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A return to common-sense lending!

A return to common sense lending through the Total Net Worth Program.

I’d like to think the Total Net Worth Program reintroduced by a lender recently is an indication of what’s to come!

I’m excited about this program. It allows borrowers with good net worth to gain access to money. This is old-school lending – nothing new – but it’s a comeback worth celebrating!

The program’s designed to provide additional mortgage solutions to Canadians with moderate incomes who have a significant amount of verifiable liquid assets and strong credit scores. The maximum amortization is 30 years, which is also promising.

This is long overdue. The program was brought back thanks to a shrinking mortgage market. In other words, there are less mortgages up for grabs and heated competition. The lender is being proactive because it believes these types of borrowers are low-risk, and it wants more business.

This is good news for those who are coming up for renewal as well since the government stress test has posed issues when a mortgage term expires even though they qualified for the initial mortgage on the property under previous rules.

Asset requirements include:

  • Minimum liquid assets of $250,000.
  • $1 in liquid asset for every $1 in mortgage needed above standard qualified amount. For instance, if a borrower qualifies for a $400,000 mortgage using standard debt-servicing ratios but requires a mortgage of $950,000, they must have verified liquid assets of $550,000 in addition to the down payment.
  • All account holders where assets are held must be on the mortgage.
  • No foreign income or assets can be used.

A variety of eligible assets will be considered, including: Stocks of a publicly-traded Canadian company; Canada/Provincial Savings Bonds; GICs; Chequings & Savings Accounts; Mutual Funds; Equity in existing properties being sold (firm purchase and sale agreement required); TFSA; ESOP; and Retirement Accounts – discounted by 30% to account for withholding taxes.

Here’s hoping this is a permanent trend and a return to common-sense lending because the government isn’t measuring the correct information to determine the true impact of its policy changes on the Canadian mortgage market!

Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.

Steve Garganis: 416-224-0114;

Steve Garganis View All

As an industry insider, Steve will share info that the BANKS don't want you to know. Steve has appeared on TV's Global Morning News, CBC's "Our Toronto" and The Real Life TV show. He's also been quoted in several newspapers such as the Globe and Mail, The Toronto Star, The Vancouver Sun, The Star Phoenix, etc.

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