Read this if you want to stop sweating the mortgage stress test
Despite having been in place since 2018, Canada’s mortgage stress test is still causing new and existing homeowners to break into a sweat. But don’t worry. Whether you need a first mortgage, second mortgage, or access to your home equity, Alpine Credits’ stress-test-free solutions take the hassle out of getting a loan.
What is a mortgage stress test, anyway?
The mortgage stress test is a fixed set of rules banks must follow any time you apply for:
- a new mortgage loan, or
- a home equity loan or home equity line of credit (HELOC)
Banks use the stress test as a mortgage qualifier tool and to determine how much you can borrow.
So why does it have so many homeowners in a sweat?
The mortgage stress test means Canadian borrowers must now qualify at an interest rate that’s higher than the rate they’ll actually be paying should their loan get approved
What the stress test means for homeowners
When the bank processes your mortgage loan application, they examine certain financial information through the lens of the mortgage stress test.
That information usually includes your:
- credit score,
- total debt, and
- income vs housing expenses
Banks are also required to use what’s known as a qualifying interest rate to determine your loan eligibility. And that rate varies depending on the type of homeowner loan you’re applying for.
New homeowners
If you’re in the market for your very first mortgage and you have mortgage loan insurance, you must qualify at whichever interest rate is higher:
- your bank’s rate, or
- the Bank of Canada’s conventional five-year mortgage rate
If you don’t have, or can’t get, mortgage loan insurance, you’ll need to qualify at the higher of your bank’s rate + 2%, or the Bank of Canada’s rate.
Existing homeowners
Perhaps you’re already a homeowner, but you’d like to apply for:
- a second mortgage loan,
- home equity loan, or
- a HELOC
You’ll be subject to the same qualifying interest rates as a new homeowner. The exception is HELOC applicants who must qualify across the board at the higher of their bank’s rate +2%, or the Bank of Canada’s rate.
Now here’s the good news: if you’re a homeowner in need of a loan, there’s one guaranteed way to stop sweating the mortgage stress test.
Applying to Alpine Credits for a mortgage or home equity loan means that, not only will you not have to pass a stress test, your approval is based on the value of your home equity – not on your income or credit.
So whether you’re short on earnings or long on debt, if you own your own home we can help. Apply online to have your home equity loan approved in as little as 24 hours, or contact us and find out more about going stress-test-free.