Vancouver Mortgage Broker Evangeline Villanueva provides information about the new stress test benchmark rate and what this means to borrowers.
As of July 18th, Bank of Canada announced the mortgage qualifying rate drop to 5.19% from 5.34%. The benchmark posted 5-year fixed rate, which is used for stress-testing Canadian mortgages fell for the first time. Since 2016, all new mortgages in Canada where down payment is less than 20% became subject to the stress test. In 2018, this was made applicable to all mortgages no matter how much you put down. The purpose of the stress test is to mitigate risk of mortgage applications by having borrowers qualify for a mortgage payment which is higher than you would actually pay.
What does this reduction in the qualifying rate mean?
This is great news for anyone looking to qualify for a mortgage! Whether you are a buyer looking to purchase a property or an existing mortgage holder wanting to refinance, you may now be able to qualify for a higher amount!
How much more?
For every $50,000 of annual income you earn, you can qualify for $5,000-7,000 more if you are putting at least 20% down. Someone earning $100,000 a year making the same down payment can afford $8,000-10,000 more. These amounts are less if you are putting under 20% down, and it may not seem like much but being able to get that extra qualification from your property can make a difference on your mortgage application!
If you have any questions about mortgages or are looking to be approved for a new mortgage – whether you are a first time home buyer or an avid real estate investor connect with Evangeline Villanueva. If you would like information about real estate, the housing market and are wondering if now is the right time to buy or sell, connect with Krista Lapp, a Coquitlam based Realtor working with clients throughout Greater Vancouver.