortgage Renewal and the Stress Test in Canada (2026)

The Stress Test at Renewal: The Key Rule

The most important rule for mortgage renewals and the stress test:

• Renewing with the SAME lender: No stress test required. The lender must offer renewal without re-qualification. • Switching to a NEW lender at renewal: The new lender applies the full OSFI B-20 stress test.

This rule creates a critical strategic decision at every renewal. Staying with the existing lender is always a guaranteed option — but switching to a better rate requires re-qualifying under current stress test guidelines.

The 2025-2026 Renewal Wave

Approximately 2.2 million Canadian mortgages are renewing in 2025-2026, many originally signed at rates between 1.5-2.5% during 2020-2021. These clients are facing renewal rates of 4.5-6.0%.

The payment shock is significant:

When Should a Client Switch Lenders at Renewal?

The break-even analysis for switching lenders at renewal:

Stay with existing lender: • No stress test required • Rate may be 0.1-0.5% higher than market (lenders often offer uncompetitive renewal rates first) • No legal fees or discharge costs

Switch to new lender: • Must pass stress test at new lender • Rate savings of 0.1-0.5% possible • No legal fees for straight switches (most lenders cover these) • Discharge fee from existing lender ($200-$350 typically)

Break-even formula: Rate savings ÷ Switching costs = Months to break even

On a $500,000 mortgage, 0.25% rate savings = $1,250/year saved. Switching costs (discharge fee only): $300. Break-even: immediate — savings far exceed costs.

The stress test is the real barrier: if a client's financial situation has changed since origination (reduced income, increased debt), they may not qualify to switch even to a better rate.

Calculating Renewal Qualification Under the Stress Test

To determine if a client can switch lenders at renewal, calculate their current TDS at the new lender's qualifying rate.

Example: Client renewing $550,000 remaining balance, income $110,000, car loan $450/month, no other debts.

New lender offers 4.85% (qualifying rate: 6.85%, 5yr fixed) Remaining amortization: 20 years

Monthly mortgage payment at 6.85%, 20yr: $4,219 Property tax: $450/month, Heating: $150/month Housing costs: $4,819 Total debts (TDS): $4,819 + $450 car = $5,269

Gross monthly income: $110,000 ÷ 12 = $9,167 TDS: $5,269 ÷ $9,167 = 57.5%

Result: FAILS A-lender TDS limit of 44%. Client cannot switch lenders. Must renew with existing lender.

This scenario is increasingly common in 2026. Many clients who bought at low rates are now carrying more debt and facing higher qualifying rates.

TDS at Qualifying Rate = (Housing Costs + All Debts) ÷ Gross Monthly Income

Required: TDS ≤ 44% (A lender)

If TDS > 44%: Client must stay with existing lender OR find a B lender
If TDS ≤ 44%: Client can switch to any qualifying A lender

Options When a Client Can't Qualify to Switch

When a client fails the stress test for a lender switch, brokers have several options:

1. Stay with existing lender: Negotiate the best rate possible. Existing lenders know the client is rate-shopping. Present competing offers (even if unqualified) to negotiate.

2. B lender renewal: If the existing lender's renewal rate is high and the client can qualify with a B lender, a B-lender switch at renewal is an option. B lenders often don't apply the formal B-20 stress test.

3. Extend amortization: Some lenders at renewal allow amortization extension if the client has owned the property long enough. Extending from 15yr to 25yr remaining reduces monthly payments and TDS.

4. Pay down debt: If the client has months before renewal, pay down the car loan or credit cards to reduce TDS before the switch.

5. Co-signer: Adding a co-borrower's income improves TDS ratios.

6. Refinance and switch: If the client needs to refinance (access equity), they must re-qualify at the new amount anyway — do it with the best lender.

Run Renewal Scenarios with BIPS

For every client approaching renewal, run their scenario through BIPS:

1. Enter the renewal details: remaining balance, amortization, current income and debts 2. BIPS calculates TDS at the qualifying rate for every lender 3. See instantly which lenders they qualify to switch to 4. Compare the rate savings against staying with the existing lender 5. If they can't switch, identify what would need to change (debt paydown, income increase) to make switching possible

This analysis takes 2 minutes with BIPS vs 1-2 hours manually — and gives clients a clear, numbers-based picture of their options.