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Total Net Worth - Mortgage Approval Success Story

Scotia Total Net Worth Program

This program is designed to provide additional mortgage solutions to customers with moderate incomes who have a significant amount of verifiable liquid assets and strong credit scores.

Asset Requirements:
- Minimum liquid assets of $250,000
- Must have $1 in liquid asset for every $1 in mortgage needed above standard qualified amount. I.e., if a customer qualifies for a $400,000 mortgage using standard debt servicing ratios but requires a mortgage of $950,000. They must have verified liquid assets of $550,000 in addition to down payment.
- All purchases including rentals and refinances are eligible 

Eligible Assets
- Stocks of a publicly traded Canadian company and Canada/Provincial Savings Bonds
- GIC, Chequing & Saving Accounts
- Mutual Funds
- Equity in existing properties being sold, a firm purchase and sale agreement is required
- TFSA, ESOP
- Retirement Accounts – discounted by 30% to account for withholding taxes.

Real deal example – case study

- Client just sold her free and clear property for $1,610,000 and purchased a new home for $1,340,000

- Client works part time and earns $22,000/year and also receives spousal support in the amount of $40,000/year. The separation agreement had not been updated as it was being revised, meaning our lenders would only accept her part time income for debt servicing on the application.

- Without use of the net worth program, the client was only able to achieve a new mortgage of approx. $100,000.

- With the net worth program, see below:

Sale proceeds: (1,610,000)

 

Amount

Realtor (5%) + HST

90,965

Legal

2,000

Total

92,965

Total available for down payment = $1,517,035

Purchase: (1,340,000)

 

Amount

Land Transfer + legal

23,375 + 2,000

Down Payment (35%)

469,000

Total

494,375

Total remaining proceeds of sale = $1,022,660

Approval:

- We took what she traditionally qualified for ($100,000) and added this to her net worth. Since she had $1,022,660 remaining after the proceeds of her sale, her max mortgage is $100,000 + $1,022,660 = $1,122,660 (capped at 65% of the homes value).

- 65% x $1,340,000 = $871,000

The client locked in $200,000 in a 3 year fixed mortgage at 2.89% on a 25 year amortization.
The remaining equity of $671,000 is on a line of credit at Prime + 0.50% = 4.45%, unadvanced.
This client now has access to her equity for the remainder of her life without the need to re-qualify.

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