If you are planning to put less than 20% down payment, you need to use the BOC's posted qualifying rate or the contract rate, whichever is greater. to determine your affordability. This is called the stress test and aims to test your buying power at sometimes higher rate to ensure that you are able to afford your mortgage even when rates change.

According to Department of Finance Canada: Effective October 17, 2016, all insured home-buyers must qualify for mortgage insurance at an interest rate the greater of their contract mortgage rate or the Bank of Canada’s conventional five-year fixed posted rate. 

If you are putting more than 20%, it's a whole other story.

In this case, you need to know whether the home you are purchasing is less than $1 million and if you are going with 25 year amortization or less. If those are true, then you can use the BOC rate or your contract rate (which ever is greater).

If for example you are putting more than 20% but your home is greater than $1 million or simply you are refinancing or getting a HELOC then in those cases you have to use the greater of the BOC rate or the contract rate + 2%.

Of course, we have simplified your selection process by building the Stress Test Tool. Available in the latest Canadian mortgage app under Tools >> Affordability >> Stress Test.

Hope you find this useful.