Real Estate

Mortgage lender forcing me to pay off car financing loan

  • Last Updated:
  • Feb 15th, 2018 1:38 pm
[OP]
Newbie
Jan 30, 2018
26 posts
9 upvotes

Mortgage lender forcing me to pay off car financing loan

I sold my house for $500k. My gross proft will be $140k.

Household income is $130k.

I applied for a mortgage and are looking to buy a property for $615k...offer has been given.

We got approved for mortgage at 2.9% interest rate but the lender is requiring me to pay off car loan from BMW (40k) and few credit cards with balances less then $1500.

Long story short....I do not want to pay off this car loan all at once and would rather continue payments. I would rather have that 40k saved in a account or used to cover some minor renovations. I have agreed to pay off credit cards ASAP as soon as I receive sale if funds but would like to keep car loan.

Has anyone experienced this. Any suggestions?
Last edited by tekkspekk29 on Feb 13th, 2018 8:38 pm, edited 2 times in total.
16 replies
Banned
Feb 23, 2009
1670 posts
1495 upvotes
Oshawa
tekkspekk29 wrote: I sold my house for $500k. My gross proft will be $140k.

I applied for a mortgage and are looking to buy a property for $615k...offer has been given.

We got approved for mortgage at 2.9% interest rate but the lender is requiring me to pay off car loan from BMW (40k) and few credit cards with balances less then $1500.

Long story short....I do not want to pay off this car loan all at once and would rather continue payments. I would rather have that 40k saved in a account or used to cover some minor renovations. I have agreed to pay off credit cards ASAP as soon as I receive sale if funds but would like to keep car loan.

Has anyone experienced this. Any suggestions?
Welcome to the real world when they use TDSR (Total Debt Service Ratio) to figure out if you can afford a mortgage.
You have too much debt for the income you make.
Deal Guru
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Mar 23, 2008
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Shop for another lender?

As others have posted, this one doesn’t like your debt servicing ratios. Either play their game or go elsewhere.

C
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Jan 3, 2017
413 posts
391 upvotes
Find another lender who won't make you pay off your car loan, if you can find one. That's your only other option
Deal Addict
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Oct 13, 2008
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tekkspekk29 wrote: I sold my house for $500k. My gross proft will be $140k.

I applied for a mortgage and are looking to buy a property for $615k...offer has been given.

We got approved for mortgage at 2.9% interest rate but the lender is requiring me to pay off car loan from BMW (40k) and few credit cards with balances less then $1500.

Long story short....I do not want to pay off this car loan all at once and would rather continue payments. I would rather have that 40k saved in a account or used to cover some minor renovations. I have agreed to pay off credit cards ASAP as soon as I receive sale if funds but would like to keep car loan.

Has anyone experienced this. Any suggestions?
Your answer is: YOU DON'T WANT TO.

The Bank's answer to that: YOU HAVE TO.

Your next answer to the bank: I'M GOING TO ANOTHER BANK.

The Bank's answer to that: GO AHEAD.

Your next answer to the bank: SO YOU DON'T VALUE MY BUSINESS? I'VE BEEN YOUR CUSTOMER FOR SO LONG. YOU CAN'T DO ANYTHING ABOUT THAT?

The Bank's answer to that: IT'S OUR UNDERWRITER IN THE MORTGAGE DEPARTMENT. THEIR RULES AND REGULATIONS NOW. AND BY THE WAY, YOU HAVE NO WAY TO SPEAK TO ANYONE OF THEM BECAUSE THEY DON'T TALK TO CUSTOMERS.

So the VERDICT is: DO AS YOU ARE TOLD ... OR GO TO A TIER B FINANCIAL INSTITUTION.

*** I have seen plenty of these over the last 3 months as banks have tighten their regulations .... we still process a lot of real estate deals at my firm but a lot are from Home Trust, B2B Trust, National Bank, ICICI Bank, HSBC, Equitable Bank .... not much from the BIG 5 ***
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Jan 27, 2004
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AV-Fishing wrote: Your answer is: YOU DON'T WANT TO.

The Bank's answer to that: YOU HAVE TO.

