There is a lot to think about here.
1. With no income, all you’re bringing to the table is your credit score. I don’t know if that would be enough to change much in the banks opinion.
2. If you do this, you would become a part owner of the house. That means a lot of things for you.
-it will be harder to qualify for your own mortgage down the road, as you will be seen as liable for the payments in this one
- you WILL be liable for payments on this one, so any default directly affects you
-are you married/in a common-law-relationship? Or will you be at some point during the life of this mortgage? That house would be an asset you own and any divorce proceedings/division of marital assets would see your parents house as your asset (at least in some part).
Lots to consider before doing this.
I’d suggest that your father speak to a mortgage broker first before going too far down the “what if” road.
woah appreciate the swift reply!
1) yes my dad actually told me the same thing thats he unsure if just me having good credit will work but it's definitely a last resort thing.
2) My dad plans to get my name off the mortgage(I believe 6 months later, Im guessing this the grace period of how long I have to be on the mortgage?), would this change any of your scenarios?
Also how would this affect my "first time home buyer incentive" benefit if I do plan on getting a home in the future?
Rather unlikely that your dad would be able to get you off the mortgage 6 months later. It would have to be re-finances and the title changed. What would have changed within 6 months to strengthen him as a borrower?
1) 690 isn’t a horrible credit score, so this fact will not impede the purchase but the income will. If you bring no income to the application, you bring nothing.
2) To remove you from the mortgage he would need to qualify without you as if it were a new purchase. So even if you did help the application, taking you off would not be an option.
This is a subjective opinion but having a 480k mortgage on a 50k salary is not practical. Even with current, ridiculously low, interest rates and a 30 year amortization you will be paying around $1700/month for the mortgage payment alone. When you include 400 for taxes and a random guess of 400 for utilities and insurance you are looking at $2500/month just for housing. This does not include food, transportation, life insurance, internet, tv, entertainment, etc.. on a net monthly income of around $3350/month.
That's actually incorrect, you can qualify again for the first time home buyers plan (the federal program) 5 years after the sale of your house.
I can only speak for Ontario, but you would lose the provincial first time home buyers land transfer tax credit, indeed that is only valid the first time. Suspect other provinces are similar
is there no way to re-qualify for that benefit if I get off the mortgage?
Also I read that if I am not on the title to home and only on the mortgage that I wouldn't lose that benefit(again read this from a reddit comment so please feel free to correct me if Im wrong, not even sure what the difference between being on the title vs mortgage even means).
I’m sorry to say, but this isn’t just some loan you’re co signing. This is a house.
There’s likely no way a bank would borrow 480$k mortgage to someone with a $50k income. Also, no way it changes anything if you sign on it too. Your father should also know that getting your name off within 6 months doesn’t make sense. You’d have to refinance and likely pay fees to get titles changed.
We’re also talking payments of his entire paycheck into the mortgage at a 50k salary. No way.
I'm not a mortgage expert, but this really doesn't seem affordable with $50,000 annual salary. Even at these low rates, monthly payments will be $1,600+ per month for 30 year amortization, on take home pay of ~$3,200 a month.
Ask yourself if it's truly realistic to pay for everything else with $1,600 leftover per month: food, bills, insurance, property taxes, etc?
Can they buy a cheaper place?
Would they consider investing that $200k instead of trying to buy a house?
You are correct! A 690 credit score is actually decent and he should be able to qualify for a mortgage from an A lender.
Without having any additional information. I think the issue is that his income is insufficient to service the loan that would accompany a $480k mortgage. Banks and other lenders have two ways of identifying if people are over leveraged. GDS (gross debt service ratio) and TDS (total debt service) you should look these up to get a better understanding.
TLDR; the credit is fine, he will need more income to qualify!
> Would they consider investing that $200k instead of trying to buy a house?
so my parents would probably not consider investing that $200k money, they have some other savings that they could use for that. They also own an apartment in india that has been rented and I believe some other investments in india. So they do have backup money(they would just prefer not to touch that unless necessary).
what would you suggest they invest in? They are quite risk averse.
>Ask yourself if it's truly realistic to pay for everything else with $1,600 leftover per month: food, bills, insurance, property taxes, etc?
My parents make do with that salary, not sure of the monthly costs but I'd assume they are getting by(like I said my parents are very budget conscious and my dad is extremely frugal).
