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w at er lo oc hr on ic le .c a W at er lo o C hr on ic le | T hu rs da y, A ug us t 4, 20 22 | 14 Cut out paying more Your only destination for more coupons, more flyers, more savings. #SavingWithSave Save $1.00 On One (1) Green Giant* Riced Veggies 283-340 g bag or Seasoned Corn 269 g bag *T.M. of / MC de B&G Foods North America, Inc., used under license / utilisée sous license. save.ca/couponsScan to get coupons Searching for a homely and affordable retirement home that offers excellent care? Family going away for sometime? Searching for Post hospitalization Care? or has Home care become so expensive or not sufficient anymore? Enjoy exceptional care and support at BudgEt FriEndly ratEs starting at $2200 To Book an Initial Assessment and Tour, Visit us at dunbarheights.ca or Call 519 219 5483 or email: hello@dunbarheights.ca 611 Dunbar Rd. Cambridge ON N3H 2T4 Our standard care package includes: • Onsite Visiting Physician • Onsite Pharmacy Support • 24hours PSW/Nurse • 3 Full Meals and 3 Snacks Daily • Medication Administration including Injectibles • Assistance with Showers • Laundry and Housekeeping • Personalized plan of care and Customizable experience • Socials, Health and wellness activities • Spacious Suites with 24/7 Emergency Call Bell • All utilities included A 28 Suite Community that is small and not intimidating for seniors. As interest rates contin- ue to rise, it's getting hard- er and harder for Canadi- ans to buy a home -- espe- cially when you have to pass the mortgage stress test. The test, which first came into effect in 2018, re- quires all home buyers to prove they can afford to make payments on a mort- gage at their contract rate plus two per cent, or a total rate of 5.25 per cent, which- ever is higher. That means many borrowers must prove they can afford a mortgage at a whopping seven per cent rate -- too high for many. So, what to do if you want to purchase a home and want to get around -- or ahead -- of the stress test? Jason Heath, a certified financial planner at Objec- tive Financial Partners, says buyers can consider variable rate mortgages. "The stress test num- bers tend to come back a lit- tle bit better for variable rate mortgages," says Heath. The latest interest rate hike puts the stress test for most variable-rate borrowers at around six per cent and as high as sev- en per cent for fixed-rate borrowers. According to Heath, you have to meet a lower stress test rate with a variable rate mortgage because it's almost like you're buying an insurance policy against interest rates ris- ing -- for the lender. Vari- able rate mortgages are pegged to your bank's prime rate. As the Bank of Canada hikes interest rates, the prime rate in- creases, and so does the in- terest rate on your vari- able-rate mortgage. But there are some po- tentially serious down- sides to going this route. "It's almost like a short- term fix because if you're not going to be able to com- fortably pay your mort- gage at higher interest rates, you may face chal- lenges if and when interest rates move higher," says Heath. The central bank has signalled more hikes are on the way. Jordann Brown, at Ca- nadian real estate market- place Zolo, says tough as it is, buyers should focus on increasing their income, increasing the size of their down payment and paying down their debt, rather than attempting to circum- vent the stress test. These three strategies, according to Brown, will improve your gross and to- tal debt service ratios and your ability to afford your mortgage. "Whenever it comes to borrowing for a big pur- chase like a home, any cuts that you make to borrow a tiny bit more or qualify for a higher mortgage might just be indicative of the fact that you're borrowing too much in the first place," says Heath. By doing so, he adds, you might be setting your- self up for other risks in the future, such as not having enough saved for retire- ment or not having cash on hand for repairs and emer- gencies. THANKS TO THE MORTGAGE STRESS TEST, MANY NOW HAVE TO QUALIFY AT 7% - BUT IS THERE A WAY AROUND THAT? Many borrowers must prove they can afford a mortgage at a whopping seven per cent rate - too high for many. Torstar file photo SRIVINDHYA KOLLURU MONEY MATTERS