qualifying rate changes
Let’s see how it impacts you
The qualifying rate, sometimes referred to as the stress test, is the rate lenders must use when qualifying for a mortgage. This rate is rate is established by OSFI (Office of the Superintendent of Financial Institutions) and is strictly enforced. Below is an example of how this affects qualifying.
at a glance
As of June 1, 2021 the qualifying rate increased to 5.25% (from 4.79%) for both insured (less than 20% down payment) and uninsured (20 % or higher down payment) mortgages.
This is a precautionary step implemented by OSFI to ensure mortgage holders will able to afford their mortgage in the event of an increase in rates down the road. In the long run, this change may help to create stability in the mortgage market and keep personal debt in check.
let’s look at some numbers
Here’s an idea of how the numbers look.
Prior to June 1st, 2021, using a combined income of $81,000 with a 5% down payment and no other debt, you could look at a purchase price up to $400,000.
Using the new qualifying rate of 5.25% the purchase price is reduced to $380,000 – a difference of $20,000.
Let’s move forward
Rules change frequently. Of course, with rules, review, understanding and interpretation is required. That’s where we come in. Let’s chat about your individual situation and together we can come up with a plan that will work for you. We’re happy to help.