As of January 1/2018, there are new mortgage rules for Canadian borrowers who now must undergo a mortgage stress test to make sure that they can afford the new mortgage they are applying for. The mortgage stress test applies to anyone buying a home or refinancing their existing home. Under the new mortgage rules, all federally regulated financial institutions offering mortgages now require borrowers to qualify at the bank of Canada’s five-year benchmark rate or their contractual rate plus two percent.
While mortgage renewals will not be subject to this test, borrowers who can’t pass the new mortgage stress test will be forced to renew with their existing lender, eliminating the ability to shop for better rates or borrow against the equity of their home.
While there might not be a lot you can do to make the math favour your situation, it is a good idea to consult a mortgage broker before signing your renewal, especially if you want to borrow against your home equity.
With all Canadian borrowers being subjected to the new mortgage rules, borrowers are looking for alternative solutions to avoid having to qualify based on the mortgage stress test; fortunately, there are options. While all federally regulated lenders are forced to comply with the stress test, there are several lenders who are exempt.
With rejection rates skyrocketing with the big banks and other lenders subject to the new mortgage rules, there has been a rise in alternative lenders to fill the void. While rates are modestly higher, borrowers who are consolidating high interest credit card debt, paying off consumer proposals and bankruptcies or need an influx of cash can benefit greatly from these alternative lenders.
Secondmortgage.ca can offer a whole host of products designed to help consumers who can’t pass the new mortgage stress test. In fact, most second mortgages or home equity loans, as they are often referred to, don’t even require you to demonstrate income and are based almost exclusively on your equity position. If you have been declined by your bank or know you won’t meet the conditions of the new mortgage stress test, let us help you explore your options. Call us for a free consultation at 1-866-306-2637 or apply online and put the stress test to rest!