Your next answer to the bank: I'M GOING TO ANOTHER BANK.

The Bank's answer to that: GO AHEAD.

Your next answer to the bank: SO YOU DON'T VALUE MY BUSINESS? I'VE BEEN YOUR CUSTOMER FOR SO LONG. YOU CAN'T DO ANYTHING ABOUT THAT?

The Bank's answer to that: IT'S OUR UNDERWRITER IN THE MORTGAGE DEPARTMENT. THEIR RULES AND REGULATIONS NOW. AND BY THE WAY, YOU HAVE NO WAY TO SPEAK TO ANYONE OF THEM BECAUSE THEY DON'T TALK TO CUSTOMERS.

So the VERDICT is: DO AS YOU ARE TOLD ... OR GO TO A TIER B FINANCIAL INSTITUTION.

*** I have seen plenty of these over the last 3 months as banks have tighten their regulations .... we still process a lot of real estate deals at my firm but a lot are from Home Trust, B2B Trust, National Bank, ICICI Bank, HSBC, Equitable Bank .... not much from the BIG 5 ***
I want to speak to your branch manager.
Newbie
Oct 20, 2017
31 posts
12 upvotes
Ontario
As other's have mentioned, they're requesting you to pay off the car loan because of your debt ratios.

Are you going to lenders by yourself or are you using a mortgage broker? Your broker should be able to find you options out there but be prepared to pay lender fees and broker fees if you're going onto the "B" side for mortgages. However, I'd probably take the current mortgage you're offered since 2.90% (assuming that's a fixed rate) is pretty good in today's market.
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Oct 13, 2008
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UrbanPoet wrote: I want to speak to your branch manager.
Branch Manager's have no leverage now. Unless you have banked with them for many (and I mean many years) ... have enough stuff with them (a previous mortgage, personal loan, line of credit, credit cards, various accounts, RRSP, TFSA, etc) ... and obviously money with them ... then they may be able to PUT UP a case to the Mortgage Underwriters ....

Otherwise ... you probably have to go with a Broker ... make a sacrifice for a year or two with higher rates and then hope the banks will lower their qualifications in the next year or two.

In the 1990s and early 2000s ... Branch Managers and even Area Managers had a say in approving a mortgage ... (I used to work in a Bank in the late 90s to early 2000s ... so this was a fact) ....

Afterwards ... the entire banking industry changed. Even more drastically ever since our awesome government decided to come up with this NRST which provoked the banks to change their views and values of risk lending (Mortgages) ....
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Jan 27, 2004
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AV-Fishing wrote: Branch Manager's have no leverage now. Unless you have banked with them for many (and I mean many years) ... have enough stuff with them (a previous mortgage, personal loan, line of credit, credit cards, various accounts, RRSP, TFSA, etc) ... and obviously money with them ... then they may be able to PUT UP a case to the Mortgage Underwriters ....

Otherwise ... you probably have to go with a Broker ... make a sacrifice for a year or two with higher rates and then hope the banks will lower their qualifications in the next year or two.

In the 1990s and early 2000s ... Branch Managers and even Area Managers had a say in approving a mortgage ... (I used to work in a Bank in the late 90s to early 2000s ... so this was a fact) ....

Afterwards ... the entire banking industry changed. Even more drastically ever since our awesome government decided to come up with this NRST which provoked the banks to change their views and values of risk lending (Mortgages) ....
Jk... i could tell you work in the industry and i do too at retail level.
I just find it a little funny everytime someone says that... as if the branch manager is some sort of all knowing all doing type of beast.
And that if you bring christmas chocolates enough ge will give you a big fat mortgage bc youre a good guy!!
Deal Addict
Jan 15, 2010
1188 posts
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Toronto
Stress test at 5.15% (or whatever it's at now) is causing your TDSR to be above government mandated limits. You're SOL unless you reduce your debt levels.
Deal Guru
Feb 22, 2011
10417 posts
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Toronto
Just get a family member to pay it off or put it on a LOC and then move it over to your own later, pay at your own convenience. Doesn't really make a difference if it's a car loan or personal line later.

