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Old 12-11-2013, 01:42 PM   #1
polak
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So I have a mortgage question that I was hoping one you more financially astute folks could help me with.

Basically, I need to buy a car this week as mine is now kaput and transit isn’t an option where I work. Now I was hoping my car would make it until I get a mortgage (some time early 2014) but since that’s no longer a possibility, I need to know what a safe debt load is, percentage-wise, so that I can still be approved.

I don’t have any cash to buy a car at the moment so I need to finance. Bad luck timing wise. I’ve budgeted what I could afford based on the Mortgage, Condo fees, Property Tax… etc. I’m expecting to take on, but I know the banks will probably have a different # in mind.

Hope that made sense. Help greatly appreciated!
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Old 12-11-2013, 01:46 PM   #2
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I'm interested in this as well- taking out a mortgage imminently but also need a new(er) car and am wondering what is the best way to go about it.
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Old 12-11-2013, 01:48 PM   #3
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Really depends on what type of mortgage you're taking out.

If it's CMHC insured you need to be wary of their DSC requirements.

http://www.cmhc-schl.gc.ca/en/co/moloin/moloin_004.cfm
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How Much Can You Afford?

Not sure? If insured through CMHC, you can work out the mortgage loan that you can afford, with just a few simple calculations. If you don't know how much your monthly mortgage payment might be, you can use our mortgage calculator to determine the likely monthly payments (principal + interest) associated with different house prices at different interest rates.
The following calculations will help you determine how much you can afford. Your mortgage lender or mortgage broker will make these and other calculations when evaluating your unique situation. Ask them about being pre-approved for a CMHC-insured mortgage to avoid any surprises. You can also do the following exercises to find out where you stand.
Calculating Gross Debt Service (GDS)


This is a way of estimating the maximum home-related expenses you can afford to pay each month. To qualify for CMHC insurance, the total should not exceed 32% of your gross monthly household income. Calculating Total Debt Service (TDS)



This enables you to estimate the maximum debt load you can carry each month. It should not exceed 40% of your gross monthly household income.
If it's conventional you can get away with different ratios.
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Old 12-11-2013, 01:58 PM   #4
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Yeah this would be cmhc insured. 5% down, first home.
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Old 12-11-2013, 02:10 PM   #5
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Originally Posted by polak View Post
Yeah this would be cmhc insured. 5% down, first home.

Then 40% TDS.

Use the links and it'll explain everything.
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Old 12-11-2013, 02:12 PM   #6
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I just did the calculations. I hope thats right. That gives me a decent amount of room to play with since im debt free (outside of this soon to be car payment)
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Old 12-11-2013, 02:17 PM   #7
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nm
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Old 12-11-2013, 03:39 PM   #8
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Depending on your beacon score, you could go as high as 44% for your TDS
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Old 12-11-2013, 03:52 PM   #9
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Anyone on here work in the mortgage game? I wouldn't mind just running my plan by someone with mortgage knowledge to make sure im understanding this right.
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Old 12-11-2013, 05:49 PM   #10
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Why not buy a cheap but reliable car? I drove some absolute garbage for a few years before buying new.
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Old 12-12-2013, 09:04 AM   #11
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Shoot me a message with any questions you may have polak. I'm a mortgage professional.
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Old 12-14-2013, 03:24 PM   #12
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Having just sealed the deal on a house andd going through a crash course on this, I still won't pretend to be an expert, but I will say that our broker told us that car payments are often an issue for people getting the mortgage that they want.

I will also say that you should be careful somewhat. They approved me for much more than I personally think I could comfortably pay off. My debt load ratio is fantastic, but my month to month spending habits are not. Banks and brokers obviously can't see these things on a computer screen.
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Old 12-15-2013, 11:57 AM   #13
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Quote:
Originally Posted by FlamesAddiction View Post
Having just sealed the deal on a house andd going through a crash course on this, I still won't pretend to be an expert, but I will say that our broker told us that car payments are often an issue for people getting the mortgage that they want.

