(Nov 13, 2023)

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We’re all familiar with the concept of ‘addition by subtraction,’ where achieving more sometimes requires letting go of excess. In the realm of mortgage qualification, this principle takes on a unique and powerful meaning.

One common instance of this concept in mortgage qualification occurs when one applicant weighs down the application, leading to a lower qualification amount or, in some cases, a higher interest rate. The circumstances are typically evident but can also be challenging to spot. Consider a standard application profile; a husband and wife, where one carries significant debt impacting their desired property range. In this scenario, the idea of addition by subtraction comes into play by removing the indebted spouse, eliminating the debt from the application and increasing the overall qualification amount. However, removing the spouse also means losing their income, so other factors must align.

Regardless of the outcome in the preceding example, a glaring flaw in mortgage qualification today is the failure to explore potential game-changing qualification opportunities. Many pre-approvals that are generated these days are simply generic; they lack creativity and expansive thought. It is not uncommon to have varying pre-approved mortgage amounts from various bankers or mortgage brokers. In almost all cases, this discrepancy is simply the result of a creative and open-minded mortgage broker identifying additional qualification opportunities within the lenders’ guidelines. Furthermore, as is especially the case with mortgage brokers, the access to additional banks and lenders also provides for more qualification possibilities as qualification guidelines vary significantly from lender to lender.

Another example of addition by subtraction arises when purchasing a new property and relying on income generated from a rental suite or standalone property. When it comes to rental income, lenders vary drastically with their eligibility criteria. For instance, Lender A will allow you to use 50% of the rental income that is generated from your rental property and apply it as qualifying income. But Lender B is offering something different. Rather than applying the eligible rental income to your overall application income, they allow you to use it as an offset to your existing debt load and they further increase the allowance to 80%. As a result, you end up qualifying for significantly more! Although the latter may lead to a significantly higher qualification, it could potentially become addition by subtraction if the lender has a higher interest rate. However, in most cases, the rate premium is negligible compared to the overall benefit of qualifying for the property.

Except for a few straightforward applications, mortgage qualification is a complex process. In highly competitive markets or challenging economic conditions, partnering with an experienced mortgage broker is crucial. The examples mentioned here are just a glimpse of addition-by-subtraction scenarios; numerous others may apply to your unique circumstances. To navigate this complex landscape, choose a mortgage broker with a proven track record of handling challenging files.

Looking for a way to optimize your mortgage qualification? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko. You can also call Marko on WhatsApp.

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