Mortgage Stress Test- What you need to know about it?

Homebuyers need to prove to the lender that they will be able to afford the mortgage if the rates go up and that’s why they have to go through and pass the mortgage stress test. Over the past few years, it has been found that Canadians are among the most indebted people in the world. In order to mitigate it, Bank of Canada proposed changes in housing and mortgage rules in Canada and the Office of the Superintendent of Financial Institutions Canada (OSFI) actioned these to settle the Onratio housing Market.





The federally-regulated financial institutions like banks and monoline lenders have to abide by the mortgage stress test. Let’s take a glance at what you must know about the stress test in Canada.

You need to pass it.
No matter what; you have to pass the mortgage stress test. The aim of the test is to measure the risk of your application and find out how you will make your mortgage payments. So today’s benchmark rate of 5.19% is applicable to you with every mortgage bank or lender at 5% downpayment or 20% downpayment. However, the single catch to this is the provincially run credit unions that may use their policy under FSRA (Formerly known as FSCO) & DICO that can allow for a 20% purchase to be completed at the 5-year contract rate.

Your borrowing capacity reduces.
It is noteworthy that the stress test will reduce your borrowing capacity. You will have to look for a less expensive property for your home. And the mortgage holders who are interested in refinancing; better stay with your current lenders and avoid the test. At the same time, it cannot be overlooked that they are limiting their options.

You can find a suitable lender for you.
For some homebuyers, the mortgage stress test is a burden. And some believe that it gives them the opportunity of comparing alternative lenders. Private and small lenders don’t require the mortgage stress test and as per many analysts, most buyers will go to these lenders. 

All in all, mortgage stress test is a complex process but once you get to learn about it, it can be easily managed. If you want to learn more about the stress test, you can visit the official website of RateShop.ca. On the website, you can also find numerous options to compare the mortgage rates being offered by different mortgage lenders.
Location: Mississauga, ON, Canada

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