Theresa’s Soap Box – Establishing a Good Credit History

Why is it important to establish a good credit history?
- Obvious answer is to get mortgages, car loans, or any types of loans
- Some people may not know that if you don’t have good credit, it can deter you from getting things like:

• Cell phone contracts
• A lease on an apartment
• Or even a job

If you don’t have credit history, lenders will not know if you can pay your debt on time.
- No credit history does not equal good credit!

Having good credit history can even help you get lower rates on your loans.

So, how do you build a good credit history?

1) First thing to do is to check your credit and find out what your score is

2) Secondly, make sure you have a savings account under your name

3) If you do not have a credit card, apply for one, and if you can’t get one under your name, try to get a supplementary card.

a. If you can’t get a regular bank credit card, try getting store or retailer cards.

i. Some of these stores allow you to buy an item such as a tv and only pay $30/month for 24 months to pay it off with no interest.

4) Pay your bills on time, don’t max out on your credit cards or get close to max.

a. Try to use less than 30% of your credit limit.
b. Try to pay off your balance if possible.

5) To get a good credit score, you need a mix of different credits. In addition to credit cards, you can get installment loans such as small personal loans or car loans.

a. The key is to keep the loan periods short, no more than 1 to 2 years, so you’re not paying too much interest.
b. And also it doesn’t deter you from getting other loans because your debt ratio is too high.

6) Keep in mind not to go too crazy in applying for credit as too many inquiries on your credit can scare off lenders as well.

Last resort: If you cannot get a loan on your own, see if you can get someone like your parent to co-sign for you.

If you have any questions on refinancing, feel free to call us at 1-866-521-9557 or email at mortgage@suttonmember.com.

Theresa’s Soap Box – Mortgages & Student Loans

Let’s take a few minutes to talk about refinancing…

The obvious reasons to refinance are to get a lower interest rate or consolidate your debt.  However, we want to spend a few minutes today to talk about refinancing your mortgage to help pay for your kid’s post secondary education.

On average, it costs up to $80,000 to complete an undergraduate degree in Canada. This is a large sum of money if you do not have an RESP set up or some kinds of savings put aside.

One solution would be to use the equity you have built up in your home.

The benefit of refinancing is:

• Lower interest rate – The average student loan interest rate is at prime + 2.5%, making it 5.25% right now, while you can get mortgage rates under 4% for a 5-year fixed/closed mortgage.

Think about this tidbit of info – it’s called the “rule of 10″

• For every $10K in student loans, your child should earn about $10K over a base of $10K annually in order to pay off the loan 10 years

• For example:
  • If your child took out a $80K loan, he or she would have to earn $80K on top of the $10K base, making that $90K annually to pay off the loan in 10 years

Most people don’t make this kind of money right after graduation, so it would take your kids a long time to pay off this debt.

If you can help your kids pay for this education, it will help with reducing the financial burden later on in their lives.

If you have any questions on refinancing, feel free to call us at 1-866-521-9557 or email at mortgage@suttonmember.com.

Theresa’s Soap Box – Check Your Credit Without Affecting Your Credit Score

There are 2 major credit reporting agencies in Canada: Equifax and Transunion. Usually you would have to pay to check your credit score, and when you check it through a bank/mortgage broker or apply for a credit card, there is a record of this check. If you do many credit checks over time, this will eventually lower your credit score.

However, you can call Equifax and get them to mail you a free copy of your credit report once a year, without hurting your credit score. This report does not show your actual credit score, but it will show you all the items and who has been checking your file. You can go through these items and make sure they are accurate and there are no fraudulent activities on your credit file.

Remember to keep a good handle on your credit file so the next time you apply for any credit, your score should be good and well-maintained.

Equifax’s phone number is 1-800-465-7166. Feel free to give us a call at 1-866-521-9557 if you have any questions.

Theresa’s Soap Box – 4 Different Types of Insurance for Your Home

1. Home insurance
2. CMHC
3. Title insurance
4. Mortgage life insurance/creditor insurance

Home Insurance

If you have a mortgage, the lender/bank would usually require you to buy home insurance

• Because the mortgage is secured to the home and if something happens to your home (eg. fire), the lenders want to ensure that they will be able to get their money back
• With home insurance, you are insuring your physical home and contents in the home

CMHC

CMHC mortgage loan insurance is required when you put less than 20% downpayment on your property and is backed by the government.

• Sometimes this insurance is also provided by Genworth
• This insurance helps protect  the lenders (not you) in case you default on your mortgage

Title Insurance

This type of insurance is very different from the typical insurance that you are used to.  It protects your deed or claim to the property, therefore allowing you to be able to use or sell the property.

• Prevents fraud against your deed
• Mandatory in most provinces and with most lenders

Mortgage Life/Disability Insurance

This is like any other life or disability insurance, except that it just covers your mortgage if something were to happen to you and you are unable to make the mortgage payments.

• Optional but when you are signing your mortgage documents, you have to either accept or waive
• Consider getting this insurance if you have dependents because if something happens to you, the mortgage payments would be covered

If you have any questions or comments, feel free to call us at 1-866-521-9557 or mortgage@suttonmember.com.

