Monday, October 22, 2007

Combination Income Loans

There is an article in the Edmonton Real Estate Weekly magazine regarding combination income loans. This loan is for people who overlook the following from Revenue Canada when filing taxes:

If you received tips through your employment and they are not included on your T4 slip, report them on line 104 of your return.

The article clearly describes how this type of tax oversight can be problematic when applying for a conventional mortgage.

However, it is very unlikely that most individuals who are paid in tips or cash declare their entire income on their annual taxes, so right out of the gate this method of qualifying has a number of possible ways to go wrong.

The solution:

Because of these increasing obstacles, a number of non-conventional lenders are recognizing this growing problem and offering employees alternatives beyond just that of declaring more income to the tax man.

It is interesting that Revenue Canada and the law are considered to be "obstacles". The article also warns of the dangers to wait until you can prove your income:

As we have seen in Edmonton, house prices can change dramatically over a period of two years, making it a potentially costly decision to wait until you have the perfect income documents to show the bank before you get into the real estate market.

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