This is the first of what will be a regular series From time to time I will be sharing different finance case scenarios with you. It is my hope that these case scenarios will provide insightful information.
Our first scenario:
This was a client who started out dealing with her own Bank because she had been with them for many years and they knew her and her soon to be ex-husband well.
- Triple A client.
- School teacher who was off on matunrity leave, and going back to work part time.
- About to be separated and coming out of a very high income life style
- Her employment income was going to be less than 30k annually
- As per separation agreement she would be receiving in access of 100k annually
After consulting with her Bank she was first led to believe she was free to buy a home as high as $700k +. The bank knew she would be receiving a large equalization pay out from her ex and they knew she would have very large monthly support cheques coming in. Every time the client tried to discuss her home purchasing plans they wanted to talk about investment plans for her money. She wanted information on Home Equity credit lines and Variable Rate Mortgages; her Bank kept pushing Fix Term Mortgages and was strongly promoting 7 to 10 yr plans. They wanted her to put a very large amount down and direct all her monthly support money into their investment fund. She felt they were not listening to her and sought new help.
When I got involved she didn’t let me know about her whole experience with her Bank until sometime later, once I had gained her trust which was after I presented my ideas. By the way she had already found her dream home and was running out of time on the waiver date, and this was a quick 30 day close deal.
After getting the full picture on her new situation and understanding her goal of paying her home off very quickly, I also found out that once the dust settles she is very interested in investing. I now had an idea of where to guide her but there were challenges.
- The separation agreement needed to be finalized and executed
- In order for the Banks to consider the support payments, they have to have been paid regularly for a period of three months or greater
- Only 30% to 50% of spousal support can be used to calculate income and it cannot be more than 30% of the individual’s gross income depending on the lender guidelines. (this was now a huge problem since her spousal support was twice as much as her employment income)
Conclusion to this scenario:
She bought a $600k + home; I arranged a 75% LTV with 65% as a Home equity credit line and 10% Variable Rate Mortgage. Her plan was to pay down the credit line very quickly and then as planned once she settled into her new life she was going to work with an Independent Investment Advisor and use her credit line to draw out equity to redirect into her RRSP and other investments.
Now of course there was a lot of work needed to satisfy all the lenders conditions and it took thinking out side of the box to present the right package to the lender in the first place, but that is what we do. And by the way her Bank’s guidelines would have never allowed this deal to be approved the way we ended up setting it up.
No one Bank has all the proper products, rates, and guidelines to best service all client’s needs. We have access to over 90 lenders and each of those lenders have many different products and their own unique guidelines. I am here to work for the client, with their best interest in mind and find them they very best Lender that will suit their needs. When they go to just one Bank, they are now working to fit into that Banks guidelines and product. Sound limiting doesn’t