Stress testing for homebuyers – or those renewing their mortgage and those with larger down payments – are now in effect as of January 1, 2018.

If you are in the market for a house or condo I hope you are prepared. Stress testing homebuyers will end up having a multitude of effects on the housing market, affecting single-family homes, condos, and townhouses. It won’t stop there either, if you are up for a mortgage renewal you will be put to the test as well.

How will stress testing affect the market?

The main result of stress testing is that a lot of potential house buyers will now be excluded due to the percentage increase that will add a significant amount extra to an already big deposit. This means that potential buyers that are already struggling to find funds for their deposit will now be out priced even more.

As for Toronto, in the GTA, the aggregate price of a home rose 14.0% year-over-year to $837,873. In the City of Toronto, it increased 17.7% to $850,899.

Royal LePage advised that in the Greater Toronto Area, the median price of a condo grew 19.5 % year-over-year to $476,421, while in the City of Toronto, the cost of a condo rose 19.6% to $515,578.

There may be a strategy shift for investors or homebuyers, they may look at changing tactics and choose to skip buying that single-family home and instead channel their attention to townhouses or condos. The market will see an uplift in an already competitive market.

Scotiabank warns mortgage-carrying costs to increase 8% in 2018

Renewing your Mortgage

So you already have a mortgage and renewal time is around the corner leaving you with the following options: renew with your current lender and skip the mortgage stress test or shop around for a better rate and be subjected to the mortgage stress test.

Investing in property

For those wanting to invest, I would suggest you start with a good financial plan and a strong budget. Also, make sure you talk to your mortgage broker and ensure that everything works out. Next comes the hard part, finding a nice property will take some work – working with a good realtor will help a lot, but be realistic with your expectations and you will soon find yourself being a landlord.