3 minute read
Net Worth Lending
If you're considering buying a home, you've probably heard about traditional mortgage options. But what if we told you that there's a new approach to lending that looks beyond your income and credit score? It's called "net worth lending," and it might be the key to helping you achieve your homeownership goals.
WHAT IS NET WORTH LENDING?
Net worth lending is all about taking a more comprehensive look at your financial situation. Instead of just focusing on how much you earn or your credit score, lenders consider your entire financial picture. This includes your assets and liabilities.
How Does It Work? Here's a simplified breakdown:
BORROWER QUALIFICATIONS: To qualify, you need to be a Canadian resident. Usually, a minimum of around $250,000 in liquid assets is required. If you're buying a property with someone else, but they're not on the mortgage application, a portion of your shared assets can be used.
ASSET REQUIREMENTS: You must have a minimum of $250,000 in liquid assets. For every dollar you need in a mortgage above what's typically qualified for, you must have a dollar in verified liquid assets. Your assets must not be pledged as security for other loans. Foreign income and assets aren't considered, except for specific eligible assets.
ELIGIBLE ASSETS: The good news is, many types of assets are eligible, including savings and more. Pledged assets are an exception. They don't count, but that usually doesn't apply in this case.
DOCUMENTATION & DOWN PAYMENT:
Standard income and documentation policies apply. You'll need to show evidence of your average liquid assets over a 90-day history. This might include investment statements or bank records. Down payment requirements are in addition to the liquid asset requirement. You'll need a minimum down payment of 20%, with at least 10% coming from your own resources.
So, what's the bottom line? Net worth lending is a new way to explore mortgage opportunities. It focuses on your overall financial health and the assets you've accumulated. If you have substantial liquid assets and a strong credit score, this innovative approach could be your path to homeownership.
Remember, this lending approach is still evolving, and not all lenders offer it. But as it gains popularity, more options may become available. It's always a good idea to talk to a financial advisor or mortgage specialist to see if net worth lending is the right fit for you.
Content provided by Scott Westlake, Mortgage Agent Level 2, Dominion Lending Centres - FC Funding, License 10761. Each office independently owned & operated.
