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Mortgage Expert TMG The Mortgage Group
Mortgage Expert TMG The Mortgage Group

My Blog

Increase to the mortgage stress test rate for insured mortgages.

On May 20, 2021, as expected, the Department of Finance extended the increase to the mortgage stress test rate to insured mortgages.  This change is no longer proposed, but will come into affect June 1st.

The rate goes from 4.79% to 5.25%, to match the already announced change to uninsured mortgages.  This is the rate you must qualify for but not the interest rate you will pay.  You will pay the rate as per your mortgage agreement with your lender.

What this means is that home purchasers and those refinancing their mortgages will qualify for approximately 4 –  5% less mortgage.

An insured mortgage is a home purchase with less than 20% down payment or mortgage lender switches.  An uninsured mortgage has greater than 20% down payment or equity in the case of a refinance.

Purchases

Whether your down payment/equity is more or less than 20%, you will now have to prove you can afford payments based on the new rules.  The mortgage stress test qualifying rate changes to contract rate plus 2%, or 5.25%, whichever is higher. Currently, the minimum qualifying rate is 4.79%.

Announced by the Office of the Superintendent of Financial Institutions and the Department of Finance, these changes will reduce the maximum mortgage you qualify for by between 4-5%. That means if you qualify for a mortgage of $400,000 now, it will fall to $382,400 on June 1, 2021, if you’re applying with a federally regulated institution.

The higher stress test will not apply to your agreement of purchase and sale is dated before June 1, 2021.

Options when you don’t qualify 

Depending on your situation, I have lenders that are provincially regulated that still offer lower qualifying rates and requirements that may be a fit for your situation.

Click here for why the changes were made and for further information.

If you have any questions give me a call or send me a message.

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