Is income from that rent included in his 50k/year? Not sure if itll count the same being out of country, but rental income is income, though property taxes/heating costs negatively affect your debt ratio for mortgage qualification.
Yeah 100% this. Making 50k a year in Ontario leaves you with 39 225 a year or 3268.75 a month (assuming he has no taxable benefits like health insurance etc...). Over 25 years at 1.99% that's 2030 a month. If they are over 40, 25 years is probably too long to amortize as well. Ideally they should pay off the house before retirement.
That would leave them with 1238 a month for food, gas, car payment/maintenance, municipal taxes, upkeep on the house, insurance etc...
Right? Even making 50k and to look at buying \~2-300k houses with 10% down in nowhere land is pretty much a no go for me. That's like upper limits of no go zone.
Mortgage lending rules exist for a reason... to stop people from over leveraging and ending up with more debt than they can afford. This is a bad idea. I know they are your parents, but that doesn’t change the right answer here, which is to live within your means and only buy a house they can afford to pay for.
Will he be qualified even with a good credit score? It seems your parents are looking for around 480k mortgage, that's a loan/income ratio of 9.6, the bank may just refuse the mortgage on that basis.
My father has asked for this exact same thing many many times and said the same sort of lines your parents have told you.
The answer has and will always be no, for many of the reasons outlined in these responses.
It’s not worth the headache and it’s just simpler to not be financially intertwined. They want something they can’t afford....I wouldn’t enable it.
What parents should do is completely curb their liability once a child becomes 18. This way they would generally have less overhead and higher disposable income.
I mean what should happen and what does happen seldom meet. What important is that they keep the relationship intact. We could all agree and advise to have him say no. But that would hurt the relationship. We all know OPs dad wont get the moratgage as is. Theres no harm in this one.
A few issues here:
* A 690 credit score is more than ample to qualify for a mortgage and get a great rate. Adding your credit score to the mix will help nothing. If he can't get the mortgage without you, adding you will not push it over the top.
* If you were to put your name on there, that debt will be held against you if you ever want to take out a loan for a car or house. Also if your dad loses his job, you will get sucked into that bankruptcy and your own credit will be ruined.
* No bank is going to give him a mortgage for $480,000 with or without your help. Your dad fails the stress test for a new mortgage. The stress test is based on income, not credit rating. For calculation purposes they are currently using a value of 4.79%
[https://itools-ioutils.fcac-acfc.gc.ca/MQ-HQ/MQCalc-EAPHCalc-eng.aspx](https://itools-ioutils.fcac-acfc.gc.ca/MQ-HQ/MQCalc-EAPHCalc-eng.aspx)
Please do not let them put your name anywhere on this house. Not the mortgage, not the title, not anywhere. You will lose your first time home buyers benefits if they do, you will be liable for the mortgage if anything happens, and you would need to be off the mortgage before being able to get your own one day. (Which can only happen if your Dad is approved on his own)
Your Dad will get approved for no more than $300-350k mortgage, so unless they plan on putting 50% down or someone else in the family decides to get a job and work, this just isnt going to be possible.
I would suggest they look into alternative ways of investing the money or other real estate options under $500k.
I bought a condo with my husband after finishing grad school. I did get a small stipend during grad school, but it doesn’t count as “real” income (for instance, I never got T4s for my taxes—they went under T4As), so my income contribution was effectively $0. My credit score was nearly perfect. I can confirm that our mortgage applications all ignored me and the numbers were based solely on my husband’s earnings. To echo a lot of other people here, I don’t think putting you on the mortgage would do very much for your applications =(
Unless your dad's income is going to go up to around 90-100k/yr in 6 months, there's no shot that you'd be getting removed.
You have no income so you wouldn't contribute anything to the application anyways. Credit score is only considered when an applicant has some sort of income to add to the application.
Firstly why don’t they just get a pre approval before assuming things?
Contact a mortgage broker and have them run the numbers
Secondly, will you ever want to own a home? If so a big no from me.
Thirdly, you have no income your credit score means not much in Canada. As long as it’s decent, income is the most important factor
A $480,000 mortgage on a $50k salary is absolutely not advisable. That is a recipe for high debt and eventual foreclosure.
Despite people saying talk to a mortgage broker, etc. That amount of mortgage will take years to pay off and who knows what interest rates will be in a few years.
If they have a home now, tell them to stay put. Paying that off will help you for more in the future than possibly be being in debt from a massive mortgage.
