Using a line of credit - Calgarypuck Forums - The Unofficial Calgary Flames Fan Community

shane_c · 05-12-2005, 07:37 AM

We've been trying to get a mortgage but haven't been having any luck. We both make very good money, have excellent credit, and have about a 7% downpayment already saved. The problem that we are running into is that my fiance is considered self-employed for the last 10 months and nobody will look at us unless she has 2 yrs of self-employment. We even tried through brokers and they couldn't find anyone to take us. Both brokers we tried though told us that if we put down 15% then they have people who can approve us. I did some calculations last night and if we were to get a line of credit for the remainder of the downpayment to make it 15% that over the term of the mortgage it would actually save us a bit of money. Do you know if you are able to use a line of credit as a mortgage downpayment? Has anyone done this?

BlackEleven · 05-12-2005, 08:11 AM

Yeah, you have to prove to the bank where the downpayment is coming from and show you financial records for the past 90 days. If any of the money is borrowed, they don't count that.

Since your wife poses the financial problem, have you tried just putting the mortgage in your own name? It could work provided you earn enough money. Generally speaking, the bank will let you borrow 3x your annual salary.

Hope that helps. I just went through all this stuff about a month ago, and I ended up having to leave me girlfriend off the mortgage because she had a lot of loans and relativley low income, and I qualified for the mortgage just on my own.

shane_c · 05-12-2005, 08:35 AM

Quote:

Originally posted by BlackEleven@May 12 2005, 02:11 PM
Yeah, you have to prove to the bank where the downpayment is coming from and show you financial records for the past 90 days. If any of the money is borrowed, they don't count that.

Since your wife poses the financial problem, have you tried just putting the mortgage in your own name? It could work provided you earn enough money. Generally speaking, the bank will let you borrow 3x your annual salary.

Hope that helps. I just went through all this stuff about a month ago, and I ended up having to leave me girlfriend off the mortgage because she had a lot of loans and relativley low income, and I qualified for the mortgage just on my own.

Well doesn't that just suck. I don't make enough on my own to qualify for what we would need.

BlackEleven · 05-12-2005, 08:42 AM

You can always try waiting until you save the extra 8% you need. Unless you've found a house right now that you want...

You can also try "borrowing" money from family/friends if you have someone generous in your family. If you get a letter from the person saying the money is a gift, the bank will accept that. Or if someone you know is willing to be a guarantor on the mortgage, the bank will accept that as well. Not the best options, I know...

Sample00 · 05-12-2005, 08:47 AM

Speaking as a Mortgage Broker, Shane
these are all very good options...
with regards to the line of credit...you would need to prove where those funds came from. And the banks wont accept borrowed funds as downpayment.
well not so much the banks as CMHC (Canada Mortgage and Housing Corporation).
They have very specific guidelines.
CMHC is the institution that insures the mortgages for the banks, when clients have less than 25% as a downpayment.
feel free to contact me if you have any questions.

shane_c · 05-12-2005, 08:55 AM

Quote:

Originally posted by Sample00@May 12 2005, 02:47 PM
Speaking as a Mortgage Broker, Shane
these are all very good options...
with regards to the line of credit...you would need to prove where those funds came from. And the banks wont accept borrowed funds as downpayment.
well not so much the banks as CMHC (Canada Mortgage and Housing Corporation).
They have very specific guidelines.
CMHC is the institution that insures the mortgages for the banks, when clients have less than 25% as a downpayment.
feel free to contact me if you have any questions.

No available co-signer and no gifts coming our way. Looks like we'll have to save the other 8%.

Sample00 · 05-12-2005, 08:59 AM

ya, unfortunately thats one way..but the other way will also be for your wife/girlfriend/fiance. to wait until she has two years in with two years of financials..then you could go from there.

Sample00 · 05-12-2005, 09:29 AM

Quote:

Originally posted by fotze+May 12 2005, 03:19 PM--></div><table border='0' align='center' width='95%' cellpadding='3' cellspacing='1'><tr><td>QUOTE (fotze @ May 12 2005, 03:19 PM)</td></tr><tr><td id='QUOTE'> <!--QuoteBegin-Sample00@May 12 2005, 08:59 AM
ya, unfortunately thats one way..but the other way will also be for your wife/girlfriend/fiance. to wait until she has two years in with two years of financials..then you could go from there.

Can you explain the point of the CMHC, or as I like to call it "The biggest goddamn scam in Canada".

Why in the bejesus do those poor vulnerable banks need insurance on a mortgage. What risk is there. A person pay's his mortgage off for a while, the bank is profiting right there, they default, the bank get's the house that has gone up in value, they sell the house then in essence get another mortgage out of it. How can they lose.

Is there car loan insurance premiums? A far riskier debt.

And why call it a fee, it's a homebuyers tax.

Another rant another day. [/b][/quote]
well fotze, we could talk about this one all day.
and I for one would tend to agree with you.
CMHC was set up to provide protection for the banks...*ahem cough cough*
like they need protection, in an environment, when people had less than 25%
to put down on their mortgage.
I believe at the time, there was some vulnerability with respect to property values.
but its now written into the Bank Act, so I dont think you are gonna see them disappear any time soon.
GE Capital does the same thing and is a competitor to CMHC.
For all intensive purposes, they do the same thing.

Claeren · 05-12-2005, 09:58 AM

I have a related question for you experts.

I have a condo on hold for fall 2007. My gf and I are both employed at 2 jobs. Myself for 5 years at both, and her for 5 at one and at the main one she is now moving jobs.

