What Can I Do If I Can’t Pass The Stress Test?
These days getting approved for a mortgage from a bank is nearly impossible for many Canadians. This is largely due to the stress test rule that was introduced by the government in 2017.
The original regulation stated that the banks must qualify a borrower at 2% above the posted bank rate. This means that even if you qualify for a rate of 2.79%, but the posted rate is 3.95%, you will need to have enough income and low enough debts to qualify for a rate of 5.95% in order to be able to take get the actual mortgage at 2.79%.
Unfair? That’s what it seems like, but luckily not all hope is lost. There are certain non-traditional lenders, such as alternative B and private lenders that might be able to get you approved. In the case of B lenders, although they must also subject you to a stress test, in some cases the rate they need to qualify you at would be up to 1% lower than the bank’s qualifying rate.
In the case of a private lender, you won’t have to go through a stress test at all since they are not regulated at the moment. This tends to be the easiest and fastest way to get a mortgage when your credit is either less than idea, if you have income issues, or if you are unemployed and declare your income in an unconventional manner.
The downside to not being able to get approved through a bank of triple A lending institution is that your mortgage through a B lender or private lender will come at a higher interest rate and may have extra lender and broker fees associated with it.
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