Real Estate

Mortgage Affordability: Buying a new home and renting our current home

  • Last Updated:
  • Jan 17th, 2022 5:44 am
[OP]
Newbie
Nov 18, 2021
12 posts
10 upvotes

Mortgage Affordability: Buying a new home and renting our current home

Hi - I’m looking to find out the calculation banks use to determine approval to hold a primary residence plus an investment property. Is potential rental income included in the TDS % calc?

Anyone recently been through this that can provide some insight? Exploring to see if this is something I can do.
28 replies
Deal Addict
Jul 3, 2007
4023 posts
4510 upvotes
Toronto
Dilltoronto wrote: Hi - I’m looking to find out the calculation banks use to determine approval to hold a primary residence plus an investment property. Is potential rental income included in the TDS % calc?

Anyone recently been through this that can provide some insight? Exploring to see if this is something I can do.
yes , 50% of rental income to offset mortgage payment, and exclude property taxes or maintenance fees, thats scotias calculation which is one of the best

some other smaller lenders use a spreadsheet calculation and are similar ...mcap, RMG, etc. but for the banks scotia is one of the best
Jr. Member
Mar 6, 2018
118 posts
141 upvotes
Ontario
joepipe wrote: yes , 50% of rental income to offset mortgage payment, and exclude property taxes or maintenance fees, thats scotias calculation which is one of the best

some other smaller lenders use a spreadsheet calculation and are similar ...mcap, RMG, etc. but for the banks scotia is one of the best
Not one of the best actually, all major banks do that. BMO does a 80% rental offset within the GTA. Not alot of people know about it however, since BMO does not work with mortgage brokers so brokers do not tell their clients about it.
REALTOR®
Deal Addict
Feb 7, 2018
1090 posts
1789 upvotes
Dealgains wrote: Not one of the best actually, all major banks do that. BMO does a 80% rental offset within the GTA. Not alot of people know about it however, since BMO does not work with mortgage brokers so brokers do not tell their clients about it.
Is that offset only for GTA?
Jr. Member
Mar 6, 2018
118 posts
141 upvotes
Ontario
wiab89 wrote: Is that offset only for GTA?
Yes, 80% for the GTA/Toronto, and 50% outside of the GTA.
REALTOR®
Newbie
Jun 28, 2012
70 posts
49 upvotes
Ontario
Dilltoronto wrote: Hi - I’m looking to find out the calculation banks use to determine approval to hold a primary residence plus an investment property. Is potential rental income included in the TDS % calc?

Anyone recently been through this that can provide some insight? Exploring to see if this is something I can do.
Find a lender that will use an offset rather than an addback as you'll qualify for a LOT more that way as it's a more realistic view of the numbers anyway. Let me know if you need any help with this, I arrange a lot of mortgages in this situation.
Newbie
Oct 17, 2021
6 posts
22 upvotes
wamartin wrote: Find a lender that will use an offset rather than an addback as you'll qualify for a LOT more that way as it's a more realistic view of the numbers anyway. Let me know if you need any help with this, I arrange a lot of mortgages in this situation.
I’m in a similar situation to the OP. Living in one unit of a triplex and will be looking to purchase another property in the next few years to live in as a primary residence.

My question is how the bank estimates the rental income from the unit I am currently living in? Does this get accounted for or will they only count the income from the two tenanted units for qualification purposes?
Newbie
Jun 28, 2012
70 posts
49 upvotes
Ontario
ItsTransitory21 wrote: I’m in a similar situation to the OP. Living in one unit of a triplex and will be looking to purchase another property in the next few years to live in as a primary residence.

My question is how the bank estimates the rental income from the unit I am currently living in? Does this get accounted for or will they only count the income from the two tenanted units for qualification purposes?
Depends. If you can show a lease agreement effective as of whenever you're moving out, along with first and last deposit into you bank, they will probably be fine with recognizing the income from that unit. Otherwise they will require an appraiser to do a market rent analysis to determine what amount of rent they will recognize. The appraiser will give a range of potential rent and the bank will go off the lowest number in that range.
Deal Addict
Apr 29, 2010
1329 posts
2542 upvotes
GTA
Does anyone have a list of banks that use 80%? I’m with TD and they said they only use 50% (on the first rental).
[OP]
Newbie
Nov 18, 2021
12 posts
10 upvotes
Thanks folks.so if I understand correctly, even if my investment property is cash flow positive, it will impact the mortgage amount I’m approved for, for my next home?
Deal Addict
Jul 3, 2007
4023 posts
4510 upvotes
Toronto
Dilltoronto wrote: Thanks folks.so if I understand correctly, even if my investment property is cash flow positive, it will impact the mortgage amount I’m approved for, for my next home?
yes
Newbie
Jan 4, 2022
7 posts
5 upvotes
so 80% wont necessarily be better as the deficit they arrive at does not offset property taxes or maintenance fees. If you want a complete "wash" on the debt a property has, the above mentioned method will do that.

Also as you stated it also depends on how many rentals you have. With TD, the first rental property does not account for property taxes, maintenance fees, vacancies, utilities in their calculation. They will take 50% rental income to offset any mortgages held on the property. If there is a surplus the income can potentially be used or at worst case they treat it like the property is not even part of your expenses.
Sr. Member
Apr 7, 2016
561 posts
428 upvotes
Canada
thats right about BMO. Had a good experience with BMO
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Member
Nov 23, 2013
266 posts
81 upvotes
Toronto
Dealgains wrote: Yes, 80% for the GTA/Toronto, and 50% outside of the GTA.
Last month my rep told me they would do 100% in the GTA.
Deal Fanatic
User avatar
Oct 16, 2008
9595 posts
3889 upvotes
Dilltoronto wrote: Hi - I’m looking to find out the calculation banks use to determine approval to hold a primary residence plus an investment property. Is potential rental income included in the TDS % calc?

Anyone recently been through this that can provide some insight? Exploring to see if this is something I can do.
Why don’t you get mortgage broker to work with you?
...
[OP]
Newbie
Nov 18, 2021
12 posts
10 upvotes
That’s the plan. Just exploring options for now.

Also brokers typically don’t have access to all options ie hsbc, BMO and maybe a few more.
teoconca wrote: Why don’t you get mortgage broker to work with you?
Deal Fanatic
User avatar
Oct 16, 2008
9595 posts
3889 upvotes
Dilltoronto wrote: That’s the plan. Just exploring options for now.

Also brokers typically don’t have access to all options ie hsbc, BMO and maybe a few more.
Broker is very beneficial, they calculate, deal with FI to get lowest mortgage rate. Broker offers many benefits and you don’t pay at all.
...
Newbie
Aug 28, 2020
86 posts
36 upvotes
Does anyone have a summary of lenders and their way to handle rental income in TDS? So far:
- BMO: "Offset" 80% for the GTA/Toronto, and 50% outside of the GTA
- Scotia: "Offset" 50%

Which lenders use "Add back" so that we know to avoid them? Neutral Face
Member
Oct 6, 2017
377 posts
415 upvotes
My mortgage broker told me Scotia will do 100% offset.

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