Secret to Qualifying for a Higher Priced Canadian Home
In Canada, there is a secret to qualifying for a higher priced Canadian home. What is it?……AVOID THE MORTGAGE STRESS TEST.
The mortgage stress test was implemented in 2018 as a way to ensure that homeowners could afford their mortgage payments even if interest rates were to rise.
The B-20 mortgage stress test requires borrowers to qualify for a mortgage at a higher interest rate than the one they are actually receiving, in order to ensure that they can still make their mortgage payments if interest rates increase.
Currently the qualifying mortgage interest rate is the contract rate offered by the lender plus 2%.
B-20 Canadian Mortgage Guidelines and OSFI
B-20 is a guideline set by the Office of the Superintendent of Financial Institutions (OSFI) that outlines prudent lending practices for Canadian banks and other federally regulated lenders. B-20 includes requirements such as verifying a borrower’s income and assessing their ability to make mortgage payments.
Credit Unions are the Secret to Qualifying for a Higher Priced Canadian Home
In Canada, credit unions are financial institutions that are owned by their members, who also have a say in the credit union’s operations and governance.
Because credit unions are regulated under provincial jurisdiction and therefore have different lending requirements than federally regulated lenders, such as banks, they can offer mortgage financing that does not require the mortgage stress test or B-20 requirements.
This will depend on the individual credit union’s lending policies and underwriting criteria.
Credit Unions Are Provincially Regulated
It is important to note that credit unions are still subject to regulatory oversight, and they have their own internal risk management practices in place to ensure the loans they provide are financially sound.
Borrowers considering this option should carefully review the terms and conditions of the mortgage offered by the credit union, including the interest rate, fees, and repayment terms, to determine if it is a suitable option for their financial situation.
Credit Unions that DO NOT use the B-20 Mortgage Stress Test
Examples of credit unions in Canada that may offer mortgage financing without the mortgage stress test or B-20 requirements include Coast Capital Savings and Interior Savings in British Columbia, Servus Credit Union in Alberta, and Meridian Credit Union in Ontario.
However, it is important to note that these credit unions may have their own internal lending requirements and borrowers should consult with them directly to determine their specific mortgage lending criteria.
Conclusions and Further Thoughts
The B-20 requirements or mortgage stress test is a hurdle to financing a property in Canada. That being said, Huber Mortgage has been working under this arrangement since the rule’s inception in 2018 and have qualified hundreds of loans during that time.
Reach out and Huber Mortgage will organize a professional mortgage strategy that will get you ready to purchase your home and your mortgage loan approved stress-free.
There you have it…ONE of the many Secrets to Qualifying for a Higher Priced Canadian Home!!
Sincerely,
Michael
PS – One of my hobbies is blogging about mortgages, debt and government policy. During the day I’m a MORTGAGE BROKER in Kelowna, BC!
Check out the Huber Mortgage Home Buyers Guide HERE
