Credit Score and your Mortgage

When it comes to mortgages, the higher your Credit Score, the lower your interest rate. Conversely, the lower your credit score, the higher your interest rate. These days almost anyone can obtain a mortgage but the key, for those with a low Credit Score, will be the size of the down payment. If you have a sufficient downpayment, you can reduce the risk to the lender providing you with the mortgage. Statistics show that default rates on mortgages decline as the downpayment increases.

• No down payment mortgage requires a credit score of at least 680
• Having no credit is viewed as having bad credit.

CREDIT SCORE FACTORS THAT AFFECT MORTGAGE QUALIFICATION

Payment History - About 35% of your credit score is based on your payment history

• Slow / Late Payments - being late on credit card payments, student loans and other financial obligations lowers your Credit Score. Paying your bills late or not in full are also bad for your Credit Score. But it's better to make a partial payment than to make no payment at all. Paying on time automatically increases your Credit Score. To obtain the most competitive mortgage interest rates, stay up-to-date on all your financial obligations.
• Delinquency - Missing even one payment is considered to be delinquent. Delinquency on credit cards, loans and regular bills negatively affects your credit score. Pay all loans, credit cards and bills on time in order to keep a high score and obtain lower rates from mortgage lenders.
• Collections - once collections are on your Credit Report, they stay there for a period of 7 years. Mortgages can still be provided for consumers that have debts in collections, but most lenders will require that you pay them before obtaining a mortgage.
• Number of Past Due Payments - The more payments you miss the worse the consequences to your credit score. Lenders prefer to see clean payment history and no past due payments on credit reports.
• Bankruptcy - Bankruptcies remain on your credit profile for 7 years. Mortgages can still be provided for consumers that have been in bankruptcy as long as the bankruptcy has been discharged. Interest rates are usually higher for consumers in these situations.
• Mortgage Foreclosure - Foreclosures take place when borrowers are delinquent on their mortgage obligations. The lender will usually provide time for you to catch up on mortgage but will not let you make it a regular habit.

Credit score agencies track payments made on time, which increase your credit score.

Amounts Owed: About 30% of your total credit score is based on the amounts you owe

This portion of your credit report is tracking the total amount of your debts including mortgages, credit cards, car loans, student loans and other debts. It also tracks the companies you owe money to, for how long, and how much. Keep your credit card balances between 4% - 12% of the available balance to increase your credit score. If possible, pay credits cards in full and only use them when you have the money to pay them back right away.

Length of Credit History - Approximately 15% of your credit score is based on the length of your credit history

This section of your Credit Report tracks the age of each credit account and the account activity until the present day. Try not to close old credit cards that you still use because they have more impact on your Credit Score than ones that were opened recently. You should, however, close any cards that you do not use in order to prevent fraud.

New Credit - Up to 10% of your credit can be damaged through new inquiries

This section of your Credit Report tracks how many times you have applied for credit. Whether it's for a credit card, car loan, cellphone or mortgage, your credit is checked for all of them. Every time your credit report is accessed by anyone other than yourself, there is damage done to your credit score. Utilizing experienced, knowledgeable Mortgage Brokers, your credit score is only accessed once (with your permission) and that information is shared with all the banks and lenders to salvage your Credit Score. You should only apply for credit if you really need it.

Types of Credit Used - About 10% of your credit score is based on the different types of credit you use

It is always better to utilize a mixture of credit products. Having a line of credit, personal loan and credit card mixture is ideal for your credit rating. It shows that you can pay revolving credit (re-occurring monthly obligations) and control the access you have to your available credit.

What Information Is On My Credit Report?

In addition to your name, address, Social Insurance Number (SIN), date of birth and employment, Equifax and TransUnion keep track of all credit cards, credit lines, home equity lines of credit, auto loans and student loans. They track information on each trade line such as the date opened, credit limit, loan amount, account balance and payment history. A credit report also tracks the number of requests you've made for credit with all the companies that ever accessed your credit. Collections, bankruptcies, judgments, lawsuits and foreclosures are also on your Credit Report and tend to stay there for a period of 7 years.

