If you’ve got a mortgage renewal on the horizon or you’re thinking of switching lenders, there’s some exciting news coming your way on November 21, 2024! The rules around the mortgage stress test are changing, and this could give you more borrowing power.
Here’s what’s happening: Under the old rules, to qualify for a $500,000 mortgage with a 25-year amortization, you’d need an annual income of at least $102,000(roughly). But starting November 21, the stress test is being eliminated on switches. This means you’ll only have to qualify at your actual mortgage rate – no more qualifying at the higher 5.25% or adding an extra 2% buffer!
What does this mean for you?
- If your renewal rate is 4%, you’ll qualify at 4%, which could slightly boost your borrowing power.
- As an example, under the new rules, you’d need roughly $84,000 in annual income to qualify for a $500,000 mortgage at a 4% rate with a 25-year amortization – a big drop from the $102,000 required under the old stress test.
This change is great news if you’ve experienced a drop in income or were worried about qualifying with today’s higher rates when shopping around for your mortgage renewal. And with rates still significantly higher than they were in 2021-2022 (when we were seeing rates as low as 1.5-2%), these changes couldn’t come at a better time.
What About Refinances and Purchases?
As of now, there’s no announcement on whether the stress test will be eliminated for refinances or new purchases. But if that change does happen in the future, it could be a huge game-changer for anyone looking to get extra purchasing power or tap into home equity through a refinance. Removing the stress test would likely make it easier for many Canadians to qualify for larger mortgage amounts.
We’ll keep an eye on any updates, but for now, these stress test changes only apply to switches.
A few things to keep in mind:
- These new rules apply only to switches – not refinances or new purchases (yet!).
- The mortgage amount and amortization period must stay the same or be lower than what you currently have.
These changes take effect on November 21, 2024, so if you’ve got a switch coming up after that date, you’ll be able to take full advantage.
Have any questions or want to know how this could impact your situation? Feel free to reach out anytime!
