Divorce Mortgages in Canada – Pt 2

I have had a tremendous response to our previous article about creative divorce mortgage solutions that allow clients to refinance to buy out their former spouse with only 5% down due to a special policy.  If you have questions about this great solution please feel free to click the link here or contact me directly.  The previous solution helped you with your down payment, this newest solution for divorce mortgages helps you qualify in spite of large support payments.

Qualifying for your new post divorce mortgages when you have support payments:

The traditional method of determining the size of a mortgage a client can qualify for relies predominantly upon a calculation called Total Debt Service or TDS.  This number is a measure of all of your new home payments in addition to other debt payments relative to your gross personal income.  For example if a client has a monthly gross income of $6000 and monthly debt obligations of $2000, their TDS is 2000/6000 = 33%.  The government through CMHC allows clients to have a TDS of up to 42% to 44%.  As you can see if a client adds a monthly support payment of $1000 to their TDS, their numbers would be well over the maximum allowable and they would not qualify.

So, how do we fix this qualifying challenge when we are funding post divorce mortgages for our clients?

Through several of our lending relationships we are able to turn the tables in your favor with this TDS calculation.  Instead of us counting the support payments as a debt, we are able to deduct them from your income.  This is a very big difference in terms of what you are able to qualify for.  For example:

In the above example of $6000 in monthly income and $2000 in debt obligations, and addition of $1000 in support payment will move the TDS from qualifying for a mortgage at 33% to not having a chance at qualifying for a mortgage at 50%.  However if instead we turn the tables and deduct the income our debt ratio is 40% and we easily qualify.

Lets put the positive impact of this strategy into real terms for you:

In the above example when support was considered a liability, you would qualify for a $250 000 mortgage

In the above example when we turn the tables in your favor, you would qualify for a $300 000 mortgage

This is a difference of $50 000 in the amount of a home your can purchase for your family.

If you have any questions or would like to take advantage of this strategy please feel free to contact me via phone or email.

Rylan Hahn 403-802-7201 for creative strategies for Divorce Mortgages