New Mortgage Stress Test Rules - Effective June 1, 2021



In recent news, the Office of the Superintendent of Financial Institutions (OSFI) is changing the qualifying rate on uninsured mortgages.


“Effective June 1, the minimum qualifying rate for uninsured mortgages (i.e., residential mortgages with a down payment of 20% or more) will be the greater of the mortgage contract rate plus 2% or 5.25%” said OSFI in a release.


What is a OFSI Mortgage Stress Test?

It is a way of testing how you and your finances might be affected if interest rates were to increase within your term. Potential homeowners will need to prove that they can afford their potential mortgage based on their lender's minimum qualifying rates.


What Changes Are Happening?

The minimum mortgage stress test level will be increased from the current 4.79% to 5.25%. This means that you will need to qualify at your contracted mortgage rate plus 2% or 5.25%, whichever is higher. This is regardless of the size of your down payment.


How Do These Changes Affect You?

Potential homeowners will need to prove that they can afford their potential mortgage based on their lender's minimum qualifying rates. So while a stress test can decrease your maximum buying budget by about 5%, it won't affect your monthly mortgage payments.


However, if you get your mortgage pre-approved by June 1st, OSFI says that the lenders have the discretion to underwrite the loans based on the prior qualification rate. Therefore, anyone who has purchased a home already should ensure that they received their mortgage approval prior to June 1st. This should allow the homebuyer to use the existing stress test.


It is always good to get a mortgage pre-approval to know what you are qualified for.


Contact us to see how we can help you achieve your goal!

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