Mortgage Affordability Calculator
In finance, planning for a worst-case scenario with an investment is called a stress test. When it comes to mortgages, our home is likely one of our largest investments, and our federal government has legislated a mandatory stress test for all mortgage borrowers in order to protect them from borrowing more than they can carry if the rates move up. All lenders must use the current Bank of Canada Stress Test Rate in their qualifying calculations instead of the actual mortgage rates available, or the actual rate + 2%, – whichever is higher.
The purpose of the stress test is to make borrowers aware of the possibility of rate increases in the future when the mortgage is coming up for renewal, or Variable rate fluctuations with the Prime Rate that government sets according to the economy and inflation. Other factors to consider are possible loss of employment and carrying the payment with less income, or less income during maternity leave, illness, change of jobs, etc. So while you are calculating different scenarios using the rates you see in the media, please do the same numbers also using the Stress Test Rate to know what you actually can be approved for by the lenders.
Feel free to call me any time to discuss your options and actual rates according to your situation.