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Will I pass the mortgage stress test?


Now if you’re getting, renewing, or refinancing a mortgage, you will likely have to pass a financial “stress test” set by the federal government. This proves to your lender that you would be able to make your mortgage payments down the road, even if interest rates go up. The stress test qualifying rate is the greater of your contractual mortgage rate plus two percent or the Bank of Canada’s five-year benchmark rate.

What does this mean for your mortgage?

If you’re buying a home, you will have to qualify at a higher rate, which might mean you can’t borrow as much. Or if you’re renewing your mortgage, you may have to stay with your current lender (since the stress test doesn’t apply to those renewing with their current lender) rather than shopping around for better rates.

Since the stress test might affect how much you qualify for, you may need to look at less expensive houses – but your Realtor will be able to help you find an amazing home within your budget. The upside is knowing you’ll be able to afford your home even if interest rates go up in the future.

The new rules affect federally regulated lending institutions, like Canada’s big banks. So you can also talk to your mortgage broker about exploring other financing options too, since credit unions and private lenders are not required to follow the same guidelines and could potentially offer you more purchasing power.

Written by CIR REALTY

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