07 Jun 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.