Poor Decision To Keep Stress Test As Is

Today the government agency OFSI announced that the infamous mortgage stress test would remain unchanged.

In our opinion, this is a very poor decision because it targets and prevents prospective homebuyers from entering the market.

How absurd is it that some renters are paying upwards of $4000/mth to rent a home, but they are not given the opportunity to own the home they are living in? Currently $4000/mth can carry a mortgage of approximately $700,000!!

If the government is truly trying to protect borrowers from overextending themselves, there are other ways such as extending the amortization period.

The stress test requires mortgage applicants to prove that they can afford a rate of 5.25% OR that they can afford the rate the bank is offering (known as the contract rate) + 2%.

Because rates are all in the range of 4.5% and higher now, the 5.25% threshold is meaningless.

Example:

The bank has just offered you a rate of 4.74%.

You need to prove that you can afford a rate of 6.74% before they will give you the money. In this example below, the client’s affordability dropped by almost $100K due to the stress test.

The good news: we have access to GOOD lenders who will allow for longer amortization periods to help qualify and bypass the stress test. If you would like more information on scenarios where you may be able to bypass the mortgage stress tests, please check out this article: https://www.robertfloris.com/how-can-i-avoid-the-stress-test/

Please call us for free advice if you are in the market to purchase or refinance and feeling the stress!

Robert Floris and Sean Howard are Mortgage Brokers in Hamilton. Their office is located at 236 Pritchard Rd, Hamilton, ON L8W 3P7. If you would like to speak with Sean or Robert, he can be reached at 1-855-558-7878.