stressed mixed race couple

Are you stressed over the stress test?

We have solutions to help!  

What is the stress test?

At the start of 2018, the Office of the Superintendent of Financial Institutions (OSFI) enacted the all-new mortgage stress test. The stress test requires the qualifying rate for both insured (a down payment of less than 20%) and uninsured mortgages (a down payment of 20% or more) must be the greater of the Bank of Canada’s five-year benchmark rate, or the rate homebuyers negotiate with the lender plus two percentage points.

Our goal is to help you navigate the stress-test and provide you with the assistance you may need to purchase the home that meets your financial goals. Let’s get started on your mortgage approval journey today!

A real world example of how we helped a client beat the stress test:

ScenarioA couple who both were working full-time had an annual income totaling $113,000. Their mortgage was $504,000 with a qualifying interest rate of 4.79% and had other debts outside of their mortgage which resulted in a total payment of $5,434 per month.

Purpose: They wanted to decrease their monthly debt obligation and renew their home before the stress test took effect and were confused about losing their existing interest rate and qualifying for the new stress test.

Income: Full-time, two-income source. 

Credit score: They had a credit score of 530 and 600.

Financial options: Our plan of action was to consolidated existing debts by combining all of their monthly payments under one simple payment option.

Result

  1. With the consolidation, they were able to reduce their monthly payment by $3,488 (Before they were paying $5,434 and now their monthly payments were $1,946).
  2. After 60 days of consolidation, they were able to improve their credit score to 680 & 700 respectively which allowed them to qualify with an A-rated product. As a result, their monthly cash flow increased by $3,488 which led to saving over $41,856 annually.
What would have happened if they had renewed their mortgage after June 1st , 2021?

According to the New Stress Test rule, the qualifying rate would be now 5.25% instead of 4.79% for which they would have only qualified for a mortgage of $480,000 instead of $504,000 – which means it would have reduced their purchasing power by $24,000! 

Have questions or concerns? Call +1 800-288-2764 or email today today for full details and a free consultation.

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