Getting a mortgage as a Pilot

[ehv8oar]

So I'm trying to buy a house, the problem is my base pay is only in the mid $30's, but with per diems included it gets boosted up into the low $40's.

The difference in the type of house I can get based on just the base pay or the base pay plus per diems is huge. I'm struggling to get a mortgage though on including the per diems.

Has anyone come up against this problem before but managed to get the per diems included?

Thanks for any advice!

[Yycjetdriver]

So I'm trying to buy a house, the problem is my base pay is only in the mid $30's, but with per diems included it gets boosted up into the low $40's.

The difference in the type of house I can get based on just the base pay or the base pay plus per diems is huge. I'm struggling to get a mortgage though on including the per diems.

Has anyone come up against this problem before but managed to get the per diems included?

Thanks for any advice!

Per diems isn’t pay. If the bank could give you more they certainly would love to, the more you borrow the more they make.
They’re just sensible enough to know the difference. An illness, injury or heck even a long stretch of vacation time will result in 0 per diem earnings, but the bank will still want their same share.

[laserstrike]

Per diems do not and never will count towards your qualification. Sorry.

[ant_321]

If the bank won’t give you the money you 1000% can’t afford it. They were willing to give me 2X what I could afford.

[ehv8oar]

Yeah that's the problem I'm coming up against.

The annoying thing is that I certainly can afford the repayments, I'm paying more now in rent, it's just that to qualify they use a much higher rate than you actually get once you have the mortgage.

Thanks for the info though.

[contactapproved]

It’s been a few years since I was in this position but I remember getting my company to put full pay including per diems on letterhead to take to my lender. Can’t remember if per diems made any difference but I did get what I was after. It was also a credit union which I know is less restrictive to begin with on their criteria. I’d also caution against taking out the full amount of what a bank will even offer. We just did a preapproval on a new home and had a pretty scary high number come back at us. Yes we could afford it if everything stayed peachy and the same but one little change would start raising the stress meter, and that’s under the new CMHC rules...

[laserstrike]

Yeah that's the problem I'm coming up against.

The annoying thing is that I certainly can afford the repayments, I'm paying more now in rent, it's just that to qualify they use a much higher rate than you actually get once you have the mortgage.

Thanks for the info though.

What happens when interests rates go up?

The qualification is by iirc 2% more. If things continue down the path they are currently going economically, 2% increase over a few short years isn't that far fetched.

[Yycjetdriver]

Yeah that's the problem I'm coming up against.

The annoying thing is that I certainly can afford the repayments, I'm paying more now in rent, it's just that to qualify they use a much higher rate than you actually get once you have the mortgage.

Thanks for the info though.

Unfortunately that’s the way she goes as a pilot in Canada. Most of the pilots I know who are in the 30’s or 40’s an hour range (I.e. Jazz, Encore, Porter Driver’s) are living like they’re College students. Whether that be in their parents basements, or sharing a condo with at least 1 other person. Not to mention the large associated costs with buying/selling a home, unless you have a rich partner or parents, it’s not very doable.

[ehv8oar]

Thanks everyone for the input, yes it's annoying that as a Professional you can't afford to do one of the most basic things such as buying a house. It's not like I'm trying to buy myself a castle, it's just a small semi in a decent location.

contactapproved thanks for the advice, my companies helping me out as much as they can but I'm running up against the problem that my salary just sucks.

laserstrike to be honest even if the interest rates went up hugely I'd still be paying less than I am in rent.

[laserstrike]

Curious as to where you live where you can buy something on a mortgage based off even $40,000. That's like 200-250k tops. Where rent is "significantly more"? The only place I can think of is Montreal.

[Squaretail]

Curious as to where you live where you can buy something on a mortgage based off even $40,000. That's like 200-250k tops. Where rent is "significantly more"? The only place I can think of is Montreal.

That is Calgary’s housing market right now. Townhouse condos would be going for the mid 250s, but rental rates are insane. You would be lucky to find a cardboard box to rent for less than 1400/ month.

[ehv8oar]

Curious as to where you live where you can buy something on a mortgage based off even $40,000. That's like 200-250k tops. Where rent is "significantly more"? The only place I can think of is Montreal

.

