Important Credit Score Tips

There’s a virtual credit file with your name on it! When it comes time to take out a mortgage, that file gets opened and the result is a credit score that will help determine whether and how much you can borrow and at what rate.  

The good news is that you are entirely in control of your own credit score. Even if your past credit history has been bumpy, there are steps you can take to increase your score: showing lenders that you are a good risk and worthy of their best rates. Here are a few important tips:

1.      Never let a bill get past due. This is the single biggest factor in your credit score: paying your bills on time. Set up automatic payments if you can or keep a careful calendar. This one habit carries the most weight when it comes to your credit score so be sure to take it seriously.

2.      Create your own credit limits. If the credit card company gives you a credit limit of $10,000, create your own limit of $3000: or no more than 30% of the available funds. Have more than one credit facility? Balance them out. It’s better to be at 30% on three cards than have one at the limit and two that are never used. You want to show that you are using your credit but using it wisely. 

3.      If you are getting too close to your limit, pay more than the minimum every month if you can, and work towards clearing off your balance entirely. Having your credit limits increased can help if that doesn’t cause additional spending.

4.      Keep that history. Make sure you do have a credit history. You may have a low score because you do not have a record of owing money and paying it back. Since history is important, you don’t want to cancel a card and lose that history. The longer you’ve had a card, the clearer the picture is of how you manage your debt. If you feel you really need to cancel a card, get advice first.

5.      Never ever let a bill go to collections. This can be a tough one if you’re short of money or a bill is under dispute. But a bill that is sent to collections is - next to bankruptcy - one of the blackest marks on your good credit name. If you’re having trouble paying, talk to the creditor about a negotiated payment plan. 

6.      Be selective. Applying too frequently for credit has a negative impact on your score. A raft of cards looks like you’re an out-of-control spender and not a good credit risk. So when you’re asked - would you like to apply for our Store Card to save on your purchase – just say no; the high rate that goes with that card isn`t worth your savings on that particular purchase.

Get in touch if you want to discuss taking control of your credit score. If you need to get a mortgage while you’re still working on improving your score, we can also advise how that may be possible. We do this all the time and am here to help! 

No Need To Panic Over New Mortgage Rules

No one has a crystal ball to see what the next few months - or years - will bring, but it’s likely that some Canadians will have trouble with their debt in the wake of COVID. With that possibility in mind, the Canadian Mortgage and Housing Corporation (CMHC) recently announced that it is tightening the rules for Canadian homebuyers looking for insured mortgages. Homebuyers with less than 20% downpayment require mortgage default insurance: an important protection for Canadian lenders.

Summary of the new CMHC rules (effective July 1):

1. Reduced buying power. Previously, CMHC allowed 44% of total income to service all your debt and up to 39% of total monthly income to service housing payments (principal, interest, taxes, heat, condo fees). They have now tightened this back to 42% of total income can now go to service all your debt, and 35% of total monthly income to service housing costs. This reduces a homebuyer’s purchasing power by anywhere from 9 to 11%. As an example, someone qualifying for a $500,000 home now, will see that decrease to approximately $445,000.

2. Higher minimum credit score. At least one applicant’s credit score must now be a minimum of 680, up from 600. Find out your own score - free - through Equifax or TransUnion.

3. Downpayment funds can no longer include most borrowed down payment sources. Very few buyers used this option so this will have a minimal impact.

Alternative options available

This is a great time to work with a mortgage broker! I work with dozens of lenders… and private mortgage insurers – Genworth Canada and Canada Guaranty - that are an alternative to CMHC. Neither have announced new underwriting guidelines, which means I expect to be guiding many new homebuyers through these alternate insurance channels.

Get in touch at anytime

Having trouble keeping up with all the changes lately? That’s why I’m here. My only focus is mortgages and I am always up to date on the changing mortgage marketplace. If you or someone you know is looking to buy, it’s important to get in touch early so we can put a solid plan in place. Or, if you have concerns about your current mortgage strategy, let’s talk, especially if you want to find out if you can renegotiate your mortgage to take advantage of today’s low rates, or refinance to consolidate troubling high-interest debt.

