11/06/2025
How cars, boats, snowmobiles and other things may impact your mortgage
Scan the internet and social media and you won’t find a shortage of mortgage brokers sharing stories of what not to do when buying a home, or how a $1,500 truck payment can derail your mortgage plans.
Even if you feel confident you can afford both your current expenses and a new mortgage payment, especially if it’s close to what you’re already paying in rent, lenders see things differently.
When it comes to qualifying for a mortgage, lenders look beyond your income, down payment, and current housing costs. They’ll also consider all your monthly debts, such as car loans, student loans, personal loans, credit cards and lines of credit, to ensure you can comfortably handle a mortgage on top of everything else.
Here’s how those non-mortgage expenses can
affect what you qualify for.
Why your debt matters
Every lender uses what’s called a “debt-service ratio” to calculate affordability. This compares your monthly debt payments to your gross income. If too much of your income is already going toward other loans, there’s less left to cover mortgage payments, and that can reduce the size of the mortgage you qualify for.
Car loans and leases
Car payments are one of the most common affordability limiters. A $600 monthly car payment can have a surprisingly large impact, roughly equivalent to $100,000 less mortgage qualification in many cases. If you’re close to buying, it’s worth discussing options to reduce or consolidate this debt first.
Student loans
Even if you’ve deferred your student loans, lenders often include a notional payment in their calculation, typically around 1% of the outstanding balance per month. For example, a $25,000 student loan could add $250 to your monthly debt load, reducing your borrowing power by tens of thousands of dollars.
Credit cards and lines of credit
Even if you don’t carry a large balance, lenders use a minimum payment amount (often 3% of the limit for credit cards or the actual payment amount for lines of credit). For example, a lender will require that a $600 payment is factored in for a $20,000 credit card balance, even if your minimum payment required on your statement is much less.
Paying down balances can make a noticeable difference, but think twice before closing your oldest zero balance credit accounts. Those long-standing accounts help show your credit history and can contribute to a stronger score.
How to strengthen your affordability
Pay down balances: Reducing your revolving debt lowers your overall monthly obligations and can improve your credit score.
Avoid new loans: Taking on a new car or personal loan before applying for a mortgage can hurt your approval.
Consolidate: If you’re carrying significant debt, an amortizing consolidation loan can reduce your payments and improve your credit.
Talk to your broker early: A quick affordability check can show how much of a difference paying off or consolidating certain debts can make.
I can walk you through different scenarios; what happens if you pay off that car loan or consolidate credit cards, so you can see how each move affects your approval range. Sometimes small adjustments can make a big difference.
If you’re planning to buy or refinance soon, I’d be happy to help you review your current debts and get you the most suitable mortgage for your situation.
Let’s connect for a quick chat about your goals and what’s possible for you right now and build a plan that achieves your goals.
