What home buyers should know about the Canadian mortgage stress test + MORE May 28th

Mortgages in Canada can be a murky subject – one that we hope to shed some light on with a series of highly informational articles.

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Are Canadians Ready For A Tougher Stress Test?

– canadamortgagenews.ca

Securing a mortgage just got a little more difficult. As you likely know, getting an uninsured mortgage in Canada requires you to prove you can keep up with payments if rates go up. This hypothetical rate, called the qualifying rate, is changing. On May 24, the Office of the Superintendent of Financial Institutions announced that they will be raising the qualifying rate effective June 1st.

The New Qualifying Rate

The OSFI’s rather abrupt announcement details that the new qualifying rate is 5.25%, or 2% added to your contract rate, whichever is higher. These changes are swift and steep, and will no doubt impact the average homebuyer.

How Does This Affect Me?

This announcement means you’ll have to prove you can make payments against a much higher rate than in the past. Let’s put it this way: rates are currently as low as 1.40%. If this is your rate, you’ll have to qualify against 5.25%, a rate that’s 3.5 times higher. Seems excessive, doesn’t it? It’s because it is…

Continue Reading On canadamortgagenews.ca »

What home buyers should know about the Canadian mortgage stress test

– moneysense.ca

In late 2017, the federal government introduced a mortgage stress test for anyone applying for or renewing a home loan. But, if you’re like nearly half of Canadians polled by TD Bank in 2019, you may not understand what the test is—or who it affects.
And with the recent announcement that the stress test will change effective June 1, 2021, there’s even more confusion among Canadians.
But, make no mistake, the stress test isn’t going away. It’s just evolving to adapt to current housing market conditions.
“Even if you have amazing credit and a 20% down payment, you still have to go through the stress test,” says Ann-Marie Rasiawan of Mortgage Architects, a national mortgage brokerage based in Mississauga, Ont.
In other words, if you have a mortgage or plan to get one, the stress test applies to you. Here’s what you should know before you apply for your next home loan:
What is the mortgage stress test?
First off, it’s not really a test. Rather, it’s a more stringent set of rules banks must now use to determine if you qualify for a mortgage and, if so, how much you can borrow…

Continue Reading On moneysense.ca »

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