CMHC tightens lending standards to protect housing market during COVID-19

Tara Deschamps The Canadian Press June 4, 2020 6:20PM TORONTO --

Canadians looking to borrow money for a home purchase a home are in for some extra challenges after the Canada Mortgage and Housing Corporation announced changes to its lending standards on Thursday.

The country's national housing agency is increasing the qualifying credit score for mortgage insurance to 680 from 600 and limiting gross and total debt servicing ratios to their standards of 35 per cent and 42 per cent, respectively.

"COVID-19 has exposed long-standing vulnerabilities in our financial markets, and we must act now to protect the economic futures of Canadians," CMHC head Evan Siddall said in a statement. "These actions will protect homebuyers, reduce government and taxpayer risk and support the stability of housing markets while curtailing excessive demand and unsustainable house price growth."

Under the changes effective July 1, CMHC will also no longer treat non-traditional sources of down payment funding, such as a personal unsecured line of credit, as equity for insurance purposes.

It will also suspend refinancing for most multi-unit mortgage insurance. The move comes just weeks after Siddall appeared before the Standing Committee on Finance in Ottawa to warn of trouble ahead for the housing market. "Our support for home ownership cannot be unlimited," he said. "Home ownership is like blood pressure: you can have too much of it. Housing demand is far easier to stimulate than supply and the result, as we've seen, is Economics 101: ever-increasing prices."

The majority of mortgages insured by the CMHC will not be affected by the more stringent qualifications. In the fourth quarter of 2019, the average debt servicing ratios were well below the 35 per cent and 42 per cent thresholds, and depending on the metric, between 63% and 82% of all qualifying mortgages were below the limit.

Spokesperson Leonard Catling said the changes "were not made because of our current book of mortgage insurance business, rather to maintain its integrity. "High household indebtedness continues to be a concern and the COVID-19 pandemic has exposed the long-standing vulnerabilities in our financial markets."

The CMHC forecasts a decline of between nine per cent and 18 per cent in average house prices over the next year because of higher mortgage debt and increased unemployment.

Siddall warned the finance committee a growing debt deferral cliff could be headed Canada's way in the fall, when some jobless Canadians will need to start paying their mortgages again after deferrals run out, and as much as one-fifth of all mortgages could be in arrears if the economy has not recovered sufficiently, he warned. "We need to avoid exposing young people and through CMHC, Canadian taxpayers to the amplified losses that result from falling house prices," he said. "Unless we act, a first time homebuyer purchasing a $300,000 home with a 5 per cent down payment stands to lose over $45,000 on their $15,000 investment if prices fall by 10 per cent," he said.

Mortgage Deferrals & Ten More Tips

I hope you and your family are enjoying good health and finding some measure of happiness in this strange spring. Certainly, many Canadians are feeling the financial pressures mount as we work together to conquer this pandemic. The good news is there are strategies that can help.

The Mortgage Deferral Program has been the first line of defense for thousands of homeowners looking for immediate financial relief.

A Mortgage Deferral is not payment “forgiveness” that allows you to simply miss payments. While you don’t pay anything at all during the relief period, your lender will add the interest accrued during the skipped period to your outstanding balance, which means your mortgage balance will increase. Your payments remain the same for the rest of your term but can increase at renewal to account for the higher balance. Some lenders may increase your payments after the deferral. We can help you determine if this is right for you and advise how to apply.

Some additional strategies and tips:

1. Consider other options. Instead of using the Mortgage Deferral Program, perhaps you can borrow what you need from a Line of Credit, making interest-only payments until the financial stress begins to ease. Other possibilities include extending your amortization or moving from accelerated to monthly payments.

2. Applying for the CERB. You need to apply to the Canada Economic Relief Benefit (CERB) for each 4-week period that your situation continues, up to a maximum of 16 weeks. If you are receiving the CERB through EI, you simply complete your bi-monthly reports to continue receiving your benefit. Keep in mind that these payments will be taxable to you next spring.

3. Get your tax return filed. If you collect the Child Benefit or GST/HST credit, you don’t want your benefits delayed. If you’ll owe money, payment has been deferred until September 1, so don’t let that keep you from filing now.

