Mortgage Stress Test: An Important Medium in Canadian Mortgage Payments


As the mortgage interest rates in Canada remain on the lower side, the use of mortgage estimation tools like mortgage calculators and the mortgage stress test is on the rise. The mortgage stress test was first introduced in Canada to help the homebuyers get their dream home with a 20% down payment under the Canadian lowest mortgage rates-which is typically higher than the actual rate in your mortgage contract.
Before getting into the process of the mortgage stress test, you must take notice of connecting with mortgage lenders and brokers. They are the ones that guide you with the necessary information on the mortgage terminology and the right use of it accordingly. Regularly connecting with the mortgage lenders and professionals helps you get all information on the Canadian mortgage stress test. 

What is the Purpose of the Stress Test?
The the mortgage stress test was designed to tackle the household debt issue in Canada and prevent consumers from getting themselves into even more debt by taking on a mortgage that was too big for them.
But in recent times, especially in the last two years, all mortgage applicants, including those applying for conventional mortgages with at least a 20% down payment, are now required to undergo this test. This regulation is also applicable to those who wish to change to a different lender when their mortgage expires. 
How to Prepare for the Mortgage Stress Test?
There’s not much that can be done about the benchmark rate and the rate that your the lender is charging you, but it would help to have a basic understanding of where you stand before you apply for a mortgage.
Lenders use a few key metrics when assessing borrowers to make sure they’d be able to pass the stress test and manage mortgage payments, including the gross debt service ratio (GDS) and total debt service ratio (TDS).
·         Gross debt service ratio (GDS) – Your GDS represents the percentage of your pre-tax income that’s required to pay all housing costs.
·         Total debt service ratio (TDS) – All your debts will need to be factored into the equation as well, which is why lenders will also look at your TDS. This represents how much of your monthly income is needed to adequately cover your debts.
Wrapping Up
Hence, before getting into the options of purchasing the new home, it is essential to seek information on the mortgage stress test and mortgage tools. For all information on the mortgage stress test and connecting to the needful mortgage lenders, you need to communicate with RateShop.ca!

Location: Canada

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