If you live in Canada and you intend to apply for a mortgage loan in any of the major banks, you will be required to undergo a mortgage stress test. Since it is a legal requirement in the country, you should prepare for this if you are thinking about buying a home as it is a way to prepare against any mishaps in the future.
What is the Mortgage Stress test?
We live in a world full of uncertainties, especially in finance. There may be changes in interest rates or the prices of homes. You may even lose your job in addition to other uncertainties. The Canadian government has therefore deemed it necessary to consider all these factors before giving you a mortgage loan. The process of using the factors to determine how much you qualify for is known as the mortgage stress test.
Basically, your lender models the worst case scenario to see if you can survive in it. If you lose your job and home prices go up in the future, will you be able to sustain your mortgage payments? You may pass or fail the test depending on the kind of home you wish to buy.