4. Check your travel points program. Many points programs allow you to redeem travel points for gift cards that will help pay for gas, groceries and other essentials.

5. Ask your credit card provider about minimum payment deferrals. Some providers will allow deferrals to help get you through a tough patch.

6. Talk to your local utilities and communications providers. Again, many are willing to talk about payment options or deferral programs.

7. Look for money leaks. Go through your credit card and bank statements with a fine-tooth comb, looking at subscriptions or other expenses that can be eliminated or reduced.

8. Make a (better) budget.  Check out the good budgeting apps that are free – Mint, Wally, or check out KOHO, which is like a chequing account with the perks of a credit card.

9. Be aware. These are unsettling times and unfortunately there has been a wave of fraudulent scams. Visit the Canadian Anti Fraud Centre for up-to-date information.

10. Adopt a positive mind. Use this time period to be better with money. There are many predictions that our new habits will carry forward with us, so adapting and keeping better money habits will serve us well in the bright future that is just over the horizon.

What now? Making sense of a changing marketplace

Let me begin with my heartfelt hope that you and your loved ones are in good health.

We are in uncharted territory with the mortgage marketplace continually shifting. Here is a quick summary of some of the most common questions to help you make sense of it all

FOR CURRENT HOMEOWNERS

What do the mortgage payment deferrals mean and how do I access that?

Mortgage insurers and lenders announced that eligible clients can delay mortgage payments. These are “compassionate” programs for those who are in serious financial straits and unable to make their mortgage payments. You will need to apply to the program, and assistance will be determined on a case-by-case basis so please do not just start skipping payments. If you urgently need this help, get in touch. We can help you find the right channels to apply.

Will the lower Bank of Canada rate help me with my variable mortgage or line of credit?

Yes, your interest rate will also drop. Keep in mind that it usually doesn’t happen instantly, and your own rate won’t necessarily move in lockstep with the Bank of Canada rate. Ultimately, it’s the lender’s decision on whether – and how much of – the rate cut will be passed along to the end consumer. Lenders are naturally concerned about liquidity and the potential for an increase in defaults. If you do have a deep discounted variable rate mortgage, you are in a very good position.

What about my fixed-rate mortgage?

If you’ve got a fixed-rate mortgage, then nothing changes for you right now. The rate you negotiated is guaranteed for the entire term of your mortgage.  However, if your fixed rate is a lot higher than the current rates available, then it is still worth calling to see if it makes sense to re-negotiate your mortgage to take advantage of today’s rates.

I have some credit-card and/or loan debt that now has me worried.

If you’re carrying high-interest credit card debt, and you have more than 20% equity in your home, it can make sense to roll those other debts into a new mortgage. You get one manageable payment, better cash flow, and interest savings.

FOR HOMEBUYERS 

Events that have impacted buyers include:

1.      Obviously, we’re seeing not as many listings and home visits are certainly not wise. Most activity will be on hold until the future becomes clearer. Use this down time to get in touch for a review of your situation so you are ready to go when the time is right for you.

2.       The stress test changes announced earlier this year that would make qualifying a bit easier for both insured and uninsured mortgages will no longer go into effect April 6th.

3.       While rates initially went down at the start of this crisis, they then started to go up. New variable-rate mortgages are no longer being offered at deep discounts to prime.

We all need to take things as calmly as we can, evaluate our priorities, and make decisions that are needed for the long term. Health and happiness to you and yours.

Need to defer Mortgage payments? Know the costs first.

Hi everyone, very interesting article written By Pattie Lovett-Reid Chief Financial Commentator, CTV , have a look below before you make any decisions on deferring mortgage payments.

A word of caution before you defer your mortgage payments amid the COVID-19 pandemic: it will cost you in the long run.

Remember, a deferral isn't mortgage payment forgiveness.

There seemed to be a collective sigh of relief when Finance Minister Bill Morneau, after consultation with the big banks, highlighted potential mortgage payment and credit card deferrals would be available for Canadians.

Understandably, Canadians rushed to the phones only to be met with frustration and confusion and left wondering:

Who would qualify?

