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<Solved> Is a mortgage with payments of 75% of post tax income even possible?

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[OP]
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<Solved> Is a mortgage with payments of 75% of post tax income even possible?

On the news tonight there was a certain politician stating their post tax income was $120,000 and mortgage payments were $90,000. That works out to payments equal to 75% of post tax income. Is that even possible?
I'm pretty sure the bank would just laugh at me if I went in asking for such a mortgage.

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Last edited by ROYinTO on Feb 22nd, 2018 7:10 pm, edited 1 time in total.
13 replies
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Apr 17, 2017
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ROYinTO wrote: On the news tonight there was a certain politician stating their post tax income was $120,000 and mortgage payments were $90,000. That works out to payments equal to 75% of post tax income. Is that even possible?
I'm pretty sure the bank would just laugh at me if I went in asking for such a mortgage.

Mods: Please delete if you think this is a political post or becomes one.
Aren't the debt service ratios used by mortgage companies based on gross income, not after tax income?
Deal Guru
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Mar 23, 2008
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Have you considered he’s voluntarily paying that amount? With an open mortgage, you can pay as much as you like.

C
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Jul 3, 2011
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His payments to income ratio will mean nothing if he has other sizable assets and if he doesn't well he'd better hope the lender missed his statement come renewal time.
[OP]
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elpresidente wrote: Aren't the debt service ratios used by mortgage companies based on gross income, not after tax income?
Might be. Guesstimating a $120K net @ ~53% tax rate would be say $255K Gross
90/255= 35.3%
CMHC says:
Gross Debt Service (GDS)
The percentage of your monthly household income that covers housing costs such as your mortgage principal and interest, taxes, heating expenses and half of the condo fees (if applicable). Should not be more than 32%.
Mortgage payments alone exceed the 32%
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Who’s the politician?? Name names...
[OP]
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Sanyo wrote: Let’s be real - all politicians are dirty and I can only imagine what he bank accounts of all these politicians look like, regardless of political party..
Sorry, you are the one that asked.

For me I'm interested in the mortgage qualification and payments. If I bump up my income to that of the average RFDer or maybe a little bit more, I'm wondering if I can also get approved to buy a $2.3 million lakefront home.
Deal Guru
Feb 9, 2009
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ROYinTO wrote: Sorry, you are the one that asked.

For me I'm interested in the mortgage qualification and payments. If I bump up my income to that of the average RFDer or maybe a little bit more, I'm wondering if I can also get approved to buy a $2.3 million lakefront home.
Do we know if he has a co-signor on the Mtg?
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Oct 20, 2017
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Ontario
ROYinTO wrote: Might be. Guesstimating a $120K net @ ~53% tax rate would be say $255K Gross
90/255= 35.3%
CMHC says:

Mortgage payments alone exceed the 32%
That's correct - gross income is used when calculating the debt servicing and many lenders will go up to 39% GDS, 44% TDS with good credit. There are also several ways how somebody can exceed those limits such as going with an alternative lender or having sufficient assets.
[OP]
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MarkLinMTG wrote: many lenders will go up to 39% GDS, 44% TDS with good credit.
Thanks Mark.
So it is possible then.
I can see why the governments are getting worried. Assuming the mortgage is in the $2 million range ($375k down) a 1.5% increase in rates would essentially swallow up the remaining $30K in net income.
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MarkLinMTG wrote: That's correct - gross income is used when calculating the debt servicing and many lenders will go up to 39% GDS, 44% TDS with good credit. There are also several ways how somebody can exceed those limits such as going with an alternative lender or having sufficient assets.
CIBC used to offer “no income” or “new immigrant” mortgages where they didn’t consider ratios with a 35%+ down payment. In their mind they see themselves either:
(1) taking a huge chunk of it after they repo and sell your home,
(2) they bleed you to death with the interest.
(3) all of the above.

I used to room with a guy who went through that program... after taking a huge dump, if you left the bathroom fan on for an extra minute more than he liked, he’d sprint up the stairs to switch it off in fear of an extra $1 on the power bill. The guy also would lose it if you used an extra piece of paper towel or two than he like, because maybe over the month he’d be one roll poorer.

Also, some odd lenders through brokers offer a “stated income” program for 10%+ downpayment. Instead of using traditional verification avenues, they take your word for it on your income- then compare it to averages/medians of your stated industry and position.

Lastly, if all fails - note that the credit pull is valid for 90 days. So within those 90 days, you can borrow from other source(s) to reduce your debt-to-income ratios without them knowing.
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ROYinTO wrote: Might be. Guesstimating a $120K net @ ~53% tax rate would be say $255K Gross
90/255= 35.3%
CMHC says:

Mortgage payments alone exceed the 32%
An income of $190K in Ontario will net $120K annually (assuming no extra deductions like pension contributions, etc). It would get you around $9,300 for the first few months when CPP and EI were coming off, and then about $10,300/month for the rest of the year.

My husband and I net more than that per month and I would never in my wildest dreams (or nightmares more likely) take on those kind of mortgage payments. There's something very fishy with this guy.

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