What is a mortgage stress test, and how is it calculated?
In finance, “stress tests” are ways of considering the worst-case scenario for any investment. When it comes to mortgages, stress tests determine the risks of each loan application. How much can the borrower afford given their current debt-to-income ratio, and would they still be able to make the monthly mortgage payments should the rates increase? How would their payments be affected in the case of a temporary job loss? These are all important factors in determining how likely a borrower is to default on their loan payments.
As of January 2018, home buyers will need to qualify not only for the rate negotiated as part of their mortgage contract, but also at their current rate + 2%, or the average bank 5 year posted rate of 4.89% (whichever is higher).
By “stressing” the mortgage this way, banks will ensure that the borrower would be able to service their loan under pressure, should the interest rates climb higher than the current average.
Additionally, borrowers should not exceed a 44% Total Debt Ratio (TDS), and will be required to spend less than 32% of their income on housing costs such as utilities, mortgage payments, and real estate taxes.

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1. What is the Banff Housing Corporation (BHC)?
2. Who oversees the BHC?
3. What is the BHC’s focus?
4. Does the BHC have rental units?
5. How the BHC ownership properties are kept “value-priced”?
6. What is the equity share model?
7. What is the price restricted model?
8. How many units has the BHC developed?
9. Can anyone buy a BHC property?
10. What is the head lease?
11. What is the BHC’s sublease agreement?
12. What is the annual administration fee?
13. What is meant by “owner-occupied”?
14. Who’s responsible for taxes, utilities and insurance?
15. What key decisions does the BHC make when a property is sold?
16. What is Right of First Refusal (ROFR)?
17. How can I see the sublease agreement?
18. How do BHC properties sell?
19. How do I get my name on the Registered Resale List (RRL)?
20. Is the RRL a first-come first-served arrangement or is it a prioritized list?
21. What are these criteria and how are points allocated to RRL applicants?
22. What is the process of sale for equity share properties through the Registered Resale List?
23. What is the process of sale for price restricted properties through the Registered Resale List?
24. What criteria does the BHC look at when deciding whether or not to defer payment of the BHC’s equity share when an offer to purchase is presented to the Board for consideration?
25. What happens if I’m on the RRL and invited to a BHC showing, but I’m not interested in attending?
26. What happens if I attend a showing through the RRL for a BHC property but I’m not interested in making an offer?
27. If I want to buy a BHC property, can I own other property at the same time?
28. If I buy a BHC home can I stay on the RRL?
29. If I were to acquire a BHC property, can I rent the BHC property if I choose to be away from Banff for any period of time?
30. So what if I retire while I own the BHC property and want to travel or spend a period of time outside of Banff?
31. If I want to purchase a BHC property, how much do I have to have as a down payment?
32. What is a mortgage stress test, and how is it calculated?
33. If my down payment is less than 20% of the sale price of the property, don’t I have to pay mortgage insurance?