Starting June 1, 2021, the qualifying rate used to “stress test” your ability to afford a mortgage now and in the future has increased from 4.79% to 5.25% (or the contract rate plus 2%, whichever is higher) on pretty much all mortgages no matter the down payment or equity!
According to Ratehub.ca’s calculations, “a household with an annual income of $100,000 and a 20 percent down payment – with a 5-year fixed mortgage rate of 1.78 percent amortized over 30 years – would qualify for a home valued at $651,000 under today’s 4.79 percent qualifying rate.
Under the new stress test rate of 5.25 percent, the same household’s maximum affordability would decrease to $618,000. That’s a difference of $33,000 (or 5 percent).
There is a caveat: if you get a mortgage pre-approved before June 1st, OSFI says the lenders would have the discretion to underwrite the loans based on the prior qualification rate.” (http://ratehub.ca)
Pre-Approval
The jury is still out on the impact on pre-approvals (rate holds with no signed Purchase Agreement in place) as all lenders determine how they wish to interpret the new guidelines.
With only a few days to go to the deadline and with a majority of lenders being too overwhelmed to even issue pre-approvals right now in this crazy market, most will likely require a signed Purchase Agreement in place before June 1, 2021.
Refinance
If you have Mortgage Approval for your refinance before June 1, 2021, there is no impact.
After June 1, 2021, the qualifying rate increase may mean your borrower power has been reduced if you were already looking to refinance to your maximum amount; if you weren’t, then you are likely fine.
Everyone’s situation is unique and different, and so we need to re-run some numbers to see how specifically it has impacted you.
Purchase
If you have a signed Purchase Agreement in place before June 1, 2021, there is no impact.
After June 1, 2021, the qualifying rate increase may mean your borrower power has been reduced if you were already looking to purchase as your maximum amount; if you weren’t, then you are likely fine.
Everyone’s situation is unique and different, and so we need to re-run some numbers to see how specifically it has impacted you.
Renewal
If you are offered a renewal from your existing lender, you have been approved based on your history with that lender, and there is no need to qualify to remain with them.
If you are looking for a more competitive option and want to move to another lender, you will need to qualify using this higher stress-test rate. This may impact your borrowing power and options.
Everyone’s situation is unique and different, and so we need to re-run some numbers to see how specifically it has affected you.
