How This New Mortgage Rule Could Affect You
A mortgage is one of the most significant investments that most people will make in their lifetime. Therefore, to ensure home seekers can afford to take on the massive debt, a stress test was introduced in 2018, which shook up the industry.
Three years on, with the current unprecedented times we’re all facing, the government has amended the stress test, which came into effect on June 1, 2021. The new stress test means that home seekers have to “qualify” at 5.25%, even if the rate they’re paying is only 1.5% on a variable rate mortgage or 2.34% on a fixed-rate mortgage. All mortgages being completed by nationwide banks have to follow the new policy.
The policy was amended to ensure that mortgages are underwritten smartly, which prevents Canadians from borrowing more than they can afford. The downside is that many people are struggling to qualify for a property they can very easily afford. A person who qualified for a $500,000 mortgage before the stress test will now only be allowed $400,000 under the current legislation.
In the short term, borrowers are becoming increasingly frustrated as they will qualify for a lower mortgage amount than they’d like. However, in the long run, it will normalize as all borrowers are affected the same nationwide.
If you’re looking to secure a mortgage in Vancouver, BC, but find it challenging under the current circumstances, get in touch with Rowan Smith Mortgage Broker – City Wide Mortgage Services today. Over the past twenty-one years, I’ve maintained top industry contacts, enabling me to set you up with a local credit union that has not been affected by the stress test legislation. It will allow you to get approved for more than a major bank will offer you. In addition to straightforward home purchases, I specialize in more complex transactions, including construction, commercial, and debt restructuring while in foreclosure. I also offer access to private lending.
My services are available across Vancouver, Yaletown, Burnaby, Richmond, Coquitlam, Surrey, South Surrey, White Rock, Langley City, Fort Langley, Langley Township, Aldergrove, Abbotsford, Chilliwack, Hope, and the surrounding areas.