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How the New Government Stress Test Affects MortgagesCanadian homebuyers who are renewing or applying for mortgages are now required to go by the stress test rules put in place on June 1, 2020. These new rules can make it more difficult for some borrowers to qualify for a mortgage, or at the very least, reduce the approved mortgage amount. The new government stress test applies to borrowers who are putting 20 percent or more down when buying their home. Prior to the change, you had to show you could afford a mortgage with an interest rate two percent over the rate the lender was setting for your mortgage or the minimum of 4.79 percent. With the change, the minimum is 5.25 percent.

It might not seem like this increase is significant, but for borrowers with a high debt-to-income ratio, it can mean the difference between qualifying and being unable to secure financing without choosing a home that is $10,000 to $50,000 less. While there was a hope that the new rules would cause a reduction in home prices, that has not been the case as there is still plenty of demand keeping prices steady.

The good news is that, with the guidance of an experienced mortgage broker, you can overcome the challenge of the new government stress test and still become a first-time homebuyer or purchase a second home. The stress test does not adversely affect everyone, so you need the advice of a brokerage that cares like we do at Donna Mullen & Associates. Whether you are ready to purchase a home or it is time for renewal and you want to be sure everything goes as planned, reach out to us for the answers you need to get the most favourable outcome. We know mortgages better than most and can help you see yourself through the eyes of a mortgage lender.