Thanks to the government introduced “stress test” earlier this year, most borrowers are now qualifying for approximately 28 to 30% less of a mortgage amount than they would have in 2017.

This is a significant reduction. Perhaps there was a change in your income or you had a late payment reporting on your credit bureau or a material change in your financial situation, even if you’re thinking of transferring or porting your existing mortgage, the lender will still require you to re-qualify for the transferred amount based on today’s stress test rules.

We recently had a client that contacted us after selling their home because they wanted to have a smaller mortgage amount. Their existing mortgage amount was approximately $800,000 based on a rate of 2.59% (arranged in 2017). They sold their million-dollar home and purchased a home valued at $700,000 based on $200,000 down payment, however, this time they did not qualify for a traditional mortgage.

Their rate on their new $500,000 mortgage from a non-traditional lender was now in the high 5% range and they were paying about the same monthly payment each month as the $800,000 mortgage. Their previous home also had rental income which helped offset their mortgage payments.

Factoring in the higher interest rate on their mortgage, real estate commissions, property purchase transfer taxes, and closing costs, the move didn’t make financial sense. If you are thinking of selling your home, before putting your home up for sale or accepting any offers, please contact us and let us help you run the numbers to see if it will make sense for you. We are happy to help without any obligation or costs!