What is a BEACON Score?

A Beacon Score is most commonly referred to as a "Credit Score" or "Credit Rating."

Understanding house prices (Article by Merix Financial)

What factors affect the value of a home?

Location: Real estate people always say "Location, location, location." That's because the area you live in will be the biggest factor affecting your home's price. It's smart to buy a home where housing prices are likely to increase. Also, the people who may buy your home from you one day may be willing to pay more for a home that is close to schools, sports centres, stores, services, and so on. Keep that in mind as you look.

The condition of the home and the property it is on: Does the home need a lot of repairs? How is the roof, plumbing, and electrical wiring? A home in good repair may be worth more. Also, the condition of the outside of the home, the lawn, gardens, driveway, and trees will all affect the value of a home. These are the first things that buyers see, and are together known as curb appeal. Renovations and updates: An older home might need some work to keep it safe, modern, and comfortable. If you are buying at a home that has had some renovations, check the quality. When you do work on a home you own, do it as well as you can. Poor work can lower the value.

The economy: There are some things you can't control that affect house prices, like interest rates. Higher interest rates mean it costs more for a mortgage, so fewer people buy homes. When that happens, the prices of homes can fall. Lower interest rates, on the other hand, can boost buying and drive prices up. House prices often go up for a while, and then come down a bit. Try to find out as much as you can about how prices are changing, or may change, when deciding to buy or sell a home. Often there will be stories in the paper about housing prices.

How much is my home worth today?

If you're considering buying a home, or you just bought one, you know how much it's worth. But if you've owned your home for a while, its value has probably changed. Here's how you can find out how much it's worth now:

Call a real estate agent: Ask them for an estimate of your home's value. You may be able to get an agent to do this for free, because they hope to get your business in the future.

Ask an appraiser: Your bank or a real estate agent should know a number of appraisers. Banks use them to estimate house values before they approve mortgages. You can also look in the yellow pages. An appraiser will charge a fee for the service.

Check to see what other homes in your area have sold for recently: Compare your home with similar ones that have sold. Unless you keep up with what's happening in your area, this information may be hard to get. Ask your real estate agent if you can't find it yourself.

How much will my home be worth in the future?

To estimate a home's future value, you will have to do some informed guessing. Start with finding out what has happened to prices in your location over several years.  The average growth for these cities since was 4.6%, close to the historical average of 5% a year.

Remember, There's no guarantee what housing prices will do. Location and the condition of the home are both important factors, as is the economy as a whole

Major banks predict rate hold through to Q2 2012

European debt crisis, US debt downgrading, stock markets plunging- all the global financial turmoil has made major banks modify their rate  to hold through to 2012 to Q2

To further support this notion, the US Federal Reserve took the unprecedented move by pledging to keep rates low  in an effort to keep the economy rolling rather than stalling.  Although many economists do not expect rates to drop, they rate expect rates to remain status quo.

Prepare your Home for Winter

How to Prepare your Home for the Winter!

Your home takes the greatest toll from the Canadian winters.  It is imperative to perform winter maintenance before the snow falls.  This will prevent potentially costly repairs down the road.

Here are some tips to maintain your home and avoid costly problems

- Clean out eaves troughs and spouts and make sure that water will flow where it is intended to- away from the home’s foundation.

- Service heating systems and check  chimneys and combustion vents for debris.

- Remove dust from around baseboard heaters. Also vacuum forced-air vents to get rid of all dust and debris 

-  Make sure all windows and doors seal tightly

- store BBQ and patio furniture, wrap up vulnerable shrubs and bushes 

Is buying Grow Ops a great opportunity?

While you can find grow ops with quite a bit of equity in it, it doesn't mean you can buy it, fix it and resell for a profit. 

