How Do Child and Spousal Support Payments Affect Mortgage Qualification?

Thursday Oct 12th, 2017

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Child and spousal support payment obligations will often impact mortgage financing available.

The majority of lenders treat support payments as liabilities; and for most buyers this will significantly affect borrowing limits.  I have an excellent solution through an A lender; support payments are deducted from income rather than treating them as a liability.  The following example compares the two methods & as you can see, the majority of lenders would decline whereas the other lender can approve with A rates.

Scenario
Mortgage required: $400K
Monthly mortgage P&I payment + taxes + heating = $2,400
Monthly spousal & child support payment = $4,500
Salary: $12,500 monthly ($150K/annual)

 

 

 Income

 

P&I + Taxes + Heat

 

 
Liabilities & Support Payments

Gross Debt Servicing Ratio (max 39%)

Total Debt Servicing Ratio (max 44%)

Lender deducts support from income

$8,000
(gross income less support)

 

$2,400

None (support was deducted from income)

30%

30%

Lender treats support as a liability

$12,500

$2,400

$4,500

19.2%

55.2%

 

Let me know how I can help you. 

Maura Walsh

Sales Representative
Sutton Group Realty Systems Inc., Brokerage

Cell: (416) 803-4224/Office: (416) 762-4200

Email: mauracwalsh@yahoo.ca


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