Whether You Are a First-time Buyer, or Perhaps Looking to Downsize or Upsize Your Current Home, My Best Advice is to Start With a Mortgage Pre-approval.
As interest rates are always changing and not predicted to ease until 2024, having your ‘pre-approval’ in place is even more important than ever. It is important to remember that there is also a stress test that the lender will impose on your application. Mortgage Broker Lance Dawson puts it like this:
The mortgage stress test in Canada applies to insured and uninsured mortgages. The minimum qualifying rate is 5.25%
OR the rate offered by your lender plus 2% – whichever is higher.
Let’s look at some practical examples. I just closed a deal where we secured the client an insured 5 year fixed at 4.69%.
To qualify, the lender required that we added 2% to the lender rate of 4.69% which gave us a stress test rate of 6.69%. Therefor, the client had to qualify at 6.69% and not the 5.25%.
What About The Variable Rate?
The prime lending rate in Canada is now 6.7%. On the insured side, the discount is 90 basis points and 50 basis points uninsured.
So, 6.7% minus .90 = 5.8% OR 6.7% minus .50 = 6.2%.
The stress test requires that we add 2% which means that the clients have to qualify at either 7.8% or 8.2% depending on whether the mortgage is insured or uninsured.
So, as we can see, the lender rate plus the 2% applies in most cases.
Knowing how much money you can spend ahead of time, will put you in a much better position to make an offer on the right property.
It can become extremely frustrating for both buyers and sellers when a buyer puts an offer on a property, the offer gets accepted and the property is now conditionally sold to the buyer, only to find out they cannot get financing approval and are unable to purchase their desired property.
The best solution is to have both a knowledgeable Realtor®️ and mortgage lender guide you through the process before you even start looking at homes.
Having this information in advance will provide you with peace of mind, and you and your family can easily start the search for your dream home.
Mortgage lenders and mortgage brokers are professionals, always ready to help and give you the advice necessary so yo and your family can move forward with your future purchase.
If you have any questions, please don’t hesitate to contact me.