I live in Halifax. My rent is over $1200 a month. Granted that's for a reasonably nice place and I could find cheaper for around $900 a month but the extra $300 a month gets you a much nicer place.

[Adam Oke]

I'm not sure where you are at in terms of career or age, but I'm going to assume early and young.

I'll start with Rule Number 1 as everything else follows suit.

Rule Number 1: Pay yourself first. Take 10% of every pay cheque and put it towards retirement. All remaining money is fair game.

Now to follow suit. A couple points

1) You can't afford it. This is the reality. The bank see's this reality. Without looking at your numbers; your TDS/GDS proves you can't afford it because you are trying to bring on more debt with current debt/lines OR you are trying to bite off more than you can chew and you are looking to mortgage an amount you can not afford. The banks are in the business of making money. They want your money for the next 25 years...not for you to default. If you are too much of a risk, they will not invest in you. Think Dragon's Den with the company's that come in with the over the top valuations of their business...this is you.

(Assuming zero debt) The rule of thumb is typically a lender will allow for up to 30% of your GROSS income towards housing expenses (mortgage, taxes, insurance). So a quick and dirty way to see what mortgage amount you can afford is to go by 3X your income. You make 30k, so you can afford a 90k mortgage, so roughly a home valued at 108k with 20% down. Do not, in no way, make yourself house poor. By that, I mean every last cent goes into buying the house and every chunk of your pay cheque goes into paying for it and you have nothing left when the roof comes due (etc). Not only should you be putting down 20% to save yourself big money on CMHC fees, but you should also have 6 months of your salary set aside as an emergency fund for the rainy day when you lose your medical/the company goes under/you are layed off etc.

A line of credit or credit card is not an emergency fund by the way, and these also impact your TDS/GDS due to the credit already available to you, which is taken into account for how much MORE a bank is willing to lend. These calculations are done as if you maxed all of your credit cards and lines even if they have sat at 0 since inception.

2) The typical rule of thumb is that you should not be buying a house unless you will be living in that home over the course of a minimum of 6 years. In short term, renting will always always always come out ahead if not equal to home ownership if you are investing properly and you are not spending the excess cash flow. Don't listen to the uninformed that say you are "throwing your money away" or "paying someone else mortgage". With aviation there are lots of physical moves and job changes early on. It is very expensive to buy and sell homes -- and I'm not talking about the mortgage, but more so the other things like legal fees, transfer taxes, moving expenses, and all other start up/transfer costs associated.

Your argument that you can afford the rent payment, so you can afford the mortgage payment is no where near the reality of home ownership. Making the minimum payment mentality gets you into a world of financial hurt. This is spending beyond your means. While you can meet the rent payments now, and you think you can meet the mortgage payments; Can you replace the roof in 5 years time for 10k? Can you replace the Air Conditioner for 2.5k at the end of July? How about the 4k furnace when it quits in January? How about the water heater for 1k when you wake up to a cold shower. When the sump pump doesn't kick in and your basement floods during the storm last night and you wake up to your entire lower level with belongings destroyed...I hope you paid extra for that coverage on your insurance! What I'm getting at is home ownership is not "meeting the payments". Owning a home comes with many other perk$.

3) Your pay is going to go up and down in the 10's of thousands for the foreseeable future until you find your final employer to hang your hat. Even then it will drop to 50k at year 1. Over the course of the last 10 years, my pay has fluctuated up and down 50k. Even though right now you might be thinking "well next year I'll be making 70k as a Captain, I can afford this." When you make another jump to progress your career you will be back down to 40k. It's very much 2 steps forward 1 step back every year or two in this industry. This is why cash is king above and beyond the rainy day fund to help you through the salary swings.

4) Establish yourself early on with a decent paying job and sit there until you have cleared all your debt, established an emergency fund, and saved up enough to cover 20% down on a home that is no more than 3X your gross.

5) Don't ever get a car loan and don't ever buy a new car. This has a direct impact on lending and is the biggest scam going in terms of flushing money down the toilet.

