Is it really that complicated?
You’ve been following Penticton area real estate news and have come to the conclusion that you can no longer afford to sit on the fence over buying your first home. Mortgage rates are rising with each passing Bank of Canada announcement, so by waiting you’ll only pay more to own one. That said, you’re nervous about reports regarding Canada’s mortgage stress test. Further, you’re not sure what it even is. Collectively this has made you uncertain about getting approved for a mortgage, even though you know you must get the ball rolling by doing the test right away. It’s either that or you’ll have to throw in with your folks (or other family member) to get approved – not exactly the path you wanted to take.
You’ve come to the right place.
Instead of providing a standard DIY guide for how to do a mortgage stress test, we’re going to help you get it done. But first, here a practical look at exactly what Okanagan BC buyers need to know about passing the mortgage stress test for 2022-23.
What New Buyers in the Okanagan Need to Know About the 2022-23 Mortgage Stress Test and Where to Get Help to Pass It
Mortgage Stress Test Defined
Lenders (Canada’s big banks) want confidence that you can cover your mortgage. The government of Canada demands the same. The federally mandated stress test provides them with that confidence, determining whether or not you can afford the principal and interest payments should interest rates rise. In June of 2021, the federal government raised the rate that anyone applying for a mortgage must meet. They set the stress test level to 5.25 percent OR (now this is the important part) 2-percentage points above the borrower’s mortgage rate, whichever is higher.
At the same time last year (2021) you may have laughed in the face of the stress test. Mortgage rates were at all-time lows. It was easy for almost anyone with sound financial standing to pass given that fixed and variable rate mortgages were around 2 percent. The good ol’ days, so to speak. But things have changed.
How the Mortgage Stress Test Has Changed for 2022-23
The stress test has become more stressful for some in light of recent mortgage rate increases. With mortgage rates above 5 percent buyers are now faced with that “2-percentage points above the borrower’s mortgage rate” rule. Not cool. Under this updated stress test rate, new buyers theoretically have a harder time qualifying for a home loan than they would have earlier in the year. It’s also a bummer for some of those doing renewals.
How to Pass the New Stress Test Grade
As mentioned above, if you entered into a mortgage at the same time last annum, passing the mortgage stress test would have been easier. Lenders would have had more confidence in you as an investment. However, with the big banks (BMO, CIBC, RBC, Scotia, and TD) marketing mortgage rates above 5 percent and 2% points being added, passing the test is more challenging.
For this reason, you need to find a way to lower the quoted mortgage rates. How can you do so unless you’ve got an uncle who runs the Bank of Canada? That’s where a mortgage broker comes in. When you partner with a reputable mortgage broker, you gain access to lower unadvertised mortgage rates. This essentially reduces the mortgage stress test requirement, making it easier for you to pass and qualify.
What if the combined rate still places you under the passing grade? Fret not, all is not lost. A well established mortgage broker will have partnerships with private lenders. A private mortgage offers an alternative means to securing a home loan, as these lenders (unlike Canada’s big banks) are not beholden to the government’s stress test requirements. Learn more about private mortgages.
How to Do Mortgage Stress Test, Today
You now have a better understanding of Canada’s mortgage stress test. You also understand why it has been a hot topic in the news of late. With greater clarity, you’re now ready to pull off the proverbial bandaid and get it done. That said, you’re still uneasy about how to do the mortgage stress test on your own. You don’t have to., That’s what we’re here for. If buying a home in the BC Southern Interior, Carloni Mortgage Brokers will walk you through the entire process. We will help you do the mortgage stress test from the best possible position, ensuring that you take the test against the best possible interest rates. Furthermore, we will be there with alternative options should your stress test results limit your buying power.
How to do the mortgage stress test for an Okanagan Valley home? Just call 250.493.9111. It’s that simple.