Non-Subject Properties: Qualifying for a Higher Home Purchase Price
Are you looking to buy a new home and currently own non-subject properties? Let’s look at how the type of non-subject property may affect how much you can spend on the subject property.
Living
If you’re currently living in a home and looking to move to another one, technically, the home you’re living in is considered the non-subject property since it’s the property you’re not going to take the mortgage out on.
If you’re currently living in the property and planning to sell it, it’s pretty straightforward. You can exclude it from debt servicing ratios, provided that you have a signed purchase agreement and conditions have been removed at least two to three weeks before the closing day of the new home you purchased.
Living + Rent
If you’re currently living in the property and renting out a portion of it, again, like the first scenario, as long as you have a firm sales agreement at least two to three weeks before the closing of your new home, you can exclude it.
If you are currently renting it out, you cannot include the rental income since you are selling the property and that rental income will stop.
Full Rental
If you have an entire rental property as a non-subject property, depending on the lender, you can usually include between 20% and 80% of the rental income.
If it’s an entire rental property, the lender will want to see mortgage statements, property tax statements, signed leases and usually three months of bank statements.
It would help if you never accepted cash from your tenants for the rent. This could cause issues. It’s best to accept post-dated cheques or e-transfers. That way, there’s a paper trail to verify the rental income.
Second Home
If you own a second home, a weekend home or a place where a family member lives, you’ll need to factor it into any other mortgage applications.
Like somewhere you’re currently living, the lender will want to see a mortgage and property tax statement and include it as a liability.
How the Canadian Mortgage App Can Help
With the Canadian Mortgage App, you can find out how much you could afford based on the type of non-subject property.
Using the Purchase Calculator, you can include any non-subject properties you might own to see how it affects how much more or less you can spend on a (subject) property.
What are you waiting for? Download the Canadian Mortgage App today to try it out.
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