The Mortgage Stress Test is a requirement by the Federal Government to qualify for a mortgage at a higher interest rate. Currently, the stress test rate is the Bank of Canada’s 5-year benchmark rate of 4.79% or 2% more than the contract rate, whichever rate is greater.
If you require mortgage default insurance or are applying with big banks, you will need to qualify using the current stress test guidelines.
Are there lenders that don’t have to use the Mortgage Stress Test?
Yes. The Mortgage Stress Test applies to all federally regulated financial institutions. Some credit unions in Ontario are regulated by the Provincial Government, which means if a borrower is seeking a conventional mortgage loan, they may not need to be stress-tested.
If you are having issues qualifying for a certain mortgage amount, speak to your mortgage broker about which credit unions won’t use the stress test. If this option still doesn’t work for you, consider alternative lenders.
Although alternative mortgage lenders still have to use stress-tested mortgage rates, they often have extended qualifying ratios which help people renewing a mortgage or buying a home who have more than a 20% down payment get a mortgage.
If you have questions about qualifying for a mortgage, call or write today.
By: Sarah Colucci