Do Not Qualify Due to Stress Test
What is the 'Stress Test'?
In both the Prime (‘A’) lending and Alternative (‘B’) lending mortgage spaces, you now have to qualify for a mortgage based on an interest rate that is higher than the actual rate of your mortgage. This test is used to ensure you will continue to qualify for your mortgage if interest rates increase at the end of your term. In 2018, the Bank of Canada raised the conventional five-year mortgage rate (benchmark rate) that is used to qualify you for the mortgage you approve. Additionally, new regulations took effect in which require individuals to qualify on the greater of the Bank of Canada conventional five-year mortgage rate or their contractual mortgage rate + 2% (‘Stress Test’). These changes affected all federally regulated institutions including the big banks. Before the new regulations, the requirement was for individuals to qualify at the greater of the Bank of Canada conventional five-year mortgage rate or the contractual rate of the mortgage you approved for. If these stress test changes have affected your ability to qualify, we maybe able to help you.
Solutions we can offer:
Due to this stress test, the mortgage amount that many Canadians qualify for has significantly decreased. In many cases, given that Canadian real estate prices are astronomically high, Canadians are just not able to afford financing or refinancing in this current environment.
Luckily alternative lenders and private lenders have higher qualifying ratios which allow Canadians to qualify for a higher mortgage despite this stress test.
If you have any questions, we would love to hear from you. Contact us.