6) Stop spending money you don't have. Stop spending money on luxury you can't afford. A prime example if something you state yourself. You could get a place for $900, but you're spending an extra $300 on luxury. I really hope you have zero debt. If you have any debt (consumer, education, car) then anything and everything you buy you are effectively paying interest on because it is not your money! For example if you have a car loan between 3-6% and you buy a coffee....you are paying interest on that coffee because that money you bought it with is borrowed money and not your money because you are in DEBT!

These are things that helped me afford entering home ownership debt free, with a large down payment, a 6 month emergency fund, and a slush fund of cash on hand post mortgage. The bank looked at 23 year old me (at the time) as a guy with stable income, reasonable TDS/GDS, zero debt, cash in hand, and asking for a modest 3x my income. To put icing on the top I was actually on EI at the time of my application as I was a spray pilot in the off season when I bought my home.

There is no reason to race into debt other than "Keeping up with The Joneses".

Kudo's to you for asking questions! Dive into some material by Gail Vox Oxlade for very elementary but frank advice. Read material from Dave Ramsay. Pick up a David Chilton's book "The Wealthy Barber Returns". Read up on the Canadian Couch Potato. Do a bit of research before you make the single largest purchase of your life. As someone said up thread, don't trust advisers and Bankers advice. Unfortunately this is stuff you have to educate yourself on.

[laserstrike]

I'm not sure where you are at in terms of career or age, but I'm going to assume early and young.

I'll start with Rule Number 1 as everything else follows suit.

Rule Number 1: Pay yourself first. Take 10% of every pay cheque and put it towards retirement. All remaining money is fair game.

Now to follow suit. A couple points

1) You can't afford it. This is the reality. The bank see's this reality. Without looking at your numbers; your TDS/GDS proves you can't afford it because you are trying to bring on more debt with current debt/lines OR you are trying to bite off more than you can chew and you are looking to mortgage an amount you can not afford. The banks are in the business of making money. They want your money for the next 25 years...not for you to default. If you are too much of a risk, they will not invest in you. Think Dragon's Den with the company's that come in with the over the top valuations of their business...this is you.

(Assuming zero debt) The rule of thumb is typically a lender will allow for up to 30% of your GROSS income towards housing expenses (mortgage, taxes, insurance). So a quick and dirty way to see what mortgage amount you can afford is to go by 3X your income. You make 30k, so you can afford a 90k mortgage, so roughly a home valued at 108k with 20% down. Do not, in no way, make yourself house poor. By that, I mean every last cent goes into buying the house and every chunk of your pay cheque goes into paying for it and you have nothing left when the roof comes due (etc). Not only should you be putting down 20% to save yourself big money on CMHC fees, but you should also have 6 months of your salary set aside as an emergency fund for the rainy day when you lose your medical/the company goes under/you are layed off etc.

A line of credit or credit card is not an emergency fund by the way, and these also impact your TDS/GDS due to the credit already available to you, which is taken into account for how much MORE a bank is willing to lend. These calculations are done as if you maxed all of your credit cards and lines even if they have sat at 0 since inception.

2) The typical rule of thumb is that you should not be buying a house unless you will be living in that home over the course of a minimum of 6 years. In short term, renting will always always always come out ahead if not equal to home ownership if you are investing properly and you are not spending the excess cash flow. Don't listen to the uninformed that say you are "throwing your money away" or "paying someone else mortgage". With aviation there are lots of physical moves and job changes early on. It is very expensive to buy and sell homes -- and I'm not talking about the mortgage, but more so the other things like legal fees, transfer taxes, moving expenses, and all other start up/transfer costs associated.

Your argument that you can afford the rent payment, so you can afford the mortgage payment is no where near the reality of home ownership. Making the minimum payment mentality gets you into a world of financial hurt. This is spending beyond your means. While you can meet the rent payments now, and you think you can meet the mortgage payments; Can you replace the roof in 5 years time for 10k? Can you replace the Air Conditioner for 2.5k at the end of July? How about the 4k furnace when it quits in January? How about the water heater for 1k when you wake up to a cold shower. When the sump pump doesn't kick in and your basement floods during the storm last night and you wake up to your entire lower level with belongings destroyed...I hope you paid extra for that coverage on your insurance! What I'm getting at is home ownership is not "meeting the payments". Owning a home comes with many other perk$.