My question is this: We are having to get preapproved at 10% for a condo we get in 2007 - where we will be able to get our own mortgage when we take posession. To what degree will the fact that i have a small amount of credit card debt (<2k - but that is only because i needed the 10% so i made a couple min payments instead of paying it off after a big vacation) and the fact she has a new job come into play?

It is annoying because in 2 years we will have another 10% (20% total), no debt, and presumbably her job status will have been maintained or changed again...

The tricky thing is that if we push it we can put the application forward this week before she changes jobs OR we can wait til next week when she has a new job but i have paid off all of my debt... ?

Claeren.

Sample00 · 05-12-2005, 10:32 AM

Claern,
not a completely easy question to answer...but..here is how I understand it.
if she is going into a similar line of work, then it shouldnt matter...as long as she can get a letter stating she is off the probationary period.
if she is changin professions..then you will have to wait until her probationary period is over. In two years time it wont matter..as she will have a history then.
not sure if that completely answers your question or not..
please feel free to contact me
Axel

Sample00 · 05-12-2005, 10:48 AM

if anybody has questions with regards to mortgages, I will be more than happy to try and answer any for you..
my msn is calgaryflamescphl@hotmail.com
email is axmann@quickmortgages.ca
thanks

Claeren · 05-12-2005, 11:47 AM

Okay... so it is the same profession but i assume there will be some sort of probationary period legally when she starts... but she has been educated for this profession and has been employed in it without interuption for 4'ish years.... this will be her third employer but she has left each opn very good terms, she leaves for better money of course.... ?

Does that help?

Claeren.

Sample00 · 05-12-2005, 11:50 AM

yes..that does help.

shane_c · 05-13-2005, 08:44 AM

Quote:

Originally posted by Sample00@May 12 2005, 02:47 PM
Speaking as a Mortgage Broker, Shane
these are all very good options...
with regards to the line of credit...you would need to prove where those funds came from. And the banks wont accept borrowed funds as downpayment.
well not so much the banks as CMHC (Canada Mortgage and Housing Corporation).
They have very specific guidelines.
CMHC is the institution that insures the mortgages for the banks, when clients have less than 25% as a downpayment.
feel free to contact me if you have any questions.

What if it's not all borrowed funds. We figure at 15% downpayment we will need about $30,000. We have ~ $15,000 (savings and RRSP). Does it matter if only a portion of it comes from borrowed funds, to top up our downpayment? I guess the thing I don't really understand is if I get a line of credit and put the money in my savings account isn't it my money now? So couldn't I then take that money and use it as if it is my cash? Using a different bank of course for the mortgage than who I have the line of credit from. And then I would just report my monthly line of credit payment as a liability. It just doesn't seem fair.

BlackEleven · 05-13-2005, 09:22 AM

The bank will want a15% downpayment so that if you go backrupt and default on your mortgage they can take your house and sell it for up to 15% less than you paid for it and still make all their money back. It's like an "insurance" that the bank is guarnateed to get their money back. If any of all of that 15% of the money is borrowed, then you're paying that loan back in addition to your mortgage payments, so its really just the equivalent of asking for a bigger mortgage, which the bank doesn't think you can afford. They would rather have you pay interest for 5 years (or however long you make your mortgage for) than have to seize your house and sell it for a minimal profit. Its better for them to collect the interest from you. At least that's that way I understand it...

ricosuave · 05-13-2005, 09:29 AM

Quote:

Originally posted by shane_c+May 13 2005, 08:44 AM--></div><table border='0' align='center' width='95%' cellpadding='3' cellspacing='1'><tr><td>QUOTE (shane_c @ May 13 2005, 08:44 AM)</td></tr><tr><td id='QUOTE'> <!--QuoteBegin-Sample00@May 12 2005, 02:47 PM
Speaking as a Mortgage Broker, Shane
these are all very good options...
with regards to the line of credit...you would need to prove where those funds came from. And the banks wont accept borrowed funds as downpayment.
well not so much the banks as CMHC (Canada Mortgage and Housing Corporation).
They have very specific guidelines.
CMHC is the institution that insures the mortgages for the banks, when clients have less than 25% as a downpayment.
feel free to contact me if you have any questions.

What if it's not all borrowed funds. We figure at 15% downpayment we will need about $30,000. We have ~ $15,000 (savings and RRSP). Does it matter if only a portion of it comes from borrowed funds, to top up our downpayment? I guess the thing I don't really understand is if I get a line of credit and put the money in my savings account isn't it my money now? So couldn't I then take that money and use it as if it is my cash? Using a different bank of course for the mortgage than who I have the line of credit from. And then I would just report my monthly line of credit payment as a liability. It just doesn't seem fair. [/b][/quote]
try calling the shell credit union - 691-3817, i think... and speak with mary-lynn

im not saying they will give you a mortgage, but they were more flexible than anyone else i talked with.

if its a go, youll need to become a member, so if need be, pm me and i can refer you.

rico

photon · 05-13-2005, 11:15 AM

I think they take it all.. they tend not to get top dollar for repossessed properties because they want to sell them fast (the bank is in the money business not the real estate business) and because the property itself is usually in poor shape (crack heads don't usually keep their places in good repair).

I've looked at a few bank repossessions (even came close to buying one), and they weren't pretty. The one I almost got was a "cat lady" house, the smell was unimaginable. We would have had to take it down to a shell to get it out. It was probably worth about $240,000 and it sold for $170,000 (and I thought that was about $20,000 more than it should of, someone must have been able to fix it up for less than I was thinking).

I guess the thing I don't really understand is if I get a line of credit and put the money in my savings account isn't it my money now?

If you take out a line of credit and put the money in your account, it's not your money.. It's still borrowed money. BlackEleven has the right of it.