What is the Mortgage Financing Stress Test?
Effective Oct. 17, 2016 all homebuyers, requiring an insured mortgage (a mortgage with less than 20 or 25% down-payment) for their home purchas
e will have to further be assessed/qualified on a mortgage payment stress test to
evaluate if a homebuyer would still be able to make the mortgage payments if their mortgage payments increased based on higher interest rates or the homebuyer potentially generated less income.
Until now, Mortgage financing stress tests weren’t required for closed or f
ixed-rate mortgages with a term longer than five years.
In addition to the mortgage stress test, several eligibility rules will tightened on mortgages where borrowers made down payments of at least 20 per cent of the purchase price by Nov. 30, 2016.
The immediate impact for home buyers will result in fewer home buying opportunities for those that only qualify under their current income level.
Home buyers with room to spare in their ability to make higher monthly payments, will have little or no impact at all.
In the (Greater Victoria) real estate market where we already noticed a slight leveling of the market from our earlier very aggressive price and volume increases, the new mortgage rules most likely will offer a new balance to the local market place.
This leveling in the local real estate market will assist homebuyers with a bit more time to review their options in order to make the best home buying decision possible for their next home.
In summary, it would appear that the Mortgage Financing Stress Test may possibly result in some short term pain but will result in a more secure and stable (well qualified) real estate market place.
We would urge aspiring home buyers to connect with the mortgage broker or lender of their choice and confirm their personal financing qualifications.
With the rules changes, some people will notice that the price range of their future home may be impacted by the new mortgage financing stress test.
If you have any questions, please connect with Peter at 250-213-9490 or email us at your convenience.