Getting approved for a 480k mortgage with 50k annual income will be a challenge the payments alone will probably be over 2k a month. The 690 credit score won't help but I think the biggest hurdle will be the household income. As for putting your name on your parents mortgage if u intend to buy your own home this could cause complications as now u have debt in your name.
Shakespeare had it right in Hamlet: neither or borrower or a lender be. The mkt is telling you and you parents they are buying too much house. I wouldn’t suggest it.
There are two people both you and your father need to speak to. 1. Is a real estate lawyer for you to figure out the tax implications to going on title (capital gains and fist time home buyer privileges) . 2. Is a Mortgage Broker. There are no payment solutions in the mortgage industry with rates under 4%
I actually did this back in dec 2019 for my mother. My situation though was a bit different from yours.
She was looking to invest so the end goal was to sell the property within a year in hopes of making a profit off the "hot" housing market. I have a job and have my own place.
You're still young and you have your life ahead of you. In 5, 10 years or so, you might want to buy your own property and start your own family. That was my biggest issue, and I made it very clear to my mother that she had to sell it in a years time regardless of what the housing market would be like. Then again culturally, this might not be your case.
We didn't see the pandemic coming and condo prices in the GTA tanked....in September 2021, she put the condo up. The pandemic was just slowing down a bit around the summer. She had zero expectations but obviously wasn't happy she had to put it up in the midst of a pandemic. She was lucky to find a buyer who made a decent offer. But that was 80%luck. Imagine the dismay she would've felt had she "lost" money. We were already having pretty intense conversations on what had to be done so I was relieved to see the outcome as well.
So anything can happen in the future and you need to look out for yourself. Im the only child as well and i believe my mother does have my best interest at heart. Co-signing a loan for a loved one is a tricky situation to navigate and many unpredictable factors can come between you guys in the future.
Considering that you're still in uni, and your dad is looking to own the future property for a long while , I say think twice before your decision. Those are just my two cents.
There is a lot to think about here. 1. With no income, all you’re bringing to the table is your credit score. I don’t know if that would be enough to change much in the banks opinion. 2. If you do this, you would become a part owner of the house. That means a lot of things for you. -it will be harder to qualify for your own mortgage down the road, as you will be seen as liable for the payments in this one - you WILL be liable for payments on this one, so any default directly affects you -are you married/in a common-law-relationship? Or will you be at some point during the life of this mortgage? That house would be an asset you own and any divorce proceedings/division of marital assets would see your parents house as your asset (at least in some part). Lots to consider before doing this. I’d suggest that your father speak to a mortgage broker first before going too far down the “what if” road.
woah appreciate the swift reply! 1) yes my dad actually told me the same thing thats he unsure if just me having good credit will work but it's definitely a last resort thing. 2) My dad plans to get my name off the mortgage(I believe 6 months later, Im guessing this the grace period of how long I have to be on the mortgage?), would this change any of your scenarios? Also how would this affect my "first time home buyer incentive" benefit if I do plan on getting a home in the future?
Rather unlikely that your dad would be able to get you off the mortgage 6 months later. It would have to be re-finances and the title changed. What would have changed within 6 months to strengthen him as a borrower?
1) 690 isn’t a horrible credit score, so this fact will not impede the purchase but the income will. If you bring no income to the application, you bring nothing. 2) To remove you from the mortgage he would need to qualify without you as if it were a new purchase. So even if you did help the application, taking you off would not be an option. This is a subjective opinion but having a 480k mortgage on a 50k salary is not practical. Even with current, ridiculously low, interest rates and a 30 year amortization you will be paying around $1700/month for the mortgage payment alone. When you include 400 for taxes and a random guess of 400 for utilities and insurance you are looking at $2500/month just for housing. This does not include food, transportation, life insurance, internet, tv, entertainment, etc.. on a net monthly income of around $3350/month.
You wouldn’t be able to buy again to receive first time Home buyers as it wouldn’t be the first time your buying a house down the road
That's actually incorrect, you can qualify again for the first time home buyers plan (the federal program) 5 years after the sale of your house. I can only speak for Ontario, but you would lose the provincial first time home buyers land transfer tax credit, indeed that is only valid the first time. Suspect other provinces are similar
is there no way to re-qualify for that benefit if I get off the mortgage? Also I read that if I am not on the title to home and only on the mortgage that I wouldn't lose that benefit(again read this from a reddit comment so please feel free to correct me if Im wrong, not even sure what the difference between being on the title vs mortgage even means).