I will also say that you should be careful somewhat. They approved me for much more than I personally think I could comfortably pay off. My debt load ratio is fantastic, but my month to month spending habits are not. Banks and brokers obviously can't see these things on a computer screen.
Which is always the borrowers responsiblity. I always tell people borrowing money to make sure they've not borrower as much as they can because rates can change, your payments will be higher at renewal and being house poor sucks A$$! That said, in the end the borrower usually does what they want.
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Old 12-17-2013, 12:51 PM   #14
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Agreed with above.
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Last edited by FlamesAddiction; 12-17-2013 at 02:54 PM.
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Old 01-02-2014, 02:02 PM   #15
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Somewhat related. Question for others who have/are building new.

I don't want some of the stuff the builder offers. Specifically, I don't like their fireplace supplier and would rather get one through another supplier, which the builder won't like very much...

Will my bank allow me to include stuff that is not purchased through the builder on my mortgage? ie/ can 450000k go to the builder, and 10k go to a separate company?

I guess my question is, since I am a newbie to mortgages- can I take out a mortgage and use the money to pay different people, and can I pay for more upgrades to the house after I take possession and pay the builder their price- or is my mortgage a one time lump sum that I must give in entirety to one payee?
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Old 01-02-2014, 09:12 PM   #16
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Quote:
Originally Posted by burn_this_city View Post
Why not buy a cheap but reliable car? I drove some absolute garbage for a few years before buying new.
Refuse to roll the dice on another problem car. Rather drive something I enjoy if it doesn't stop me from being able to afford the type of place I want.
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Old 01-02-2014, 10:08 PM   #17
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Quote:
Originally Posted by REDVAN View Post
Somewhat related. Question for others who have/are building new.

I don't want some of the stuff the builder offers. Specifically, I don't like their fireplace supplier and would rather get one through another supplier, which the builder won't like very much...

Will my bank allow me to include stuff that is not purchased through the builder on my mortgage? ie/ can 450000k go to the builder, and 10k go to a separate company?

I guess my question is, since I am a newbie to mortgages- can I take out a mortgage and use the money to pay different people, and can I pay for more upgrades to the house after I take possession and pay the builder their price- or is my mortgage a one time lump sum that I must give in entirety to one payee?
Yup, something like that can be arranged. Pm me if you want to look into it.
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Old 01-03-2014, 02:47 AM   #18
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Quote:
Originally Posted by REDVAN View Post
Somewhat related. Question for others who have/are building new.

I don't want some of the stuff the builder offers. Specifically, I don't like their fireplace supplier and would rather get one through another supplier, which the builder won't like very much...

Will my bank allow me to include stuff that is not purchased through the builder on my mortgage? ie/ can 450000k go to the builder, and 10k go to a separate company?

I guess my question is, since I am a newbie to mortgages- can I take out a mortgage and use the money to pay different people, and can I pay for more upgrades to the house after I take possession and pay the builder their price- or is my mortgage a one time lump sum that I must give in entirety to one payee?

Basically a purchase plus improvement plan. I have buyers take advantage of this all the time. Not all banks offer it and of the ones that do, some are better than others. ie, you pay out of pocket for the improvement and then the bank reimburses you vs you not having to handle any money at all.
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Old 01-03-2014, 06:26 AM   #19
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Just as an added note, purchase plus improvement programs through Genworth/CMHC require the improvements to be in place prior to disbursing funds.
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Old 01-03-2014, 09:01 AM   #20
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Just as an added note, purchase plus improvement programs through Genworth/CMHC require the improvements to be in place prior to disbursing funds.
Also the list of improvements you state you are doing before hand must be completed. I almost ran into an issue when I did not put in a fireplace like I wanted because the logistics didn't work out. Luckily my appraiser didn't pay attention that the fireplace I put in was a cheap electric one.

Also the program at least through BMO you have to have all quotes done before you take possession. This was extremely difficult for us to do as our sellers did not want to grant us access at all after the sale went through. I am sure this isn't the case with all sellers but just something to be aware of. Also quote your self 1.5 times more than the actual cost of your reno's since you can't get anymore money from the bank after without a lot of hassle. Don't want to find problems that cost more fixing leaving you with an 80% completed house like myself.
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