I regularly encounter clients that have no idea what the credit score or credit history is like. This is not a good thing. Even for the vast majority that probably have a very good credit score/rating.
Why?
Well, whenever you go to apply for loan (mortgage, car loan, credit cards, etc.) the credit grantor will undoubtedly pull a copy of your credit report. Do you want to be surprised? And believe me, some people are surprised that the late payment they made on a previous loan 2 or 3 years earlier is on there. If this happens you may be asked to provide an explanation and wouldn’t you want to be prepared?
Assuming you have always paid your bills on time, it is still important to review your credit report on a regular basis. I suggest at least once a year. This way if there are any errors, and they do happen, you can have it corrected early. Also, with identity fraud on the rise you can ensure that no accounts have been opened using your info and turning you into a victim.
There are two main credit gathering agencies in Canada. Both Equifax and Transunion will provide you a copy of your own credit bureau upon request. In fact, you can order a copy online for a small fee.
I encourage you to know your credit score and history. It is an important part of your financial picture.
This is likely a great time to debate this subject as more and more lenders and brokers are competing for the borrowers business. Everyone is offering some amazing rates on fixed 5 year mortgages, however some lenders are trying to offer slightly better deals, but are they really better? for example Is it more important to take a mortgage with full, or better pre-payment options and pay a slightly higher rate or just take the lower rate and be more restricted in your pre-payments?
This question in best answered with the borrowers own thoughts of whats important to them in a mortgage. for example in my opinion the “BEST” mortgage is one that is paid off!
Considering this, pre-payment options are very important in helping doing this. Let’s say that you can get a .10% lower rate (3.69%) with one lender but you are then limited to only paying down 10% of your original mortgage balance ONCE per year. Another lender is offering a slightly higher rate (3.79%) but you have the option of paying down 20% of the original mortgage balance, as many times as you wish, as long as the payments are a minimum of $100.00 and are on a payment date. That extra 10%, if the clients have it and the ability to pay down the mortgage in multiple payment would easily make up for the .10% difference in the rate.
Let’s consider another option, let’s say the lower rate lender only allows a 10% increase in payment and the higher rate lender offers a 25% increase in payments. If the clients took a longer amortization to allow them a little more flexibility and comfort level but later down the road realized that they wanted to increase their payments to reflect a shorter amortization, more towards the 25 year mark…. The lower interest lender while only allowing a 10% increase in payments would only reflect a 6 year reduction in amortization, thus allowing an original amortization of 35 years to decrease to 29 years.
The higher rate lender, offering 25% increase in payment options allows the original amortization to be reduced from 35 years to just over 23 years. This is close to 12 years of interest savings, 6 more years than the lower rate lender. How quickly do you think you could make up for the .10% difference in the rate over 5 years?????
Simple interest calculations show that on a 200K mortgage with a .10% difference is equal to $200 a year, and $1000.00 over 5 years. However, I believe that having the ability to pay down your mortgage faster, and the ability to save years and years of interest by increasing your payment is more important..
Remember when taking out your next mortgage to think about more than just the rate.
Your thoughts are appreciated and I look forward to hearing from you.
The Royal Bank, TD Bank & CIBC all dropped rates again today. In fact the Royal Bank lowered rates over the weekend without much fanfare. This has been a common practice lately with them. The 5 year posted fixed rate is now at 5.39% at the three banks and others will follow undoubtedly. We have now seen a drop of 40 bps in the last month on the 5 year fixed rate term.
And based on the yields on the 5 year bond we may see further decreases as there is room so stay tuned.
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Official Transcript
Hi everyone. How are you! It is Leah Coss with the Mortgage Centre. Another credit myth for you. If you have a good credit score, that doesn’t necessarily mean you can get a mortgage. Many of you have great credit scores out there. But it doesn’t mean that a bank wants to invest their money with you, reason being is the credit score is just basically a mathematical algorithm that the Credit Bureau has come up with.
