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The housing market showing up in the headlines isn't something new in 2021. All last year there were sensational headlines about the expected housing market crash, the unexpected turn of the housing market, and finally, headline after headline about the hottest year on record. 

So when something relatively small happens, it's less likely to turn heads. But there is a new change coming that all home buyers and sellers should be aware of. 

And that's changes in the mortgage stress test. 

A mortgage stress test is a way of determining exactly how much you can afford when you're applying for a mortgage. If your income was reduced or you lost your job, could you still afford to make mortgage payments? What if interest rates spike or you need to refinance your home? These are considerations that are taken into account when a mortgage broker shops around for rates and determines your top purchasing power. 

When determining how this will affect buyers, we turned to Alex Lavender, a mortgage broker with the Clinton Wilkins Mortgage Team:
 

When is a stress test done when applying for a mortgage?

A stress test is done when someone obtains a pre-approval or a full approval for a mortgage.  The maximum amount that you can qualify for will be based on this stress test rate.  

The stress test rate is always used for qualifying purposes, not the actual rate.

What exactly is changing after June 1st? 

The Office of the Superintendent of Financial Institutions (OSFI) proposed that after June 1st, borrowers applying for uninsured mortgages—those with more than a 20% down payment—need to be able to qualify at their mortgage contract rate plus two percentage points or 5.25%, whichever is higher.

The stress test currently has a minimum qualifying rate of 4.79%, nearly 50 basis points lower.

In your opinion, how will this affect homebuyers? 

Homebuyers who are trying to obtain a mortgage at the top of their budget will be impacted the most as this will ultimately reduce the amount someone can qualify for. 

However the reduction in purchasing power is relatively small, this will decrease the amount one can qualify for by less than 5% of their original maximum.

While this isn't a huge change, in a market where the top bid is winning more often than not, small changes can mean more stress for house hunters and sellers looking to get top dollar for their home. 

For some buyer's this might mean that building is a better option than buying.  Others may stay the course but with a slightly reduced max-budget. 

If you're not sure how this change will affect you in the housing market, hit that reply button. I'm always available for questions! 

👋Meet the Neighbors👋⁠

Alex Lavender @halifaxmortgage

 

1) What do you do?

I am a mortgage broker and I work to find borrowers the best lending options through a wide array of lenders completely free of cost.

 

2) What do you love the most about living in HRM?

I love the sense of community here.  I spent 5 years living in downtown Toronto when I went to school and I feel when you live in a big city like that you really lose that community feeling. 

 

3) What's your favourite neighbourhood and why?

I don’t know if you would call it a neighbourhood per se but my favourite area in HRM is around Lake Charles in Dartmouth.  I love the fact that you can live on a beautiful lake and still only be a few minutes away from downtown.  This is what makes HRM so special, there are so many lakes that someone can live on and still be so close to the city, I can’t think of very many cities in Canada that would have this opportunity. 

 

4) Can you share an insider tip about your neighbourhood?

At Sullivan’s pond, there are white geese that have become iconic in the area.  These geese use the crosswalk on the road to walk over to the other park.  It's quite the sight if you have never seen it!

 

5) What local business should people check out if they are in the area?

You have to check out the Montreal Style Bagel place on Wyse road, these are hands down some of the best bagels I have ever had in my life.


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Copyright © 2021 Margaret Craig, REALTOR® / Real Estate Advisor, All rights reserved.


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