Another Government of Canada mortgage update?!?

Effective November 21st, 2024 all mortgages that come up for renewal will no longer have to go through the stress test when switching lenders. This change is a positive for every Canadian homeowner because it will remove the barrier of a higher qualification you faced before.

What is the Stress Test?

In 2016, the Office of the Superintendent of Financial Institutions (OSFI) introduced the Stress Test as a buffer to ensure every mortgage borrower could afford their mortgage payments if interest rates rise. Banks are required to test your mortgage application by a minimum of 5.25% OR your actual rate + 2%, whichever is higher.

What are the savings you could see from this change?

If you take advantage of switching to another lender at renewal it could save you thousands over the term of your mortgage. For example, you have a $500,000 uninsured mortgage with a 25 Year Amortization. You are looking to switch lenders who are offering a 5-year fixed rate of 5%. Your current lender is offering a 5-year fixed rate of 5.25%. This 0.25% difference can result in:

• Current Lender Monthly Payment (5.25%): $2,979.59
• New Lender Monthly Payment (5%): $2,908.02
• Savings over the term of your mortgage from switching lenders: $6,013

This example is one of many in the future once this change comes into effect. It will allow homeowners to save thousands of dollars over their term.

If you have any questions about your mortgage renewal please reach out to me at nperri@dominionlending.ca!