Canada’s Proposed Higher Stress Test: How Much Could You Qualify For Now?
Interest rates are still advertised for as low 0.99%! But with new reports of changes to the mortgage stress test proposed to begin on June 1, 2021 – how does that change things for you?
Well, what is a stress test? When qualifying for a mortgage, potential homebuyers have their finances tested at a higher interest rate (4.79% now to 5.25%) to show that should interest rates increase in the future, they can still make their payments. These changes will ultimately lower how much you can qualify for.
To see how this affects purchasing power, here is an example. For a family with an annual household income of $100,000 on a 5 year fixed term and 25 year amortization, here’s how their purchasing power changes:
- 4.79% (Now): $593,286
- 5.25% (June 1): $567,192
That’s a reduction of 4.4% or more than $26,000 in this scenario and can be a change of 4 to 5% depending on your situation. To find out how much you qualify for on a new home before these changes come in effect, get in touch with your mortgage professional to work out the details. You can also contact one of our team members and we’ll refer you to one of our preferred lenders.
* Home price includes applicable taxes. Assumes a down payment deposit of $40,000. Default mortgage insurance is required for purchases with less than a 20% deposit. Actual monthly amount may vary. Consult your mortgage professional for details.
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