Debt Servicing Guidelines
- Maximum GDS/TDS ratio
- 39/44% for beacons 680+
- 35/42% for beacons 620 – 679
- GROSS DEBT SERVICE RATIO FORMULA
Annual Housing Cost* (Principal + Interest + Taxes + Heat + 50% Strata)
Gross Annual Income
- TOTAL DEBT SERVICE RATIO FORMULA
Annual Housing Costs + Other Debt Obligations
Gross Annual Income
The qualifying interest rate for all mortgages and HELOC’s is the greater of the contractual mortgage rate plus 2% or the 5 year Bench Mark Rate as set out by the Bank of Canada.
A qualifying amortization at least 5 years less than the remaining economic life of the property must be used.
Where the borrower is a tenant, include their rent payment in debt servicing.
The prescribed minimum rent of $375 is to be used per borrower for qualification if the stated rent is less than the prescribed minimum rent.
If the borrower has a clear title home, use $0 principal and interest payment when verified.
Where the borrower is a guarantor on a mortgage for which the collateral is their primary residence, use the associated mortgage payment as their shelter cost.
For each property owned, provide the amount and frequency of the heating costs. If unknown, proceed to the proxy calculation below.
Obtain the property square footage
For each property owned, determine the proxy heating costs as per the table below
| Condo | Townhouse | Single Family Dwelling |
|
The greater of $0.40 per square foot or |
The greater of $0.50 per square foot or | The greater of $0.60 per square foot or |
| $500 annually | $750 annually | $1,200 annually |
- If the client has their current Property Tax Notice, use the figure provided with the applicable Home Owner Grant deducted.
- If a Property Tax Notice is not available for the subject property and an appraisal is obtained, use the figure on the appraisal with the applicable grant deducted.
- If a Property Tax Notice or appraisal is not available, follow the manual tax calculation procedures below.
Primary Residence Tax Calculation
Capture the property's assessed value from the following:
- Property Assessment Notice
- Property Valuator
- Appraisal
- MLS (insured only)
- For properties in BC obtain the total of the residential tax rates for the municipality from the BC Government Municipal Tax Rates page (Tax Rates – Schedule 702)
- Divide the property value by 1,000 and multiply by the municipal tax rate to generate the annual tax figure. ([property value / 1,000] X municipal tax rate = annual property tax)
- Deduct the Home Owner Grant if applicable and enter the amount in the application.
- Capture the property's assessed value from the following:
- Property Assessment Notice
- Property Valuator
- Appraisal
- For properties in BC obtain the total of the residential tax rates for the municipality from the BC Government Municipal Tax Rates page (Tax Rates – Schedule 702)
- Divide the property value by 1,000 and multiply by the municipal tax rate to generate the annual tax figure. ([property value / 1,000] X municipal tax rate = annual property tax). Enter the amount in the application.
Coast Capital includes other debt obligations, which include consumer loans, leases, credit cards, mortgages, support payments, alimony payments, and any other contractual obligations with enforceable terms of repayment.
For existing consumer loans/leases, include the monthly payment as per the credit report in other debt obligations.
For unsecured revolving credit, qualifying payments are as follows:
|
Credit type |
Amount | Amortization | Rate |
| Unsecured LOC (new) | Limit | 5 years | Qualifying Rate |
| Credit Cards/Unsecured LOC (existing) | 3% of Outstanding Balance | n/a | n/a |
Use the greater of the outstanding balance that appears on a borrower’s credit report or as stated by the borrower.
For an insured mortgage, follow the insurer’s guidelines for calculating other debt obligations.
Include a debt servicing payment for non-credit card debts paid off as part of the loan application on the greater of the outstanding balance or payout amount unless Coast Capital controls the payout of the credit facility and closes the credit limit available to the Borrower. Credit cards that are paid off as part of a loan application may be excluded from debt servicing without being closed.
Include 50% of the strata fees payable as part of the borrower’s debt service calculation
Strata Fees can be verified using the following:
Subject Properties
Collect a strata form B to confirm the strata fee
Non Subject Properties
- The strata fee can be confirmed with one of the following:
- Current bank statements that indicate the strata fee for each property
- Most recent AGM minutes
- Strata form B
- If the documents above are not readily available and the strata fee as stated by the client is less than the proxy amount in the table below, you may use the proxy amount
- If the documents above are not readily available and the strata fee as stated by the client is greater than the proxy amount in the table below, use the stated amount
New Construction (Subject or Non Subject)
- If a strata corporation has not yet been established, use the strata fee as indicated on the most recent disclosure statement
- If the disclosure statement does not indicate a strata fee, use the greater of the expected strata fee as stated by the client or the proxy amount in the table below
Strata Fee Minimum Proxy Amount:
| Property Location | Strata Fee |
| British Columbia | $400 per month |
| Elsewhere in Canada | $600 per month |
Note: A strata form B must be dated no more than 3 months prior to the application approval date.
In the case of multiple borrowers, the applicable credit score must be determined on the following basis:
|
Borrower |
Credit Score |
|
Spousal Couples |
Risk Rated based on the highest Beacon score unless the person associated with that score provides <=25% of the total income, in which case the lower credit score will be utilized |
|
Multiple Borrowers |
Risk Rated based on the average credit score of all the borrowers |
- Coast Capital uses a Qualifying Interest Rate to determine the qualifying payment for all new and concurrent mortgages, financed by Coast Capital or elsewhere.
- Use a qualifying amortization at least 5 years less than the remaining economic life of the property.
- For HELOCs, calculate the qualifying payment on the limit using the qualifying rate amortized over the lesser of 30 years or the remaining economic life of the property less 5 years.
- For existing mortgage loans with an established repayment history, use the contractual payment.
- For existing HELOCs, qualify the payment on the outstanding balance using the verified contract rate amortized over 25 years
- When the contract rate is unknown, Coast Capital uses its risk based pricing as a proxy for the contractual rate.
For a student loan or student line of credit, use the repayment amount documented with the repayment terms of the original credit agreement.
Alternatively, we may also consider the payment from the Student Loan calculator found on the CRA website.