IF You Have LESS Than 20% Down Payment, You Must Qualify Using The Stress Test To Get A Lower Rate…

By: Thomas Cook

IF You Have LESS Than 20% Down Payment, You Must Qualify Using The Stress Test To Get A Lower Rate…


Bank of Canada rules have for several years now changed a lot of details about how large of a mortgage both high-ratio borrowers with less than 20% down AND borrowers with more than 20% down can be approved for. 

The Bank of Canada (BoC) has dictated that high-ratio borrowers must qualify at the BoC rate determined by them, even if you can get a mortgage for 2% - 3% less. 

As an example, look at the amount you qualify for if you earned $100,000 annually either by yourself or combined with a partner with the current BoC qualifying rate of 5.25%.

In the mortgage market now, it's common to be able to get a 5-year fixed, 25-year amortized mortgage of about 2.3% to 2.4%.

That 'qualifying' interest rate difference is huge when you consider how high TO prices are now for both condo suites and houses.

So why does the Bank of Canada do this?  In their view, there is a distinct possibility that interest rates might rise in the coming years as they did in the recent past.  

We have been in a ‘low rate’ situation now for 10+ years now and odds are that something domestically or globally might cause rates to rise.

It is probably a good thing that they’re preparing for a worst-case scenario and endeavoring to prevent a future implosion in our Canadian real estate market if rates were to rise.


Thomas Cook
Thomas@LivingInToronto.com
647-962-1650


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