3) Your pay is going to go up and down in the 10's of thousands for the foreseeable future until you find your final employer to hang your hat. Even then it will drop to 50k at year 1. Over the course of the last 10 years, my pay has fluctuated up and down 50k. Even though right now you might be thinking "well next year I'll be making 70k as a Captain, I can afford this." When you make another jump to progress your career you will be back down to 40k. It's very much 2 steps forward 1 step back every year or two in this industry. This is why cash is king above and beyond the rainy day fund to help you through the salary swings.

4) Establish yourself early on with a decent paying job and sit there until you have cleared all your debt, established an emergency fund, and saved up enough to cover 20% down on a home that is no more than 3X your gross.

5) Don't ever get a car loan and don't ever buy a new car. This has a direct impact on lending and is the biggest scam going in terms of flushing money down the toilet.

6) Stop spending money you don't have. Stop spending money on luxury you can't afford. A prime example if something you state yourself. You could get a place for $900, but you're spending an extra $300 on luxury. I really hope you have zero debt. If you have any debt (consumer, education, car) then anything and everything you buy you are effectively paying interest on because it is not your money! For example if you have a car loan between 3-6% and you buy a coffee....you are paying interest on that coffee because that money you bought it with is borrowed money and not your money because you are in DEBT!

These are things that helped me afford entering home ownership debt free, with a large down payment, a 6 month emergency fund, and a slush fund of cash on hand post mortgage. The bank looked at 23 year old me (at the time) as a guy with stable income, reasonable TDS/GDS, zero debt, cash in hand, and asking for a modest 3x my income. To put icing on the top I was actually on EI at the time of my application as I was a spray pilot in the off season when I bought my home.

There is no reason to race into debt other than "Keeping up with The Joneses".

Kudo's to you for asking questions! Dive into some material by Gail Vox Oxlade for very elementary but frank advice. Read material from Dave Ramsay. Pick up a David Chilton's book "The Wealthy Barber Returns". Read up on the Canadian Couch Potato. Do a bit of research before you make the single largest purchase of your life. As someone said up thread, don't trust advisers and Bankers advice. Unfortunately this is stuff you have to educate yourself on.

You make some very very fantastic points.

[co-joe]

Take that pre diem and save it for the down payment. The bank doesn't see it as income until it's locked into an RSP or is at least cash on hand. You and your partner can each take 30k out of rsp's under 1st time home buyer program, then save another 20k and you'll have the 20% (80K) for a 400k home. Not needing cmhc insurance should really help you in terms of lending status.

[co-joe]

Take that pre diem and save it for the down payment. The bank doesn't see it as income until it's locked into an RSP or is at least cash on hand. You and your partner can each take 30k out of rsp's under 1st time home buyer program, then save another 20k and you'll have the 20% (80K) for a 400k home. Not needing cmhc insurance should really help you in terms of lending status.

If you suck at saving, look at rsp loans.

[DHC-1 Jockey]

Not to deal with mortgages, but a situation I had almost 10 years ago:

I was offered a job with a reputable Northern Ontario company flying Metro's. I needed to pay a $10,000 bond up front (which I didn't have in my account), so I was told to go to a bank and get a loan. So I go to the bank and ask for the money, and when they want to see my paperwork showing that I have a job (not the job offer contingent on getting the money), I explain that I need the money to "buy" the job. The bank laughed at this and said they wouldn't give me the money until I had a job, and the airline wouldn't give me a job until I had the money. Catch-22.

I ended having to get my wife to co-sign my loan application just so I could get the money to pay my bond. In essence, I couldn't "afford" to buy the job I wanted.

[Adam Oke]

Take that pre diem and save it for the down payment. The bank doesn't see it as income until it's locked into an RSP or is at least cash on hand. You and your partner can each take 30k out of rsp's under 1st time home buyer program, then save another 20k and you'll have the 20% (80K) for a 400k home. Not needing cmhc insurance should really help you in terms of lending status.