And what it said is based on the credit that you do have and how long you’ve had that credit for, you have been making the payments on time and you are doing fine, therefore your credit score is good. But if your credit history only goes back six months, one year, a year and a half, that’s not long enough for most banks or lenders. And they want a minimum of two years history. So that’s the first thing.
The second thing is if you only have one credit line meaning one credit card or one line of credit or one car loan, or one student loan and just that, that’s not overly impressing the banks. They want to see multiple lines on there to show that you can in fact handle it. They also want to make sure that if you have a credit card for example, and you only have one or two, you [inaudible] over $500. To say that you can manage $500 dollars is again not overly impressing a bank who is about to lend you hundreds of thousands of dollars.
So if you have a good credit score and you have been declined, that’s probably the reason. But the good news is it is just time that you need to heal that. And when it comes to the five things that banks look at for buying a home, which you can check out in my other videos, they only want one weakness of those five. So if your credit score is good but your history is shallow, that one weakness can be overcome if the rest of your application is strong.
So there is potentially hope that you can still get approved now. Just give me a call and we can work through your applications, see what options you have. But there you go. If you have any other questions feel welcome to give me a call. Leah Cox with the Mortgage Center. Hopefully I will be talking to you soon.
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Official Transcript
Hi everyone. How are you? Leah Coss with the Mortgage Centre. Don’t mind the Bluetooth. I know that some of you are commenting that in my videos when I am driving I’ve got the Bluetooth which is a little pretentious and obnoxious. But I am driving, I am just following the rules as set out. And in between doing videos I am often talking on my phone. So that’s why it is on there.
I wanted to do a myth about bankruptcy. And there is a huge misconception that if you have a bankruptcy that it is seven years of bad luck and that you can’t buy anything or do anything. It’s actually not the case. Yes the bankruptcy will stay on your Credit Bureau for seven years. But it doesn’t mean you can’t buy a house for seven years, or you can’t get a car or a line of credit or even a credit card for seven years.
There are times where from the moment that you have been discharged it only takes you about anywhere from two years to three years to get your credit back in line to where you have purchasing power again. Now if you get two bankruptcies, now we are really in an uphill battle and we are probably going to have look at things like private lending, or B lending. You are not going to be getting the best rates. So try not to do a bankruptcy twice.
But if you have one bankruptcy, it is not the end of the world. We can do two things. One, if you want to get into a home today, what we do is we put you in a lease to own home. We give you a 2 3 year lease, enough time for you to get your credit back on track when you set out and actually do the steps that I set out for you, of a, b and c to get your credit where it needs to be, so that at the end of your lease you can in fact purchase.
Or if you are willing to wait, you don’t have to be in a home of your own right now, then simply again, I set out those steps we coach your credit back up to where it needs to be to purchase. And after two years, three years sometimes, you are back and good to go. Check out my other videos because I actually go through the steps of what you need to do to get yourself from bankruptcy to purchasing power again.
So check those out. But if you have any questions feel welcome to give me a call. Always happy to help. But just really wanted to bust that myth, it is not seven years of back luck. You can in fact buy a home after only a couple of years. So any questions, give me a call. Leah Coss with the Mortgage Centre.
I am not an insurance agent. However, there are some things I have learned through the years about Mortgage Life Insurance that I thought I would share with you.
Whenever you take out a mortgage you have been or will be offered Mortgage Life Insurance. This is not to be confused with the mortgage insurance that is offered by CMHC, Genworth or Canada Guaranty and is required if you have less than 20% equity in your property. I am referring to insurance that will cover the mortgage in case you die.
Many do not give too much thought about life insurance. Why would you? You are moving into a new home, maybe the first one you have ever owned, it would be the last thing you think about. And the cost….
Well, it is my opinion that you should! Have you ever considered what will happen if something happened to you (death)? Will your family still be able to afford the mortgage payments? Will the kids still have a roof over their heads?
Mortgage Life Insurance coverage would take care of those questions. It would pay out the outstanding balance on your mortgage thus allowing a clear title home to be left behind for your family. They would be taken care of.
