"No, if I've graduated from GBC, landed a job that provides sufficient income, and have the minimum down payment, I will not purchase the one-bedroom condominium in Toronto for $613,000. There are two reasons. Firstly, the interest rates intend to go up in 2023 because of an uncontrollable inflation in United States. The rise of interest rates will negatively affect the housing prices; Also, I will be deep in debt if I wrongly decides to purchase the condominium today. As the interest rates go up, I will have negative equity because the price of the condominium I bought will definitely drop too. Another reason is the length of my mortgage. If I only have the minimum down payment for the purchase of the condominium. I will bear a debt for 30 years with the current average rate for the benchmark 30-year fixed mortgage is 7.32% by December 4, 2022. The compound interest of my mortgage will narrow my future financial options; I will probably lose a lot of opportunities because I have to pay off my mortgage.

Stress Test

Stress test was initially introduced on insured mortgages, mortgages that buyers had a down payment for less than 20%, in 2016. Then, the Government of Canada decided to expand the stress test to buyers with more than 20% of the down payment because of the high levels of household debt. The purpose of the stress test is to ensure borrowers can afford the mortgage payments if interest rates increase beyond the rate originally stated in the lending contract. It's a test for the borrower's financial ability. The government of Canada set up a mortgage qualifying rate by two ways: the rate offered by the lender plus 2% or 5.25%, whichever is higher. Even though the interest rate is stated as 2% in the contract, the borrower must prove his or her financial ability to afford a mortgage loan payment calculating with 5.25%. " Make a positive reply of this.

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Thats a very thoughtful analysis of the condo market and mortgage situation Its great that youre con... View the full answer