I have experience buying former grow ops as well as having a property that was converted into a grow op by a tenant.

First- buying a grow op, is there money in it.  Simply said,, yes.
A few things to consider:   When buying a grow op, you can purchase properties that have been remediated and ones that haven't.  Obviously, the ones that haven't been remediated will have more equity.  Keep in mind though before you put an offer on the property that banks WILL NOT finance an unmediate grow op. Therefore, you'll have to buy it for cash.  As well, don't under estimate the cost to go from unremediated to remediated.  You can't skip on steps when remediating grow ops because the process is really out of your hands.  Once a property has been deemed a grow op, it becomes unhabitable. You can't even enter the premise without permission from the Health Board.  The Health board requires 3 air tests to be conducted. These are not cheap.  As well, depending on the severity of the "mold" you may have to rip out everything, floors, roof, insulation, down to the studs.  The reports have to be submitted to the Health Board for a stamp of approval.

I had a property turned into a grow op by tenants.  The tenants lived in the property for less than 4 months.  700 plants were confiscated. I didn't believe the mold was that bad but unfortunately because it was a safety hazard, the health board wanted everything to be ripped out (this was to cover their ass).  In the end, it cost over $85,000 to remediate it.  Trust me, I tried every angle to find the lowest possible option to remediate it but the air quality testing itself was over $40K and then I had to "rebuild" the whole house.

Can you finance a remediate grow op? Yes you can but it's difficult. Banks do not like to finance grow ops because of the marketability of the property.  If the property went into foreclosure then the banks will have a more difficult time trying to resell it when it has been deemed as a grow op. 

I put an offer on a property where the neighborhood values were around $440K.  I found a remediated grow op for $340K.  What a deal.  I didn't even have to renovate it or anything. My plans were to buy on an open mortgage and flip it.  Potential profits were $100K

However, I couldn't get the banks to finance it.  Although CMHC was willing to finance it, banks did not want to. It was too much of a risk for them.  I backed out of the property believing another investor will jump at the opportunity to buy it.  Funny that the property sat on the market with no interest.  In the end, the owners decided to just keep it and rent it out.

In the end, be very cautious when trying to buy a grow op.  Once a property is deemed a grow op, the label is placed on the Land Titles system, making this property an undesirable purchase.  As well,  grow ops are difficult to finance especially in this tough market. 

Tigher Mortgage Rules coming in March 2011

The Federal Government has again, brought out rules to curb cusomer spending habits and made for tougher mortgage lending rules.

Effective March 18 - the maximum amortization will be reduced from 35 years to 30 years

Effective April 2011- Refinancing your home to a maximum of 85% of the value as oppose to the current 90%
As well, the Federal Government will no longer insure Home Equity Lines of Credit.

While these strict guidelines are being imposed to prevent consumers going into further debt, this will also prevent a number of consumers from entering the real estate market as first time home buyers.   It won't be long when the government will reduce the amortization back to the original 25 years.

Rates are still very low so this is the best time to secure a mortgage loan!

How to Pay Down your Mortgage Faster

How to Pay Down your

Mortgage Faster

 

Payment Options	How it works	How you benefit over the life of the mortgage
Increase your Payment amounts	Increase your payments by even a few dollars and pay down your principal faster	Increase your payments by $100 nSave about $33,000 nOwn your home 5 years sooner
Make Payments more frequently	Save money in Interest charges and pay down your principal faster	Make bi-weekly payments of $500 instead of monthly payments of $1005 nSave about $29,000 nOwn your home 4 years sooner
Make a lump-sum payment	Apply your payment directly to your outstanding principal and save money on your mortgage	Make a $2500 lump sum payment every year nSave about $47,000 nOwn your home 6 years sooner
Pay as much as you want at renewal	All mortgages become open at renewal. This means you can pay down as much as you want at renewal	Make a $15,000 payment each time you renew your mortgage nSave about $49,000 nOwn your home almost 8 years sooner