• Is there an application process?

• Does the entire household have to be off work?

• Will they require documentation?

None of the banks could initially could answer those questions. As days pass, we learn a little more, yet frustration is still high. A mortgage deferral might not be the deal you think it is.

Here’s why.

1. A mortgage deferral doesn't mean an interest-free holiday.

2. If you choose to defer, the interest accrued during the skipped periods will be added to the principal balance. This will make a difference in how much you end up paying in interest over the life of the mortgage.

My take away: a deferral is not mortgage relief, it is simply the ability to skip a payment for a specific period of time and will be added to outstanding balance of your mortgage.

Here are some of your other options.

1. If you can't handle a larger payment once the deferral ends, you could try to extend your amortization period.

2. If you are able, you could make extra payments in an effort to get back to where you started prior to the deferral.

3. It might make more financial sense to borrow only what you need from a line of credit, paying the interest amount only, and paying back the principal amount as quickly as you can when you can.

Canadians are scrambling and worried about mortgage payments as many face layoffs in wake of the pandemic. I've been asked about liquidation of registered retirement savings plans (RRSPs), taking out cash advances on credit cards — all in fear of a foreclosure.

During this crisis, lenders have made it clear foreclosure isn't going to be the first course of action and there are solutions that will help keep you in your home.

If you are in a financial crisis, a mortgage deferral is exactly the lifeline you may need. However, it is always best to reach out and ask for assistance before missing a payment. Recognize it isn't going to free, but knowing all of your options can make it less costly. -

First-time buyers – take advantage of the RRSP down payment boost

Using your RRSP money for your down payment is a great strategy for some first-time buyers. It may help you achieve the 20 per cent down payment needed to avoid mortgage default insurance premiums, or simply give you a financial boost when you need it most.  First-time home buyers can withdraw up $35,000 per person ($70,000 per couple) under the Federal Home Buyers’ Program (HBP). 

Here is how to boost this opportunity even further. If you have saved up to $35,000 and have enough RRSP contribution room, you can contribute that amount to your RRSP by the March 2nd deadline. Then after 90 days, you can redeem those funds under the HBP so the money is available for your down payment. Since your contribution counts as a tax deduction, the tax refund you get this spring is an added down payment boost. Your refund is based on the amount you contribute and your marginal tax rate. So, in effect, you are letting the taxman help you buy your first home! The program does require that you pay the withdrawn funds back on a 15-year repayment plan.

Questions?  Get in touch at any time!

My home is my..........

My home is my castle! It’s also your greatest wealth building tool. Home equity can build nicely by chipping away at payments and through increasing home values, ultimately creating a terrific repository of wealth and making your home not only your castle, but so much more!

My home is – My start and my future. Home ownership makes great financial sense. Over the long term, residential real estate has been a very strong asset, showing excellent appreciation. The goal is to not help pay your landlord’s mortgage, but instead have that money build your own equity. I can help make that reality come true. Get in touch early; good advice can save time, money and stress.

My home is – Our daughter’s post secondary education. Your home may allow you to invest in your greatest asset – your children! The cost of higher education can be daunting, especially if you haven’t prepared for it. Tuition is just part of the cost. You also need to consider accommodation, food, textbooks, supplies, and transportation. Your home can be the most cost-effective financing option to help you achieve this important life goal.

My home is – My ability to retire my way.  A reverse mortgage can greatly assist cash strapped retirees who need to pay off their debts and live comfortably in their family home. Reverse mortgages are also a strategy for the well-heeled who want to unlock the value of their homes for wealth-building strategies or to enhance their retirement. You may also want to make sure you have a secured line of credit lined up before you retire.

My home is – Our renovated dream home. A smart home renovation can both increase your home’s property value and improve the way you live in your home. Putting a renovation on your high-interest credit card can wipe out the value you’re adding and create future financial stress. Whether you are looking at buying a fixer upper, or renovating your current home, I have options to help you achieve that dream home.

