Fact: buying a home today is complicated. First, there’s the financial terminology to learn and understand. Then, there’s the high housing prices. And now, there’s understanding the mortgage stress test: how it works, and how it impacts you when you’re searching for a mortgage.
Better fact: there’s professional help available that will make it easier.
The mortgage stress test and its impact
The mortgage stress test, introduced in 2018, was meant to determine whether you would be able to make payments if interest rates increased. Home buyers now need to qualify at the greater of the Bank of Canada’s five-year benchmark rate, or your contract mortgage rate plus two percent. This creates a buffer between the rate you’re being offered and the rates you might be paying in the future.
A mortgage broker can help
You are a mortgage broker’s first priority.
Talk to a bank about a mortgage, and their priority is to sell you a mortgage – one of theirs. A mortgage broker, on the other hand, is a middleman, and not employed by a lender. Their priority is finding the right mortgage for you.
A mortgage broker means more choice.
A mortgage broker works with many different lenders on an ongoing basis. Because they are not tied to one lender, they have more mortgages to choose from.
A mortgage broker saves you time.
With your demanding job and other commitments, you don’t have much extra time. A mortgage broker takes much of the responsibility of finding the right mortgage off of you, saving you time and worry. You don’t need to master mortgage terminology… because they do. (And they’ll explain it to you.) You don’t have to spend time researching and comparing mortgage rates, terms, and fees… because they will. And the job of negotiating to get the best deal isn’t yours… it’s theirs.
A mortgage broker has specific training, as well.
Mortgage brokers must successfully complete a provincially-regulated Mortgage Broker course and exam. Then they must take professional development education courses to maintain their status. In addition, their brokerage offers training as well.
A mortgage broker makes sense of the stress test.
Many industry experts report that home buyers are confused by the stress test, and how it affects them. The key to understanding it is working with an expert in the mortgage field. A mortgage broker will help you assess your financial situation to determine what you can afford today. They’ll explain how the stress test works.
They’ll also help you understand that a mortgage rate is just one element of a mortgage to consider. Other elements, such as the term and fees, also have to work for you.
Because of a mortgage broker’s experience and knowledge, they offer a better perspective on home buying. This is what will make the difference in finding a home – and a mortgage – you can live with.
If you have questions about the stress test or mortgages, reach out and let’s chat!
Tatum Neufeld, BComm
Mortgage Broker • Mortgage Tailors