What is the new Mortgage Test, Canada?
What is the new Mortgage Test, Canada?: If you are thinking about getting a mortgage, then congratulations are in order because this means that you are now ready to buy your own house! However, if you are living in Canada, you might want to hold off the celebrations till you actually clear Canada’s mortgage tests.
Yes, you read it right. In order to get a mortgage in Canada, you have to undergo a mortgage stress test and your tests results will determine whether you are capable of getting one or not!
Why Do You Need to go Through This Test?
Canadians who are renewing or refinancing their mortgages or getting a mortgage for the first time are required to undergo a mortgage stress test. The main objective of this test is to prove that whoever is applying for a mortgage is financially stable enough to make the mortgage payments even if the interest rates fluctuate up and down.
In most of the cases, it is the upward fluctuation that is always a cause of concern as far as mortgage payments are considered.
Which Banks are Following These Mortgage Guidelines?
This regulation affects all the six big banks of Canada and some of the provincially regulated lenders are also complying with these guidelines, voluntarily.
What Does This Mean?
The new mortgage stress tests mean that you may not be able to get as higher a mortgage amount as you were expecting and you may have to compromise on the property that you are interested in.
Furthermore, if you want to renew your mortgage, you may not be able to move to another lender or if you are on the lookout for refinancing your mortgage, you may have to stick to the loan you borrowed in the first place without any chance of boosting it.
What is the Test and How to Qualify?
Canada’s mortgage tests are performed to determine any risks associated with the loan. To qualify, you need the following points checked!
- The home buyers should qualify for the approved mortgage rate with an additional 2% rate or the bank rate.
- The total debt ratio (TDS) should not exceed more than 44%.
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