3 Crucial Facts Mortgage Buyers Should Know About Mortgage Stress Test!
Buying a new home is always the
most crucial decisions. Not to deny that it’s a major financial responsibility
if you are dealing with the mortgage terms like mortgage repayments and
amortization schedule. Today, when you’ve decided that you are going to keep a
note of the things you can afford, the required down payment, estimated costs,
mortgage basics, and how you are going to manage with pre-approval and
pre-qualification.
Over the past several years, the
Federal Government has been tightening mortgage rules to try to limit how much
debt Canadians take on. The new mortgage as becoming effective on January 2018
means mortgage will now undergo a stress test.
The mortgage stress test is
a way of making sure borrowers will still be able to service their loan if
interest rates climb higher. Even though interest rates are still relatively
low right now, the amount you are allowed to borrow has decreased.
If you’re a mortgage
buyer wondering whether any of this matters, here are three reasons why it
does:
1.
The Stress Test Is
No Longer Determined By The Biggest Banks
Before this, the
trending banks like Scotiabank, TD finance, and CIBC are often used to
determine the benchmark rate, which often serves as the minimum stress-test
rate. It’s taken a few years, but official s has finally realized that’s not a
good idea. For well over a year, banks and credit unions have refused to cut
their posted five-year rates enough to reduce this all-important qualifying
rate. It’s what kept the mortgage stress test unnecessarily difficult, blocking
thousands of borrowers from qualifying the best mortgage or qualifying at all.
2.
It’s Economically Beneficial
When interest rates
dive, it’s usually indicative of a slowing economy. By keeping their posted
rates high, banks prevented the stress test from adapting to lower economic
growth expectations.
This new benchmark
rate is more flexible. As economic prospects dim and rates decline, more people
will qualify for a mortgage, and vice versa. That gives our housing-dependent
economy a boost when it needs it most and slows economic growth when it gets
too hot.
3.
Expect More Rate Timing
If you’re someone with
high debt ratios, a mortgage stress test is the best of resolution. Now that
we’ll have an objective and responsive stress-test rate, it’s possible we’ll
see more borrowers – those who almost qualify for a mortgage – trying to time
rates. Folks whose debt ratios are too high under the then-current stress-test
rate might defer their mortgage application until rates fall “enough.
Conversely, some
people could be caught waiting longer than anticipated if rates unexpectedly
jump. The moral for those considering this strategy: Don’t try rate-timing.
Wrapping
Up
Hence, if you as a
user are looking for more information on a mortgage stress test in Canada,
never hesitate to connect with RateShop.ca! Recognized by Canadian Mortgage
Professional, they stand as “Top
Independent Brokerages in 2020” to get information on mortgage
terminologies.
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