While Sahil and Ananya have strong credit scores of 750 and 800 respectively, they found it difficult to secure mortgage financing for their new rental purchase. The main challenge was with servicing since they currently hold a mortgage on their primary home and on an existing rental, along with small outside debt that would factor into any debt-servicing calculations.
To invest in their future, these clients purchased a second rental property – a duplex – in their hometown of Kitchener with a significant down payment. Both have good, steady employment; he’s been a full-time, commission realtor for more than five years while she is full-time salaried.
Sahil and Ananya have good equity in both their primary home and the existing rental property. With clean credit and having saved 35% for a down payment for this new purchase, we saw solid applicants.
Our approach when reviewing servicing is to consider up to 100% rental offset for the non-subject rental, and to assist with income review of the commission applicant, we used a two-year average of his earned (gross) income.
We also recognized that the current market rent for this area provides coverage.