How Recent Rate Increases Are Impacting Your Stress Test Qualification
With the latest rate hikes by the Bank of Canada, and in turn rate increases from lenders, many hopeful homeowners are seeing a decrease in their 2022 real estate buying power. With 5-year fixed mortgage rates over 5%, those applying for a fixed mortgage are having to debt service at a full 2% higher; that’s over a 7% qualifying rate.
With the ever-changing climate of the mortgage industry, here are some considerations to keep in your back pocket as you approach a mortgage approval under the stress test.
· It’s important to get an up-to date mortgage pre-approval prior to the Bank of Canada meeting on July 13, as the industry is expecting more rate hikes.
· To maximize the amount you can qualify for, you may choose a variable rate mortgage as it has a lower qualifying stress test rate. It’s important to note that if you’re going the variable route, as the rates rise, the interest portion you pay each month increases and unless your payment is static, your monthly mortgage payment will increase too.
· See if a shorter fixed-term mortgage is right for you. Currently, 2 and 3 year fixed rates are often below 5%, so there is a potential advantage in comparison to the 5-year fixed rate.
· There are private mortgage lenders and credit unions that can finance unique buyer situations as well as specialty properties.
· The stress test applies to both those looking for a mortgage for a new property as well as those refinancing their mortgage to negotiate new terms, rates and balances.
When it comes to making your mortgage choices, it’s more important than ever to be working with a mortgage professional that has access to a wide variety of lenders and products. Ensure your mortgage pro understands your real estate goals and offers a deep understanding of how to maximize your unique borrowing power. And if you’re ready to get started with a pre-approval, do so from the comfort of your own home at https://www.chadeliason.ca/pre-approval.