What if you are single? Have no dependents? If you are the rare individual that will always have no dependents or anyone you want to leave the property to…then yes, forget about coverage.
Not all Mortgage Life Insurance policies are the same!
Your mortgage broker and the lender will be offering you coverage when signing for the mortgage. These types of policies are easy to get (just sign) and are generally group policies. For those that are too busy and just want coverage this is an easy way to go.
However, I would suggest that you find an independent life insurance agent to provide you with the coverage. Why?
Well, to start they can give you quotes from many different companies. They shop around for you and can probably get you a better deal. Secondly, insurance policies from the lenders only cover you as long as you are a mortgage client. What happens if you transfer the mortgage in the future? The coverage ceases and you will have to buy a new policy. As age is a big determining factor and we all get older, it may cost you more. A policy that is independent of where you bank, work, etc. will provide you with long term coverage without the worry about it ever terminating due to life changes or decisions.
Regardless of where you decide to get your mortgage life insurance coverage, just get yourself covered! I have experienced instances that it sure came in handy for the surviving family and the kids.
While you are looking at coverage maybe check into disability insurance as well. That will be a topic for another day.
Contrary to popular opinion, a recession is actually the BEST time to invest in revenue properties. Why? Regardless of market conditions people always need a place to live, and with today’s lower prices and near historical low interest rates, you’ve got the perfect money-making opportunity!
The first thing to keep in mind is that real estate in a recession is a long-term investment, as opposed to the short-term “flipping” of boom times. Plan on keeping the property for 2-5 years and watching its value grow steadily. Be sure it is in an area where people want to live and accessible to amenities like schools, shops and transit. Don’t buy the most expensive home on a modest street; instead buy a modest home on an expensive street. This will make your property more desirable to a greater number of tenants, thus, they’ll be willing pay higher rents and you’re more likely to have positive cash flow after expenses.
The key to a successful revenue property investment is making sure the numbers work. As your mortgage advisor, I can provide no-charge advice and assistance. I may be able to access the equity in your current home and/or arrange affordable financing through my stable of specialized lenders. By keeping your interest costs and payments low, we can help ensure that your rent will cover the mortgage. Talk to me today and develop your property investment plan.
Unfortunately, statistics indicate that couples end up divorcing or separating in about 50% of relationships in current times. I have worked with couples where the split was amicable and also with ones that were…quite antagonistic. Obviously I am not a relationship counsellor but get involved when one of the party wants to purchase the home they are living in from the other person. Or one or both come to me in order to figure out the financing on a new purchase.
In terms of mortgage financing, the most important thing to have is a legal separation or divorce agreement that outlines all the financial obligations and split of the assets. Most major lenders will want a copy of this. Why?
Well, until the finances are settled it really is hard to determine where your downpayment will be coming from and whether you will still have “debts” outstanding when the relationship is over.
Will there be support payments that one person has to pay to the other? Are there any credit card, car loans, etc that will still be owed? If there is we will have to take that into consideration as a debt.
Who is getting what and how much? This will determine what you will have for a downpayment. Or if one is buying out the interest in the current property, what is the value that is agreed on? What is the split? This will determine what size of a mortgage is needed.
Obviously, there are usually a lot more things to agree on other than financial in a situation such as this. However, from a mortgage financing point of view the division of assets and financial obligations is the key.
If you require assistance or have a comment please contact me.
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Hi, everyone. How are you? It’s Leah Coss with The Mortgage Centre, and I wanted to talk about different real estate investment strategies, I guess you can call it. Now, there’s many, many, many out there, and by no means is this the whole list. But I wanted to talk about the three main ones, especially one that’s really becoming quite trendy right now, to help you to understand the difference between them in the general sense, as well as what you can do to follow up to get more information about it.
So obviously, we’ve got our traditional buy and hold. And what buy and hold is is where you’re buying an additional home, one that you do not live in and you’re renting it out. So you’re buying it, and you’re holding it.
