If you don’t have the income to support a high mortgage, it’s not a realistic ask!
Me: Hello, this is Ross Taylor speaking.
Caller: Hi, I see you are offering a 2.99% five year, fixed rate mortgage. Is that the BMO product?
Me: No sir, that is not something I have access to, but actually since January 25 it is no longer being offered by BMO. Their mortgage is presently 3.49%.
Caller: Okay, so how do I get one of yours?
Me: Well, we still have one lender who is offering this incredible rate, but their lending criteria are pretty strict. If you fit their criteria, then it should be no problem. Are you buying a home or refinancing?
Caller: I am refinancing. I have a $430,000 mortgage now; it’s a variable rate mortgage at 2.2%. My home is worth in the $900’s, and I want to take a few hundred thousand out of the equity. I know it’s no problem; I just want your rate.
Me: Okay, well it comes down to a few things. Your home’s value, your employment and income, and your credit history. Do you have any idea how your credit history is? Have you had any disputes with any lenders, or had any problems making payments on time?
Caller: No, my credit is amazing. I checked my score a few weeks ago, and I think it was 625.
Me: Oh, actually that’s not so high. Perhaps you have significant balances on your credit cards?
Caller: No, I pay everything off.
Me: Okay, then I am going to guess there are some payment disputes, or late payments in your past. I have to tell you their minimum Beacon score to qualify is 640 – so we may have a problem there. If so, we may need to look at another lender – where the rate is still a very reasonable 3.29%.
Caller: No, I want the BMO rate of 2.99%. If you cannot do that, I will go elsewhere.
Me: Um, but BMO doesn’t have that rate anymore – no one else does.
Caller: Doesn’t matter, I’ll find it.
Me: Okay, let’s move on. You know, you are asking for a mortgage of around $720,000 – that’s a pretty big mortgage. You will have to make a very large income to qualify for that.
Caller: It’s no problem, I make very good money, and so does my wife. But I want to take her off title, and just put the property in my name. Can you do that?
Me: Well, yes, first your lawyer would transfer title to you, and then we would apply for your new mortgage. But then we cannot count your wife’s income in the application. Perhaps you two are getting a divorce?
Caller: Exactly – so it will only be me. I make $80,000 to $90,000 per year. It’s good yes?
Me: Yes, very respectable sir. But your mortgage, taxes, and heating bills would chew up more than half your gross pay. That’s going to be a problem. The lender would not be comfortable with that. Perhaps you are self-employed? If you are, then maybe your gross income is much higher, and we might be able to finesse this issue.
Caller: No, I work for salary – I get paid $2,600 every two weeks. Last year I made $77,000. This year, I will work lots of overtime, and make more.
Me: Hmm. I think to qualify for any mortgage sir you will need to bring someone else into the transaction. That would help bring your debt servicing ratios onside.
Caller: No – I don’t want anyone else. Anyway, how much can you lend me? My property is easily worth over a million dollars actually – but I want you to show as low a value as possible because of my divorce. I have to give half the equity in the home to my wife – that’s why I am doing this.
Me: Ok, let’s recap sir. You seem very knowledgeable about the mortgage industry. Your home is worth more than a million dollars, but you want me to say it is only worth $900,000, and you want to borrow $720,000 against it.
Caller: That’s right.
Me: Your credit history is “amazing”, but your Beacon score is 625.
Me: You make $2,600 gross every two weeks. So after normal deductions, you are left with less than $2,000. And you are asking me for a mortgage which would have a monthly payment of $3,024. On top of that, your property taxes and utility bills would be another $1,000 or so. And we have not even discussed if you would be paying spousal or child support after the divorce. But with these numbers sir, you have no money left over for food, shelter, and transportation.
Caller: Yes, yes, I understand but it’s a beautiful home – actually maybe it’s worth $1.2 million, maybe more – and I can make this work.
Me: Well sir, I think I understand what you are trying to accomplish, but I am sorry I have no idea how to help you with the facts you have presented.
Caller: So you are not going to give me the BMO rate of 2.99%? This is misleading advertising. I shall complain to my MP – you won’t get away with this, you know.
Me: I’m very sorry sir, have a great day. There may be a mortgage transaction in here somewhere, but I’m just not good enough to give you what you are asking for.