February 15, 2018

As if it wasn’t already tough to get approved for a mortgage, the new rules regarding the “mortgage stress testing” are making it even harder. Borrowers need to go through a series of steps to verify their financial strength to qualify.

Of course, an adequate income, a decent credit history, and a manageable amount of debt are part of the equation. But now passing stress tests before being granted a mortgage approval is also required.


What is the Mortgage Stress Test?

The Mortgage Stress Test has been around for a while and is nothing new to the mortgage industry. That said, it was only applied to insured mortgages with a down payment of less than 20%. But now, all borrowers will have to pass the mortgage stress test, even if they have managed to put down over 20% towards their mortgages.

Mortgage stress tests are basically meant to help lenders identify whether or not borrowers would be able to handle making their mortgage payments if interest rates rise in the near future. Even though borrowers may be financially capable of paying their mortgage based on their current rate, how would they be able to handle their payments if rates rise?

That’s the point of the mortgage stress test, and although it’s protecting lenders and the economy as a whole, it’s making it more difficult for borrowers to get approved for a home loan. These tests are run by assuming that interest rates are two points higher than they are today.

Based on expectations from Mortgage Professionals Canada, about 18% of borrowers who go through the stress test will likely fail. That translates into as many as 100,000 would-be buyers who would fail the test, and therefore be unable to get a mortgage and buy a home at the price they were originally looking at.


Borrowers Have Other Options for Mortgage Approval

Mortgages are already tough to get approved for, and with these new stress test rules in place, they can be even harder to secure.

That’s why you should not limit your scope of lenders to just your local big bank or credit union. Instead, you’ve got plenty of other loan options available that can help boost the odds of mortgage approval.

At Lendpin, we can help you realize your dreams of buying a home and get that mortgage you need. Even if you’re finding it nearly impossible to secure a mortgage at your bank, we can find a solution. that’s perfectly suited for your specific financial situation. Get in touch with us today!