Wondering how the rate increases (and subsequent stress test increase) would impact your ability to qualify for a mortgage?

Suppose your household income is $120,000, you have good credit and you want to buy a condo in a major urban centre. Let’s say the property taxes are $2,400 and the condo maintenance/strata fees are $360 each month.  How has the current rate increases impacted the affordability of a buyer looking to purchase through a bank these days:

High-ratio purchase with a down payment of 10% or more

Now, let’s take this same borrower in all respects, except they have a down payment of less than 20%, and so the maximum amortization period is 25 years.

Mortgage type Lender type Stress test rate Down payment Amz. Mortgage amount           possible
Variable Bank/C.U. 5.25% 10% 25 years $570,000
Fixed Bank 7.14% 10% 25 years $480,000

With the rate increases, many people have seen their affordability drop $80,000-90,000 based on the stress test of around 7.14% as opposed to the stress test rate of 5.25%.  This could be a decrease for someone looking in an area where a minimum price might be $600,000 since in the current environment, you would only be able to afford around $510,000.

Want to know more about your affordability or how Rent-to-Own might be able to help, feel free and fill out an application to set up a call.  There is no commitment required.