Where you’re making income is, hopefully, the rental payments covering the mortgage payments, which is then having that little bit of principle every month that gets packed away into equity that you then get to have. So someone else is essentially paying the mortgage for you.
Now, how is this a good or a bad investment? Well, there’s things you need to account for. One: Does the rental payment cover not just the mortgage payment, but things like the heat and other things that come into equation, maintenance on the home as well as yearly property taxes. If it’s not covering those things, this is costing you money as an investment standpoint. So that’s something important to remember.
The other thing is what about when it comes time to renew the mortgage on that home? What if rates are different? What if rates have gone up by two or three percent? Which, these days, it seems very likely. If that’s the case, now your mortgage payments are higher and, again, will the rental payments cover that?
Now, if you’re OK with taking a loss and you’re just simply in it for kind of like having that additional savings account where it’s just putting the money away for you in the equity, then great.
But if you’re looking at this where you’re actually wanting to get a return back every year, you need to account for potential increases in your payments and evaluate if the market does fluctuate in rental income, or maybe you can’t charge as much. You need to make sure that you’re still at least breaking even and, hopefully, profiting.
Now, what else is there out there? Well, obviously, there’s the buy and flip was really big all the last five years or so, but it’s really a dying trade. Why? Because house prices are not making the same jump anymore. I’m sure it will come back on the scene, especially with prices being so low in the states right now.
People can start gathering them up at less than $100,000 purchase prices, and then hopefully be able to flip them later on. But not the best time to be doing it at this exact point in time, being 2010.
So what buying and flipping is is where you’re buying a house; hopefully, for below market value for whatever reason. You’re fixing it up by either staging it nice, doing full renovations, additions; things of that nature, and then selling again. And you’re hopefully doing this within a couple of months because what you’re doing is you’re basically buying it, output of money for the down payment, paying the monthly mortgage payments.
So again, the shorter time line, the better. But again, outputting. Then you’re paying money for laborers. If you’re not a contractor yourself, you’re putting money out for fixtures, all those finishing touches, new flooring or whatever it is you’re doing to renovate the home, make it more appealing, and then selling it.
And if you’re not using a Realtor, well then I hope you know what you’re doing because that’s also an output of money.
So there’s a lot of money up front and you cross your fingers you’re going to see it in the end. Very risky, but very profitable if you know what you’re doing and when to do it, which is key. So that’s the other one.
Now, the other strategy is actually becoming very trendy right now, and it’s an alternative to the buy and hold. So buy and hold being the rental property. What this is is buy, and then lease it out.
And in some situations, you’re not even buying until you find someone who wants to buy the house, or eventually buy it but they can’t afford it right now due to perhaps not enough down payment, bad credit, new immigrant, self employed or something of this nature. For whatever reason, they cannot get approved today. But in two years from now, three years from now, they will be able to be approved.
And before you determine that yourself, get a mortgage broker like me or something to evaluate these tenant buyers to ensure that they can, in fact, afford this house someday.
But what it basically is is it’s just like leasing to own a car, except you’re doing it with a home. But you’re the investor who’s buying the home, and then someone is leasing from you. So what they’re having to do is put a lump sum up front, so you’re getting cash flow right away. Then they’re paying market rent, which is giving you cash flow. And they’re paying a bit above market rent, which is then going towards credit to help them with their down payment later.
So basically, you’re getting money up front, and you’re getting cash flow all the way along, and then you’re getting someone to buy the house at the end of it all for a pre agreed upon price, although not all of you do that out there and you should do a pre agreed upon price just so safeguard both of you. But again, that’s a whole other blog post.
But this is becoming the new trend. Now, why is this good or bad? Well, obviously, it’s risky. What if they don’t buy it? You want to make sure you can afford it on your own if, for whatever reason, the tenant buyer just happens to leave and dumps their down payment, says, “You know what? After all, I don’t want this, ” and they walk away. You want to make sure you can afford it.
But some good things is that you’re getting someone who is not a renter, so they’re going to take care of the home because they’re treating it like their own. They might even do renovations or upgrades to it. You are getting cash flow, and you’re getting someone who’s going to be buying it at the end of it all.
