Case Study 3

Case Study Sole proprietor of a bookkeeping company had applied to get a three year mortgage at 80% LTV. He bought a cottage 5 years ago and reached his credit limits renovating it. This home improvement venture lowered his beacon score to 600. Purpose ·  Refinance home to pay off debts of $70K, save on monthly expenses, and improve cash flow Borrower ·  Income of $130K ·  GDS/TDS of 31/38% with a stressed TDS of 44% Property ·  $700,000 appraised value ·  Good condition, well maintained property ·  Suburban area ·  Average DOM: 15 Income Qualification Broker included the following documents to qualify the $130K self employed income: ·  Signed Income Declaration form by owner: Gross Revenue (annualized from bank statements) $203,000 Annual Expenses $73,000 Salaries and wages (not including your own salary/drawings) 10,000 Office Lease  15,000 Travel and Car  10,000 Cost of Goods/Material 28,000 Phone & Advertising 10,000 Qualifying Income (Revenue - Expenses) $130,000 ·  6 months business bank statements ·  6 recent contracts/invoices ·  Copy of business licence ·  Statutory declaration from the lawyer showing no taxes owing ·  HST/PST/GST # to indicate that no taxes were outstanding Deal Rationale  client was able to pay off all his debts of $70K with enough leftover to start improvements on his primary residence. He saved $1,000 per month by consolidating all his debt into one mortgage.