If you suck at saving, look at rsp loans.

I like the advice of saving your per diem. Back when I could not afford the luxury of eating at restaurants on the road because the company did not compensate me enough to afford such a luxury, I would pack my meals. My advice on top of that is to open up a HISA inside of a TFSA and use that as your down payment piggy bank as your work towards your goal.

The RRSP Home Buyers plan is 25k. I never recommend taking a loan out on your future self because you were fiscally irresponsible to the point that you did not save enough for a down payment. There are one of two reason for not being able to save money. Lack of Income or Excessive spending. Both of which you have control over.

Good on you if you have money in your retirement savings plan. This is for retirement. Leave it there. Don't borrow from your future self to pay for something you can't afford right now.

Not only that, but you have now effectively reduced the amount of expendable income because you have an additional loan to service along side your mortgage. People tend to use the HBP to buy a house that is outside of their scope of affordability.

The power of compound interest in a tax deferred account, in Donald Trump terms, is H'UGE! The very basics of investing 101 are the effects of early money and compound interest. Leave your retirement savings alone for retirement. This is why chasing money down the road isn't necessarily a good thing. It's not about how much you make when you are in your 60's, it's about how much you saved in your 20's and 30's.

A first home should be a modest home. Recommending a method to scrounge up cash for a 400k loan is poor advice to say the least. Even if his/her spouse is making double for a collective house hold income of 90k. We're talking almost a mortgage 4.5 times gross income. This is the definition of house poor. This era of instant gratification and meeting the payments is why the Country is in a world of hurt. Be modest. Don't spend beyond your means. Don't make yourself house poor.

[porcsord]

Adam has some good points, I'll play devils advocate here on a financial standpoint.

I bought when I was 27, on EI because of seasonal work, and bought at roughly 4x my gross.

When I did the math on "can I afford this", the major consideration was, after my 5 year term, if interests rates went to 10% could I still afford it, the answer was yes, barely, but yes. So for the first 4 years of that term, I had room mates, doubled down every payment and put large lump sums towards my mortgage. At my first renewal, I have paid down roughly 100k on principle which on a 230k mortgage I think was pretty substantial. With that being said it wasn't the my massive salary that allowed for that, it was having room mates and tenants.

None of my investments have generated nearly as much as my down payment + income from tenants. It would be foolish to rely on this, and I have since outgrown the desire to share my home, but financially buying a little outside that 3x comfort zone has worked out fantastically.

In OPs case, 30k +perdiems is not enough to be looking at a house. The more you make, the easier it is to afford more than the 3x, because things like food, gas, entertainment etc, take up a smaller percentage of your income. I was at about 60k a year seasonally, with the option to work outside aviation during the slow season which probably could have brought the income up another 20 or so. Over my career my annual salary has never decreased, but because of that I'll also never make 300k a year, I don't mind this, and have planned accordingly.

PC

[rookiepilot]

I'm not sure where you are at in terms of career or age, but I'm going to assume early and young.

I'll start with Rule Number 1 as everything else follows suit.

Rule Number 1: Pay yourself first. Take 10% of every pay cheque and put it towards retirement. All remaining money is fair game.

Now to follow suit. A couple points

1) You can't afford it. This is the reality. The bank see's this reality. Without looking at your numbers; your TDS/GDS proves you can't afford it because you are trying to bring on more debt with current debt/lines OR you are trying to bite off more than you can chew and you are looking to mortgage an amount you can not afford. The banks are in the business of making money. They want your money for the next 25 years...not for you to default. If you are too much of a risk, they will not invest in you. Think Dragon's Den with the company's that come in with the over the top valuations of their business...this is you.

(Assuming zero debt) The rule of thumb is typically a lender will allow for up to 30% of your GROSS income towards housing expenses (mortgage, taxes, insurance). So a quick and dirty way to see what mortgage amount you can afford is to go by 3X your income. You make 30k, so you can afford a 90k mortgage, so roughly a home valued at 108k with 20% down. Do not, in no way, make yourself house poor. By that, I mean every last cent goes into buying the house and every chunk of your pay cheque goes into paying for it and you have nothing left when the roof comes due (etc). Not only should you be putting down 20% to save yourself big money on CMHC fees, but you should also have 6 months of your salary set aside as an emergency fund for the rainy day when you lose your medical/the company goes under/you are layed off etc.