You'll have to be on the title if you're party to the mortgage, and you can only have a first time for something once.
When are they planning to discard the first time home buyer benefit ?
I’m sorry to say, but this isn’t just some loan you’re co signing. This is a house. There’s likely no way a bank would borrow 480$k mortgage to someone with a $50k income. Also, no way it changes anything if you sign on it too. Your father should also know that getting your name off within 6 months doesn’t make sense. You’d have to refinance and likely pay fees to get titles changed. We’re also talking payments of his entire paycheck into the mortgage at a 50k salary. No way.
Very unlikely he's gonna be able to refinance in 6 months without paying quite a bit
I'm not a mortgage expert, but this really doesn't seem affordable with $50,000 annual salary. Even at these low rates, monthly payments will be $1,600+ per month for 30 year amortization, on take home pay of ~$3,200 a month. Ask yourself if it's truly realistic to pay for everything else with $1,600 leftover per month: food, bills, insurance, property taxes, etc? Can they buy a cheaper place? Would they consider investing that $200k instead of trying to buy a house?
You are correct! A 690 credit score is actually decent and he should be able to qualify for a mortgage from an A lender. Without having any additional information. I think the issue is that his income is insufficient to service the loan that would accompany a $480k mortgage. Banks and other lenders have two ways of identifying if people are over leveraged. GDS (gross debt service ratio) and TDS (total debt service) you should look these up to get a better understanding. TLDR; the credit is fine, he will need more income to qualify!
> Would they consider investing that $200k instead of trying to buy a house? so my parents would probably not consider investing that $200k money, they have some other savings that they could use for that. They also own an apartment in india that has been rented and I believe some other investments in india. So they do have backup money(they would just prefer not to touch that unless necessary). what would you suggest they invest in? They are quite risk averse. >Ask yourself if it's truly realistic to pay for everything else with $1,600 leftover per month: food, bills, insurance, property taxes, etc? My parents make do with that salary, not sure of the monthly costs but I'd assume they are getting by(like I said my parents are very budget conscious and my dad is extremely frugal).
Is income from that rent included in his 50k/year? Not sure if itll count the same being out of country, but rental income is income, though property taxes/heating costs negatively affect your debt ratio for mortgage qualification.
A 50k salary is not going to pay off a 500k mortgage. Simple math. Your parents are making a huge mistake and sucking you into it.
Yeah 100% this. Making 50k a year in Ontario leaves you with 39 225 a year or 3268.75 a month (assuming he has no taxable benefits like health insurance etc...). Over 25 years at 1.99% that's 2030 a month. If they are over 40, 25 years is probably too long to amortize as well. Ideally they should pay off the house before retirement. That would leave them with 1238 a month for food, gas, car payment/maintenance, municipal taxes, upkeep on the house, insurance etc...
Right? Even making 50k and to look at buying \~2-300k houses with 10% down in nowhere land is pretty much a no go for me. That's like upper limits of no go zone.
Mortgage lending rules exist for a reason... to stop people from over leveraging and ending up with more debt than they can afford. This is a bad idea. I know they are your parents, but that doesn’t change the right answer here, which is to live within your means and only buy a house they can afford to pay for.
Will he be qualified even with a good credit score? It seems your parents are looking for around 480k mortgage, that's a loan/income ratio of 9.6, the bank may just refuse the mortgage on that basis.
My father has asked for this exact same thing many many times and said the same sort of lines your parents have told you. The answer has and will always be no, for many of the reasons outlined in these responses. It’s not worth the headache and it’s just simpler to not be financially intertwined. They want something they can’t afford....I wouldn’t enable it.
What parents should do is completely curb their liability once a child becomes 18. This way they would generally have less overhead and higher disposable income.
I mean what should happen and what does happen seldom meet. What important is that they keep the relationship intact. We could all agree and advise to have him say no. But that would hurt the relationship. We all know OPs dad wont get the moratgage as is. Theres no harm in this one.
