12 Jan What does the stress test look like after January 2018?
As of January 1st, it has become harder for some buyers to get a mortgage. The reason for this is related to the decision made and announced by the Office of the Superintendent of Financial Institutions (also known as Canada’s banking regulator) to introduce new rules on mortgage lending, among them the “Stress Test”. These rules will hit first-time home buyers and those thinking of refinancing their homes hardest.
What does this stress test look like? The OSFI has set a new minimum qualifying rate or “stress test” for all prospective home buyers, even those with a down payment of over 20%. You need to ensure you are dealing with a mortgage broker who knows what impact the stress test has on your application. You also need to ensure that the broker explains it well to you. For that, you must meet with a mortgage broker who understands what this looks like before you go out and start looking for a home.
Before the stress test, only buyers that had a down payment of less than 20% had to make sure they could pass a stress test. Regardless of how much money you save for a down payment, if you don’t pass the new stress test, the bank won’t give you a mortgage.
Before the new stress test, home buyers or owners qualified at the rate offered by the lender. The actual mortgage payment will still be paid at the negotiated rate, but a higher education is used for qualifying purposes. If you bought a home in 2017 and a contract was drafted then, some lenders will honour the old rules. Thus, ensure you are working with a mortgage broker who knows about this.
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