How This New Mortgage Financing Trend Could Affect You

With a desperate need to cool down the housing market in Canada, the government recently amended the qualifying rate of the stress test. The qualifying rate affects how much mortgage applicants can get approved for when buying a house. However, the qualifying rate is not the actual interest rate an applicant pays for their mortgage.

This change in federal legislation was designed to keep individuals from overspending on a mortgage, especially in light of the extremely low interest rates available. Unfortunately, many feel that the difference between the qualifying rate and the actual rate is too large. So let’s take a closer look at the qualifying rate of the stress test.

How does it work?
As of writing this article, the qualifying rate is 5.25%, while the actual rate paid on a fixed mortgage is about 2% or approximately 1.45% for a variable rate. Remember that the qualifying rate is used for all mortgages, whether you have the minimum down-payment or you put down more than 20%.

What are its effects?
As a first-time homebuyer, the qualifying rate would lower the mortgage your would qualify for and the size of the house you can afford to buy. It also makes it more challenging to purchase in smaller areas of the country, while in major centers like Toronto or Vancouver, it makes it next to impossible to keep up with the cost.

What should you do?
Many people will look for a house and then see if they can get the mortgage for it. However, it’s essential to know what you qualify for first and then go house hunting. Also, in a competitive market, purchasers are typically asked to make an offer without any conditions, including financing. Therefore, if your offer is accepted, you will have to have a mortgage pre-arranged to show your seriousness.

In this situation, a licensed broker can help to take advantage of more sources of income than a bank. For example, utilizing the child tax benefit will enable you to qualify for a larger mortgage. There are also other programs that expert brokers can use to help you qualify for a larger mortgage.

If you require assistance from an experienced broker to pass the stress test and secure a mortgage suitable to your needs, get in touch with Vic Lehan & Associates. I’m a licensed mortgage agent in Leamington, ON, specializing in providing a wide range of mortgages services in English and Low German. As no two mortgages are the same, I search through many lenders to match clients with the right solution for their situation. My services include first-time homebuyer mortgages, mortgage refinances, mortgage renewals, bruised or bad credit mortgages, private mortgages, commercial mortgages, and New to Canada mortgages. I offer my services to clients across Leamington, Kingsville, Harrow, Essex, Wheatley, Windsor, and Ontario.

If you have any questions about mortgages, please contact me by clicking here. To learn more about the services I have to offer, please click here.