Flexible Down Payment Options

A common reason many renters feel they can’t afford to purchase a home has to do with saving for a down payment. With so many expenses, it’s hard put money aside monthly. But there are many solutions available today that can help first-time buyers with their down payments.

Many lenders will allow for a gifted or borrowed down payment. Better yet, there are programs available from some financial institutions where they will offer a “free down payment” or a “flex down”. Of course, you will end up paying about 1% more in your interest rate, but the program will help you get in the homeownership door and start accumulating equity earlier. The only catch, however, is that you must remain with the original lender for the full initial five-year term or else you’ll have to pay the down payment back.

Under the RRSP Home Buyers’ Plan, first-time homebuyers can withdraw up to $25,000 from their RRSPs for a down payment – tax- and interest-free. And if there’s a couple making a home purchase together, they can each withdraw up to $25,000 from their RRSPs.

So, for those renters who are struggling to save up a down payment, choosing to talk to a mortgage broker  about downpayment options, can possibly get them into their own home faster.

Importance of getting a Mortgage Pre-Approval

Getting pre-approved for a mortgage is something every potential home buyer should do before going shopping for a new home. A pre-approval will determine what dollar figure to work with and guarantees a rate hold while you are house hunting.

In order to get pre-approved for a mortgage, a mortgage professional requires a short list of information that will allow them to assess your financial situation, and let you know what you can spend.

Licensed mortgage professionals can lock-in an interest rate for you for anywhere from 60 – 120 days while you shop for your perfect home. By locking in an interest rate, you are guaranteed to get a mortgage for at least that rate or better. If interest rates drop, your locked-in rate will drop as well. However, if the interest rates go up, your locked-in interest rate will not, ensuring you get the best rate throughout the buying process.

Beware of Title Fraud

Sadly, the only red flag for title fraud occurs when your mortgage mysteriously goes into default and the lender begins foreclosure proceedings. Even worse, as the homeowner, you are the one hurt by title fraud, rather than the lender. Title fraud essentially is a form of identity theft.

Here’s what happens with title fraud: A criminal – using false identification to pose as you – registers forged documents transferring your property to his/her name, then registers a forced discharge of your existing mortgage and gets a new mortgage against your property. Then the fraudster makes off with the new home loan money without making mortgage payments. The bank thinks you are the one defaulting – and your economic downfall begins.

Following are ways you can protect yourself from title fraud:

• Consider the purchase of title insurance
• Periodically, go to a registry office and request a land title search

In an era where identity fraud is becoming more rampant, homeowners need to be more pro-active in protecting themselves from a whirlwind of financial trouble.  

Understanding Your Credit Report

As credit has become more and more abundant in our society, your credit report, and thus your credit rating, has become more important in your daily life. Your credit rating affects all aspects of your financial activities when it comes to borrowing money. Your credit rating also has the ability to affect the job you get, the apartment you rent, and even the ability to open a bank account.

Your credit report itself is simply a listing of all of your consumer debt. Here in Canada, the two main credit reporting agencies are Trans Union and Equifax. Both agencies have a credit history file on anyone who has ever borrowed money. Every time you borrow money, or make a payment on a loan or credit card, the lender then reports the information about the transaction to these two agencies. In addition to credit information, you will also find liens and judgments on your credit report as well as your address and possibly your work history. The accumulation of all of this information is called your credit report.

The information on your credit report varies based on your creditors and what they have reported about you. Potential lenders and others, such as employers, view your credit history as a reflection of your character. Whether we like it or not, our financial habits have a lot to say about the way in which we choose to live our lives.

The credit score, or beacon score, is a number which gives mortgage lenders an idea of your lending risk.

Credit scores range from 300 to 900, the higher your credit score the better. The mortgage products and interest rate that you will qualify for are often determined by your credit score.

One thing that many people do not know is that you have the legal right to obtain a copy of your credit report. A mortgage professional can help you obtain a copy of this report and go through it with you to verify that all of the information is true and correct.

The good news is that your credit report is a working document. This means that you have the ability over time, to repair any damaged credit and increase your credit score.

Tips for Paying Off Your Mortgage Faster

Mortgages in Canada are generally amortized between 25 and 35 year terms. While this seems a long time, it does not have to take anyone that long to pay off their mortgage if they choose to do so in a shorter period of time.

With a little bit of thinking ahead, and a small bit of sacrifice, most people can manage to pay off their mortgage in a much shorter period of time by taking positive steps such as:

• Making mortgage payments each week, or even every other week. Both options lower your interest paid over the term of your mortgage and can result in the equivalent of an extra month’s mortgage payment each year. Paying your mortgage in this way can take your mortgage from 25 years down to 21.
• Mortgage lenders will also allow you to make extra payments on your mortgage balance payment date. Just about everyone finds themselves with money they were not expecting at some point or another. Maybe you received money for your birthday or a nice holiday bonus at work. Apply this money towards your mortgage and watch the results.

By applying these strategies consistently over time, you will save money, pay less interest and pay off your mortgage years earlier!

Dispelling Mortgage Myths - Banks don't offer better rates to loyal customers

I often hear “my bank will give me the best rate because I’ve banked with them all of my life and they value my business.” Sad to say... That is false.

The truth is, your bank will offer you a higher rate because they know you want to keep all of your finances in one place. So, because all your banking is at one institution, it is highly likely you will seek a mortgage from them.  Banks will optimize on this opportunity and rather than offering you the best mortgage rate they instead try to get away with offering you a higher rate. They only offer the discounted rate if they get into a competitive situation where the customer has done some shopping around. Once people begin to shop, they quickly realize that non-bank lenders have better rates and terms.  Your bank will l still try to tell you that you don't qualify for their best rate for one reason or another.

Big banks don't need to offer the best rates because they spend a lot of money advertising to get your business and loyalty. Banks are in the business of making money, don't the mistake of thinking they are your friend.

Improve your credit score

Your credit score is a reflection of how well credit is managed. Here are a few tips for improving your credit score. Firstly, pay off any collection item registered on the bureau. These items keep the score from reaching excellent ratings. Secondly, make at least your minimum required payments on time. It isn't necessary to pay off the whole balance, just ensure that payments are not missed or late. Any late payments on your loans and credit cards are reported on your bureau. Next, make sure you don't go go over your limit.  When balances are near or over the limit, that lowers your score and lenders regard it as a sign of financial trouble. So, leave some room on your credit card. Lastly, limit the amount of credit cards you have. Credit cards establish credit history, but too many active cards with or without balances can hurt your score. Keeping these tips in mind will ensure you have a great credit score.