The stress test rate change gives your more purchasing power. Here’s how:
New Mortgage Stress Test rate drop announcements and rumors are roaring. It will be 4.79% soon! Great, but how does it affect an average home buyer’s maximum purchase price? Well, let’s just say your purchase power increases by 1.5% by a rate drop of 0.15% from 4.94 to 4.79.
This means earlier you could only get a mortgage for $493k with a $100k income but now you can afford $500k mortgage. Fantastic, isn’t it!
You may be wondering, you hear current mortgage rates are historically low, as low as 1.80% 5 year variable and 2% 5 year fixed. Then,
What is this stress test rate?
To simplify it for you, your mortgage term will be based on the rates your Licenced Mortgage Agent will lock for you. But we all know the rates follow the economy and if the bank rate goes up, so does the current mortgage rates. So what the bank wants to test is let’s say in future the mortgage rates are as high as 4.79% or 4.94% (stress test rate), will the borrowers be able to afford the mortgage. Which is why each mortgage application undergoes stress test.
More and more lenders are jumping in the pool offering to stress test your income at 4.79% so hurry and get your pre-approvals and approvals at the lowest rates!