Theresa’s Soap Box – 3 Things that Affect Your Credit Score

1)      Approaching or surpassing your credit limit on credit cards

• For example you have a $5,000 limit on your credit, don’t go over 75% of that limit. Keep it under $4,000.  If you approach your limit, the bank will think that you are not able to manage your money as you have to use all the money that is available to you.
• If you go over your credit limit, even by $1 or $2, it will make a huge impact on your credit score.

2)      Missing payments on credit cards or other bills

• Even if you don’t have enough money to pay off the entire amount owed, always make the minimum payment on time or earlier.
• Don’t wait until you’ve collected all the money to pay the entire amount, as you will have already been registered as delinquent on your credit file. Risk paying some interest instead of missing or being late on the payment, instead of lowering your credit score.

3)      Car loans or lines of credits balances

• Car loans are pretty terrible, as the average car loan payment is $600 – $700 per month. And when you think about a mortgage payment for a $250,000 house, it is only around $1,000 a month.  What the banks and lenders do is take the $700 car loan payment into consideration that cannot go towards your mortgage anymore.  You have just lost $200,000 in buying power for your mortgage. Typically, a car loan is also set up for 5 years, so keep your payments low and get rid of those payments earlier if possible.

So, if you are about to get a mortgage, think about keeping your payments low, consolidating your debts, or try to get other payments out of the way before embarking on new mortgage debts.

If you have any questions, feel free to contact Theresa Shaw at 1-866-521-9557.

Before buying a home, many of us would like to know how much we can afford or borrow. So what we do is go off to a bank/mortgage broker/lender to get more mortgage information. Now armed with a whole bunch of info and the amount of money the lender will loan, you run off and call your realtor to look for your dream home…

But, wait a minute…did you get pre-qualified or pre-approved by the lender?  What’s the difference you ask and why is it important?  Most people think of pre-qualifications and pre-approvals as the same thing, but they are not. The biggest difference is the verification process.

With a pre-qualification, the lender is giving you an idea of the mortgage amount for which you qualify. It does not include any verification of your income, credit rating, or financial situation. This step is for you to discuss your needs and wants with your lender. The lender is not required to loan you money based on a pre-qualification, it just establishes how much money you MAY be able to borrow.

A pre-approval is more in-depth and requires you to fill out a mortgage application.  The lender will require documentation that proves your income, etc. They will also pull your credit report to analyze your financial situation. If you are approved for the mortgage amount, you can shop for a house with more certainty that this is the price you can afford.

Beware though at the end of the day, to be sure that you are going to get the mortgage loan, you will need to get a loan commitment from the lender.  This is only issued after you have already picked a home and have agreed to the sale price.  A commitment letter is only provided when the lender is certain it will lend. Neither a pre-qualification nor a pre-approval will guarantee that you get a mortgage.

If you have any questions, please feel free to contact one of our qualified Mortgage Coordinator at 1-866-521-9557.

Key lending rates have changed – the first increase since July 2007.

Stats Canada has released their first quarter report and the economy is hot as its findings say.  Real GDP has grown 6.1%, the biggest increase in a decade. Residential investment continued to increase for the fourth quarter in a row.

In an effort to slow inflation, Bloomberg has surveyed and 25 of 27 economists say the Bank of Canada will raise the lending rate by a quarter percent.  The markets (predicted by the Overnight Index Swap) are slightly less sure at 70-80% chance of a rate boost.

Read more…

It’s not a surprise to anyone that mortgage rates are a reflection of bank of Canada’s rates; but one universal principle dictates if those rates increase or decrease.  Let’s take a refresher course in Economics 101; rates fluctuate based on the basic theory of supply and demand.  As home sales increase, rates tend to also increase and the opposite can be said if sales decrease.  Although this is a reliable model, there are TONS of other factors that can influence your mortgage rates moving it up and down, forwards and backwards, leaving you a little dizzy and a lot more nauseous, much like a monster rollercoaster ride!

Let us try to make a little sense for you amidst all this turbulent chaos.  Lower mortgage rates means that as a homebuyer you have the ability to buy something that cost a little bit more, awesome right?  Well not quite, this also means that the market switches to a seller’s market, hence the costs of homes can sky rocket as a result this will reduce the benefits of your low mortgage rate.  As home prices increase mortgage rates generally follow suit.  So as you can see waiting and timing to jump into a mortgage can be a vicious cycle!

When you purchase a home the big question is always asked: Fixed or Variable mortgage.  Simply put fixed mortgage rates on average are higher than variable rates, but keep in mind variable rates do not stay constant, so even if you lock in a low variable mortgage rate there is no guarantee that this rate will stay the same.

If you’re not yet ready to have a spin on the rollercoaster there are ways in which you can prepare yourself for the sometimes less than enjoyable ride. Understand that the key to a obtaining a good mortgage is to have a stable income as well as outstanding credit.  With this preparation when you are ready to plunge into a mortgage you will have the best economic condition achievable!

It’s hard for anyone to predict when and how mortgage rates are going to change, if you want to guarantee yourself a little security and take a break from the mortgage rollercoaster for a little while you catch your breath, lock into a fixed mortgage.  If you’re one for an exciting ride cautiously take a variable rate!  No matter what you choose and when you decide to commit to a mortgage it’s important to keep in mind that you should always spend less than you are really eligible for and have some cash reserve in your savings account in the case you do begin to fall off the mortgage rollercoaster!