As you’re searching for your ideal new home, you may have a list of “must have” features that will make or break a deal for you. But what happens when you find that perfect home and it’s outside of the mortgage amount you qualify for? At first it may seem you need to pass on that perfect house. But don’t fret; you still have options!
Depending on your situation, including a legal income suite in the basement of your home can help you qualify for a higher mortgage. Most major financial institutions will consider part or all of a potential rental amount as part of your income, raising the amount of mortgage you can qualify for.
As an example, if your annual household income before taxes is $100,000 and you assume a $50,000 down payment, with no other debts you may qualify for approximately $510,000*. If you can include $1,000 rental amount as part of your income, your new household income becomes $112,000. With this higher income, you may qualify for $565,000, a difference of $55,000.
* This calculation assumes a 5-year fixed rate of 4.29% over a 25-year amortization period. It also assumes no additional debts from loans or credit cards.
Keep in mind, you still need to build the income suite which will add to the overall purchase price of your new home. However, the income from the rental suite should cover these costs over time, and you’re still left with a bigger home.
Not all financial institutions treat this option the same, and some may not offer the option at all. It is best to discuss in advance how much of the rental amount, if anything, is used as part of your own income when qualifying, as it may affect how much mortgage you may qualify for and ultimately what house you can buy.
If this is an option you’d like to consider, I’d be happy to guide you through the process. Feel free to contact me to discuss how an income suite can help you qualify for your ideal new home.