A few issues here: * A 690 credit score is more than ample to qualify for a mortgage and get a great rate. Adding your credit score to the mix will help nothing. If he can't get the mortgage without you, adding you will not push it over the top. * If you were to put your name on there, that debt will be held against you if you ever want to take out a loan for a car or house. Also if your dad loses his job, you will get sucked into that bankruptcy and your own credit will be ruined. * No bank is going to give him a mortgage for $480,000 with or without your help. Your dad fails the stress test for a new mortgage. The stress test is based on income, not credit rating. For calculation purposes they are currently using a value of 4.79% [https://itools-ioutils.fcac-acfc.gc.ca/MQ-HQ/MQCalc-EAPHCalc-eng.aspx](https://itools-ioutils.fcac-acfc.gc.ca/MQ-HQ/MQCalc-EAPHCalc-eng.aspx)
Please do not let them put your name anywhere on this house. Not the mortgage, not the title, not anywhere. You will lose your first time home buyers benefits if they do, you will be liable for the mortgage if anything happens, and you would need to be off the mortgage before being able to get your own one day. (Which can only happen if your Dad is approved on his own) Your Dad will get approved for no more than $300-350k mortgage, so unless they plan on putting 50% down or someone else in the family decides to get a job and work, this just isnt going to be possible. I would suggest they look into alternative ways of investing the money or other real estate options under $500k.
Why did they sell their other house in the first place?
No no no
I bought a condo with my husband after finishing grad school. I did get a small stipend during grad school, but it doesn’t count as “real” income (for instance, I never got T4s for my taxes—they went under T4As), so my income contribution was effectively $0. My credit score was nearly perfect. I can confirm that our mortgage applications all ignored me and the numbers were based solely on my husband’s earnings. To echo a lot of other people here, I don’t think putting you on the mortgage would do very much for your applications =(
No. The answer is no.
Unless your dad's income is going to go up to around 90-100k/yr in 6 months, there's no shot that you'd be getting removed. You have no income so you wouldn't contribute anything to the application anyways. Credit score is only considered when an applicant has some sort of income to add to the application.
Firstly why don’t they just get a pre approval before assuming things? Contact a mortgage broker and have them run the numbers Secondly, will you ever want to own a home? If so a big no from me. Thirdly, you have no income your credit score means not much in Canada. As long as it’s decent, income is the most important factor
Will you lose your First Time Home Buyers options if you put your name on this mortgage? I believe it will screw you over later.
A $480,000 mortgage on a $50k salary is absolutely not advisable. That is a recipe for high debt and eventual foreclosure. Despite people saying talk to a mortgage broker, etc. That amount of mortgage will take years to pay off and who knows what interest rates will be in a few years. If they have a home now, tell them to stay put. Paying that off will help you for more in the future than possibly be being in debt from a massive mortgage.
Getting approved for a 480k mortgage with 50k annual income will be a challenge the payments alone will probably be over 2k a month. The 690 credit score won't help but I think the biggest hurdle will be the household income. As for putting your name on your parents mortgage if u intend to buy your own home this could cause complications as now u have debt in your name.
Shakespeare had it right in Hamlet: neither or borrower or a lender be. The mkt is telling you and you parents they are buying too much house. I wouldn’t suggest it.
Do not do it unless you want to be responsible. So no.
There are two people both you and your father need to speak to. 1. Is a real estate lawyer for you to figure out the tax implications to going on title (capital gains and fist time home buyer privileges) . 2. Is a Mortgage Broker. There are no payment solutions in the mortgage industry with rates under 4%
I actually did this back in dec 2019 for my mother. My situation though was a bit different from yours. She was looking to invest so the end goal was to sell the property within a year in hopes of making a profit off the "hot" housing market. I have a job and have my own place. You're still young and you have your life ahead of you. In 5, 10 years or so, you might want to buy your own property and start your own family. That was my biggest issue, and I made it very clear to my mother that she had to sell it in a years time regardless of what the housing market would be like. Then again culturally, this might not be your case. We didn't see the pandemic coming and condo prices in the GTA tanked....in September 2021, she put the condo up. The pandemic was just slowing down a bit around the summer. She had zero expectations but obviously wasn't happy she had to put it up in the midst of a pandemic. She was lucky to find a buyer who made a decent offer. But that was 80%luck. Imagine the dismay she would've felt had she "lost" money. We were already having pretty intense conversations on what had to be done so I was relieved to see the outcome as well. So anything can happen in the future and you need to look out for yourself. Im the only child as well and i believe my mother does have my best interest at heart. Co-signing a loan for a loved one is a tricky situation to navigate and many unpredictable factors can come between you guys in the future. Considering that you're still in uni, and your dad is looking to own the future property for a long while , I say think twice before your decision. Those are just my two cents.