On June 1st, The Bank of Canada will be changing the rules on the mortgage stress test for homebuyers.
What does this mean for you?
It may change how much you can afford when buying a home. The mortgage stress test is what the Bank of Canada looks at to determine if homebuyers will be able to continue making their mortgage payments, should the rates go up. Although you will receive a lower rate from your lender, the Bank of Canada will ensure that you qualify at their higher posted rate.
Upcoming changes to stress test qualifications will effect both insured (less than 20% down payment) and uninsured (more than 20% down payment) mortgages.
For Insured Mortgages (less than 20% down payment):
- Must qualify using either the Bank of Canada five-year benchmark rate, or the rate offered by your lender (without adding the extra 2%) – whichever is higher
- Minimum qualifying rate will be the greater of the contracted rate plus 2% or 5.25%
For Uninsured Mortgages (down payment of 20% or more):
- Your qualifying rate will increase from 4.79% to 5.25%
- Will reduce purchasing power by around 4%-4.5%
- Based upon household income, $100,000 at 4.79% will get you maximum borrowing of $482,000, with higher stress of 5.25% the maximum borrowed amount will become $463,000 so a reduction of $19,000
Purchase your new home with an accepted agreement before June 1, 2021, to maximize your buying power and qualify for a mortgage based on the prior qualification rate.*
*If a mortgage is pre-approved before June 1st, 2021, OSFI states the lenders would have the discretion to underwrite the loans based on the prior qualification rate (previous rates prior to regulated June 1, 2021 changes to the stress test qualifications).