Sophie dreamt of owning a townhouse in the suburbs. However, her bank, concerned about her level of debt and financial obligations, refused to grant her a mortgage. One of her friends, Julie, then suggested that she consult us for a second opinion.
Analysis of Sophie’s financial situation
Let’s take a more detailed look at Sophie’s financial situation:
- Balance of her current account: $2,000
- An RRSP of: $40,000
- Credit card debts (monthly payment $120): $4,000
- Balance of her car loan ($400 monthly payment): $3,000
- Balance of her student loan ($200 monthly payment): $2,000
- Market value of the desired townhouse: $300,000
- Minimum down payment required: $15,000
Initial evaluation and in-depth analysis
After a first analysis, it seemed that Sophie could not afford to buy this house. The $20,000 she planned to withdraw from her RRSP, combined with her debt ratio, did not present a favourable picture. However, we decided to delve deeper into our analysis.
The opportunity offered by the Home Buyers’ Plan (HBP)
It is important to note that the Home Buyers’ Plan (HBP) allows you to borrow up to $35,000 from your RRSP for the purchase of a residence.
Illustration of financial planning with the HBP
By withdrawing $30,000 from her RRSP, Sophie could provide a down payment of $15,000, and use $9,000 to pay off her car loan ($3,000), her student loan ($2,000) and her credit card debts ($4,000). She would thus have $6,000 left from the HBP, $1,200 saved in two months of non-payment of the car and student loans, as well as $2,000 from her personal savings to cover the costs related to the purchase and the move.
Conclusion: A qualified future homeowner
After reviewing her situation and validating her personal budget, we concluded that Sophie could qualify for the purchase of the coveted house. Isn’t that exciting?
Contact our mortgage brokers for more information
For more information on mortgage loans, do not hesitate to contact us. Our mortgage brokers are always available to answer your questions and support you in your property acquisition project.