My home is– My smart investment strategy. Many Canadians are building personal wealth with an investment property, by starting a business, or investing in other assets. An investment property is being increasingly viewed as a pension plan, particularly since so many Canadians are not covered by workplace plans. Rental income typically pays for most or all the expenses and property appreciation has often outperformed stocks and bonds over the long term,

My home is – Our freedom from credit card debt. If high-interest debt is choking your cash flow, you may be able to move that debt to your lower-rate mortgage. You’ll get a fresh start that will allow you to save thousands in interest, boost your cash flow, have less stress with one manageable payment, and be mortgage free quicker. You’ll get the financial reset you need to start building wealth.

We are here to make sure you get the most out of home ownership. Get in touch anytime!

Who are mortgage brokers?

Unlike your bank’s mortgage specialists, who are employed by a specific organization and therefore mandated to see that organizations’s products, mortgage brokers have access to many mortgage companies in Canada & can help you with one that has the best mortgage solution for you.

The right mortgage broker will benefit you as a borrower as they have a wealth of knowledge in mortgage lending, both from a formal training and from experience. Mortgage brokers are required to complete formal training in Canada & are licensed provincially.

In an industry that’s constantly evolving, mandatory licensing help ensure that mortgage brokers stay apprised of regulatory changes and possess the skills required to service their clients. After all, mortgage brokers can help guide clients through what may be the most significant investment of their lives.

The President of Yhard Mortgages Brian Yhard is celebrating his 30th year in the mortgage industry in 2020 feel free to lean on his knowledge of the industry for your next purchase, refinance, transfer or any other mortgage related transactions.

10 Money Saving Tips for 2020

The fresh start of the new year makes it a great time to review your finances and particularly your spending. Whether you are saving to buy a home or pay one off, your “money leaks” can add up to some big bucks over time.  Here are ten ways to find some of your missing money or help you save over the long term:

1.      Watch unconscious spending. Track your spending and consider your impulse buys at grocery, gas station, convenience and other stores, or your brand name buying when generic will do. If impulse buying is a big culprit, always make a list and stick to it, only grocery shop once a week and never on an empty stomach! 

2.      Know your prepayment penalty. When choosing between mortgages, be sure to compare how the early payout penalty will be calculated. If you ever need to get out of your mortgage early, having the right mortgage could save you thousands.

3.      Convenience costs.  It’s a lot easier to spend more than you intend to when you exclusively use your credit cards because you aren’t seeing the money. You might not be so liberal with your money if you actually had to hand it over. Consider withdrawing a fixed amount of cash for your spending every week.

4.      Renovate over relocate. The right renovation might be all it takes to turn the house you are in into the home of your dreams. It is almost always less expensive to renovate than to relocate. I have great renovation financing options for 2020.

5.      Examine your bills. Take a good hard look at your monthly bills and go through them line by line. Some of them may be for services you don’t use or can live without, or perhaps don’t remember requesting. Or they could be for services that you can actually live without. Even if the amount is small, why have it charged every month?

6.      Renew with your eyes open. When your lender sends out a letter suggesting you renew your mortgage at their current offer, get advice. Don’t renew with your eyes closed. This is your opportunity to negotiate the best possible deal and saving big over the long term.

7.      It doesn’t hurt to ask. Whether you are signing up for internet or buying a car, ask “is this the best you can do?” or “can you make it more affordable?”  Do research in advance so you are prepared and knowledgeable on all things related to what you are buying.

8.      Speed up your mortgage pay down. Change from monthly payments to weekly or biweekly payments. Or take your tax refund and put it against your mortgage principal. Your interest costs will go down with every dollar you reduce on your principal.

9.      Don’t leave money on the table. Take advantage of all incentives that are available to homeowners. First-time buyers can take advantage of the Home Buyer Tax Credit that provides up to $750 in federal tax relief. There are also many incentives available when you make energy saving investments in your home.

10.  Plug your biggest money leak: high interest. All of the savings you make in lifestyle choices mean nothing if you don’t put a plug on paying high interest  If debt is choking your cash flow and you have enough equity in your home, you may be able to move that debt to your lower-rate mortgage and save thousands. Using home equity to pay down debt is one of my specialties.

We are here to save you money in 2020 and throughout your mortgage years. Get in touch at any time!