If you don't have any family or friends that would do it for you then just get a private loan off the books and put it on a LOC later. You have high income and access to capital, you don't have to listen to a bank.
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Jul 14, 2002
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someone help me connect the two dots. why are people getting mortgages of 10x their income while others can't get 4x their income.
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Mar 23, 2008
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dantey wrote: someone help me connect the two dots. why are people getting mortgages of 10x their income while others can't get 4x their income.
Maybe because some people aren’t making payments on a 40k bmw...

C
Member
May 2, 2017
270 posts
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rjg4235 wrote: Just get a family member to pay it off or put it on a LOC and then move it over to your own later, pay at your own convenience. Doesn't really make a difference if it's a car loan or personal line later.

If you don't have any family or friends that would do it for you then just get a private loan off the books and put it on a LOC later. You have high income and access to capital, you don't have to listen to a bank.
Are you advocating this person commit mortgage fraud?

"Mortgage fraud occurs when someone deliberately misrepresents information to obtain mortgage financing that would not have been granted if the truth had been known. This can include:

"Not disclosing existing mortgage and/or debt obligations."

Consequences of Misrepresentation:

"Borrowers who misrepresent information....are committing mortgage fraud and will be liable for any financial shortfall in the event of default. They may also be held criminally responsible for their misrepresentation."

source: https://www.cmhc-schl.gc.ca/en/co/buho/ ... mo_004.cfm
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Jan 15, 2010
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CNeufeld wrote: Maybe because some people aren’t making payments on a 40k bmw...

C
With the new stress test rules most people won't get more than 4x income. Maybe 4.5X if they have no other debt.
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DaMan12 wrote: With the new stress test rules most people won't get more than 4x income. Maybe 4.5X if they have no other debt.
My point (since you quoted me) is that how much you can borrow isn't just driven by how much money you make. It's also very dependent on your other debts. So some people may qualify for 4 or 4.5x their income (as you suggested), other's might be lucky to qualify for 2x their income, depending on other obligations. Which is why the OP's bank is requesting them to pay off one of their significant other obligations.

C
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Nov 2, 2013
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pkrash wrote: Welcome to the real world when they use TDSR (Total Debt Service Ratio) to figure out if you can afford a mortgage.
You have too much debt for the income you make.
Sums it up - though the credit cards are the more harmful ones, since even if you owe say, 5000 - it appears as a 150/month debt (3% of outstanding balance).

If you absolutely cannot pay down your credit cards: tell your mortgage broker/person to get an approval with the condition that they are paid off. Then take a cash advance from another CC/other lender, and use it to pay off your current card debts. Show the updated $0 balance records to the lender. After the mortgage closes, if you had to borrow the funds from a higher interest source, pay them back with your previous indebted cards. MBNA 0% BT Transfer deal comes to mind since they just charge a 1% BT fee, and charge no interest for 12 months.

Though you may have to run the numbers here of your new home to see if you can realistically pay them off. Otherwise, you'd be dependent on selling your home/taking a HELOC years down the road to pay them off. Waiting longer to close on the mortgage incurs opportunity cost of lost appreciation income and principal contributions, in return for interest savings... therefore here you'll have to calculate which is more worthwhile (usually the home is, but you never know).

For auto loans: what people do is trade the vehicle in or sell it. If you need/want the vehicle, what you do is find a similar one. Get the bill of sale drafted up with the trade-in included, put your deposit down, and get an approval from the lender. Since you're with BMW, BMW Financial is likely the least hassle for you - and they're more lenient than the Big 5. Then ask the finance guy/lady for a loan payout letter. Bring this letter to your mortgage lender. With your deposit and approval in place, the dealership will usually hold your new vehicle for 30 days, though it depends. Pick it up after your mortgage closes - that's when you actually formally begin your new car loan (it doesn't begin if you don't accept the approval and drive off).

This works because the manufacturer financial arms are more lenient with TDSR than traditional lenders if you have a history with them. Sometimes they have better rates too when the manufacturer incentives come in.

In my case I bought the vehicle in early May, and picked it up end of May - though it was because I was working in northern Alberta, not due to closing a mortgage.
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