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The AC Lending Weekly

Stress Test Changes!

They (The government) are finally on the right path! Its not perfect but definitely moving in the right direction.

So what’s changed and when does the change start?

The When: April 6, 2020

What’s changed ?

Currently the stress test was derived from the 5 year posted rate of the big 6 banks (That is the number they use to determine your penalty if you were to break your fixed rate mortgage).

Now it will be the country’s median 5 year fixed insured-mortgage rate plus 2% (Still waiting to hear which lenders will be in on this calculation). So what does that actually mean for you? Well currently the average 5 year fixed rate is approx. 2.69% (As of March 1, 2020) so the qualifying rate would be 4.69%, Currently the qualifying rate is at 5.19% That is a 50 basis point difference!! (There are 100 basis points in a percentage). This rate will be re-evaluated weekly

How will this effect you? Well that will be based on where rates are but just using the figures above it’s a minimum of 3%-5% increase in purchasing power (That’s $12000-$20,000 on a $400,000 purchase!!) So if you were just short of your purchase price in the past or were waiting until you could afford a bit more home, the time is here to dust off those old pre-approvals and get them back online so you are ready when April 6 rolls around.

‘If you cannot do great things, do small things in a great way’

Napoleon Hill

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