A line of credit or credit card is not an emergency fund by the way, and these also impact your TDS/GDS due to the credit already available to you, which is taken into account for how much MORE a bank is willing to lend. These calculations are done as if you maxed all of your credit cards and lines even if they have sat at 0 since inception.

2) The typical rule of thumb is that you should not be buying a house unless you will be living in that home over the course of a minimum of 6 years. In short term, renting will always always always come out ahead if not equal to home ownership if you are investing properly and you are not spending the excess cash flow. Don't listen to the uninformed that say you are "throwing your money away" or "paying someone else mortgage". With aviation there are lots of physical moves and job changes early on. It is very expensive to buy and sell homes -- and I'm not talking about the mortgage, but more so the other things like legal fees, transfer taxes, moving expenses, and all other start up/transfer costs associated.

Your argument that you can afford the rent payment, so you can afford the mortgage payment is no where near the reality of home ownership. Making the minimum payment mentality gets you into a world of financial hurt. This is spending beyond your means. While you can meet the rent payments now, and you think you can meet the mortgage payments; Can you replace the roof in 5 years time for 10k? Can you replace the Air Conditioner for 2.5k at the end of July? How about the 4k furnace when it quits in January? How about the water heater for 1k when you wake up to a cold shower. When the sump pump doesn't kick in and your basement floods during the storm last night and you wake up to your entire lower level with belongings destroyed...I hope you paid extra for that coverage on your insurance! What I'm getting at is home ownership is not "meeting the payments". Owning a home comes with many other perk$.

3) Your pay is going to go up and down in the 10's of thousands for the foreseeable future until you find your final employer to hang your hat. Even then it will drop to 50k at year 1. Over the course of the last 10 years, my pay has fluctuated up and down 50k. Even though right now you might be thinking "well next year I'll be making 70k as a Captain, I can afford this." When you make another jump to progress your career you will be back down to 40k. It's very much 2 steps forward 1 step back every year or two in this industry. This is why cash is king above and beyond the rainy day fund to help you through the salary swings.

4) Establish yourself early on with a decent paying job and sit there until you have cleared all your debt, established an emergency fund, and saved up enough to cover 20% down on a home that is no more than 3X your gross.

5) Don't ever get a car loan and don't ever buy a new car. This has a direct impact on lending and is the biggest scam going in terms of flushing money down the toilet.

6) Stop spending money you don't have. Stop spending money on luxury you can't afford. A prime example if something you state yourself. You could get a place for $900, but you're spending an extra $300 on luxury. I really hope you have zero debt. If you have any debt (consumer, education, car) then anything and everything you buy you are effectively paying interest on because it is not your money! For example if you have a car loan between 3-6% and you buy a coffee....you are paying interest on that coffee because that money you bought it with is borrowed money and not your money because you are in DEBT!

These are things that helped me afford entering home ownership debt free, with a large down payment, a 6 month emergency fund, and a slush fund of cash on hand post mortgage. The bank looked at 23 year old me (at the time) as a guy with stable income, reasonable TDS/GDS, zero debt, cash in hand, and asking for a modest 3x my income. To put icing on the top I was actually on EI at the time of my application as I was a spray pilot in the off season when I bought my home.

There is no reason to race into debt other than "Keeping up with The Joneses".

Kudo's to you for asking questions! Dive into some material by Gail Vox Oxlade for very elementary but frank advice. Read material from Dave Ramsay. Pick up a David Chilton's book "The Wealthy Barber Returns". Read up on the Canadian Couch Potato. Do a bit of research before you make the single largest purchase of your life. As someone said up thread, don't trust advisers and Bankers advice. Unfortunately this is stuff you have to educate yourself on.

You make some very very fantastic points.

Without advising specifically on the OP's situation, agree. Lots of wisdom!

Read, read read. Study, study, study, whatever you do. Whatever you invest in, buy the best quality you can afford