• The Jennifer Jones Team

What is a Mortgage Stress Test and How Does it Apply to Me?



WHAT IS A MORTGAGE STRESS TEST?

The Mortgage Stress Test makes sure that you can still make your mortgage payments even if interest rates go up. Your stress test results determine whether you qualify for the mortgage you want. The stress test applies to all home buyers, even if they are making a 20% down payment.


WHAT IS THE QUALIFYING RATE?

The mortgage stress test qualifying rate legislation was introduced by the Federal Government to determine whether a borrower could meet their payment obligations if interest rates increase.

For example: if you applying for a mortgage at rate of 2.90%, then your lender will assess you as if you were paying your mortgage at 4.94% (2.94% +2%) since 4.94% is greater than the Banker of Canada’s five year benchmark rate.


HOW DOES THIS RATE AFFECT YOU?

Lenders generally make you qualify at their posted 5-year rate (4.94% for example). “Qualify” means that you must prove you can afford a payment at that higher rate. Qualifying rates are used to ensure borrowers can handle their payments if rates go up.


WHAT DOES A RATE CHANGE MEAN FOR BORROWING?

The Benchmark Stress Test qualifying rate dropped from 5.04% to 4.94% Buyers who are in the market looking to purchase their next home can now qualify for a higher mortgage amount.


Talk to your mortgage broker and find out how much of a mortgage you are qualified for. Then contact us to help you to find your dream home!



Written by: My Linh Ha (mylinh@jj.team)

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*Please note, this blog is not intended to solicit those home  buyers or home sellers that are under a current agency  agreement.

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