If they do happen to walk away, well, at least you still have the asset. You have their down payment. They’re above market rent that they’re paying each month, up until the point they walk away. And you have the opportunity where you can either rent it, find another tenant buyer to lease it or you can sell it.
I am really getting warm to it and liking this strategy the most right now only because it seems the safest in terms of investment, safest in terms of dealing with people who are renting from you. In this case, they’re leasing. And it’s giving you many outs. It’s not a strategy where you’re putting a lot of money up front like flipping, and you’re not dealing with, potentially, people who can hurt your asset like renters could.
But these are all three different strategies, very different goals and objectives with each of them. Not all of them will be a strategy that works for you.
But if you want to hear more, especially about the lease to own, actually there are seminars that I know of that are happening once a month that you can go see. If you’re looking to be a flipper, let me know. I can put you in contact with a mentor. The same with renters. If you’re wanting to have renters, give me a call. I can help you out with the financing for all of the above.
So, hopefully, I’ll be talking to you soon. Good luck. Don’t make any hasty decisions, and don’t just start purchasing houses for the sake of purchasing. Make sure you have an ultimate strategy in mind. I’ll be talking to you later.
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Official Transcript
Hi, everyone! How are you? It’s Leah Coss with The Mortgage Centre, and I wanted to talk about being a cosigner, because I do get questions about this all the time. It’s also called being a guarantor, and it’s typically done on big items like on a car if you’re trying to get a lease on a car or car payments to own it. It’s also done on mortgages. Where this is useful is, if you can’t qualify for a mortgage on your own, you have someone who could help you to qualify. Because they’ve got good credit, good income, stuff like that. Then they come onto the mortgage as well, and it helps to boost your application so that you can get it approved. Typically done for students or young people, first time home buyers. Maybe they want their parents to cosign for them.
Now, I want to direct this video, specifically, to the people who are being the cosigners or guarantors, and answer the quick question of, “How am I liable? Where can this get me into trouble?”
Well, with cosigning, if you’re trying to get a mortgage yourself later on or renew your home, or refinance your home that you currently have… If your bank that you’re going to to get your new funds from knows that you’re a cosigner, they will want you to debt service this.
What that means is, they want to know, “Can you qualify for both mortgages on your own?” It doesn’t matter that there’s someone else on the mortgage as well. They want you to qualify for both mortgages because they don’t have control of that other mortgage.
So, say that person that is actually on title of the home who you’ve cosigned for. If they all of a sudden get rid of it or they go into default, and you’re having to make payments or the bank starts coming after you, they want to make sure that you can handle it. So, it can make qualifying on your own later on down the road difficult if the bank knows that you’ve been a cosigner.
The other way that it’s making you liable is, in a situation where the person who you’ve cosigned for has defaulted and they’re going into foreclosure… If, at the end of it all, the house gets sold, debts gets paid, but there’s still some debt left over that isn’t being accounted for, the bank will come after you.
Now technically, they’ll come after you and the other person who is on the mortgage with you, the person that you were cosigning for. The problem is is chances are, if that person couldn’t qualify for a mortgage on their own, it’s probably because they don’t have any assets or money to come after. So, you’re next in line and they’re going to come after you for the whole shebang.
So, if you cosign, be careful of who you cosign for. Make sure that they’re good for it and be prepared. If nothing happens, if they pay their bills every month with no problem, you’ll never even think about being a cosigner. It will never come up. But the day that they miss payments and the day they start to default on their loan and the day they go into foreclosure, you will definitely be hearing about it.
So, if you have any questions about this or anything else along mortgages, give me a call. Leah Coss with The Mortgage Centre. I’m always happy to help. My contact info is somewhere on this site for you, and hopefully I’ll be talking to you soon.
I regularly encounter clients that have no idea what the credit score or credit history is like. This is not a good thing. Even for the vast majority that probably have a very good credit score/rating.
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