The mortgage stress test is having a powerful effect on new home buyers in Winnipeg.
The mortgage stress test is a required mortgage calculation ensuring you can afford your mortgage payments should interest rates rise. If you require an insured mortgage, you must qualify for payments based on the Bank of Canada qualifying rate for a five-year fixed-rate mortgage. The rate currently stands at 4.64%.
There can be a considerable gap between what you must qualify for and what you actually pay. The Bank of Canada rate is currently 4.64% and a competitive mortgage rate is 2.28% according to ratespy.com.
Unknowing buyers see the actual competitive rates and go out and buy a home. Unfortunately, a lot of them won’t qualify for financing based on the mortgage stress test.
It’s not easy to buy the right home today. The average house price in Canada as of February 2017 is $551,400 according to the Canadian Real Estate Association. Some markets, such as Vancouver and Toronto, are fiercely hot. Inventories are low and competition is very high. Bidding wars break out over the smallest of lots.
Of course, not all markets are as hot as Vancouver and Toronto. However, markets are still competitive. When you actually hit the pavement to shop for a new home you need to be prepared. You need to understand what you qualify for and what you really want to purchase.
In Winnipeg, the value of an average home is $298,329. The mortgage stress test still has to be applied. It’s a matter of being prepared and knowing the mortgage you qualify for and what you want to buy.
Your mortgage gap could be significant. According to the Financial Post, for a federally backed loan on a house worth $551,400, your actual monthly payment based on a 25-year amortization at 2.28 percent would be $2,278.35. However, you have to qualify for a mortgage payment of $2,925.74. The nearly $700 a month difference is what’s causing a lot of problems.
When Vertuity Mortgage prequalifies clients for a mortgage, we explain the mortgage stress test. We look at the amount you want to spend on a home and we determine ahead of time if you can pass the mortgage stress test implemented by Ottawa. We discuss the payment amounts of what the mortgage stress test says you have to qualify for and your payment amounts at a competitive mortgage rate.
Vertuity Mortgage has a No Hassle process to walk you through the steps of buying a new home. We work through the rigors of the mortgage stress test so you understand today’s mortgage process.