A Different Perspective on the Mortgage Stress Test

There has been a lot of negative chatter on what has become known as the “Stress Test” when applying for a mortgage.  Essentially what this means is that the buyer must qualify for a mortgage as calculated on the current interest rate as well as a potential increase in the interest rate of around 2 extra points. 

Please understand that I am sympathetic to the buyers who have been challenged by this process.  However, as someone who was selling houses when the interest rate was 22%.... I am going to put on my “Mom Hat” and suggest that it is far better to be prepared for an economic change then to have it thrust upon you.  If the interest rate were to rise quickly, would you be able to handle the increase at that time?  We have enjoyed historically low interest rates over the past couple of years and our tendency is to get comfortable and think that these rates will not change in the foreseeable future. 

However, history has shown that interest rates and the economic picture is always subject to change.  The economic cycles can be short or long but they are never stagnant.  There are currently a number of changing dynamics  – from the demographic shift to unknown global factors – we should be prepared for change. 

Our home should be our “comfort spot” …. not our financial breaking point.  Ideally, we want to enjoy our home regardless of the instability of the market or the economic swings. 

Let’s build our future on a solid financial analysis of affordability.