Buying a house anytime soon? You might want to take a chill pill first.
As if the thought of purchasing a home wasn’t stressful enough for millennials (whether or not you admit to being one), the Federal Government decided to make the milestone virtually unattainable with one simple test.
The new Federal rule involves a stress test for all insured mortgage applications to make sure the borrower will still be able to service their loan in the event interest rates rise or their personal financial situation changes.
That’s right! In the midst of the most stressful decision you may ever have to make, you will be tested on your ability to handle the weight on your shoulders, should everything come crashing down. Until now, stress tests were not a requirement for fixed-rate mortgages longer than five years.
This means, upon application for a mortgage, potential house-buyers will be tested to handle a five year 4.64% plan on a five year loan, even though most lenders offer plans that are much lower than that, according to CBC.
The changes were inspired by the Federal government’s urgency to stabilize the country’s housing markets, particularly in cities like Toronto and Vancouver where prices have skyrocketed. By making it harder to get a mortgage, the demand for housing will be limited, which should cause prices to drop or, at the least, not increase as rapidly.
What do you think of the new incentive?
Image courtesy Steve Browne & John Verkleir via Flick