24 Sep

20 Year Homesteads Don’t Exist Anymore!


Posted by: Michael Hallett

More than two-thirds of repeat homebuyers expect their next house purchase won’t be their last, states a survery conducted by TD. 23% of the more than 1,000 participants — all repeat homebuyers — said they plan to move again within six years. One in five repeat buyers has owned more than five homes.

All participants had either purchased a home that was not their first home within the past 24 months, or intend to purchase a home that is not their first home within the next 24 months. Roughly half of Canadians will hunt for a smaller house, while the rest will look to upsize. Most intend to find a fully-detached home next time around. As a result, 51% will need to take out a mortgage to finance their next purchase.

The majority said they plan to save as much as possible to limit the debt burden. Still, 21% said they will take out the maximum mortgage that they qualified for from their bank. This increases to 28% of those under 40.

As a mortgage broker I recommend that homebuyers buy the house that fits their budget, not just their lifestyle. After all, if you buy a house that is too big for you to afford, you could be giving up that lifestyle just to pay it off.

Ottawa has already taken steps to tighten mortgage lending rules as interest rates begin to come off historic lows. Finance Minister Jim Flaherty just last week said he would revisit the issue if he sees signs Canadians are getting in over their heads with debt.

Repeat homebuyers should consider taking their mortgage with them when they switch homes for additional savings or use their mortgage as a selling feature if the seller’s rate is lower than the current market rate.

Canada’s housing market, which helped drag the economy out of recession, has been cooling rapidly over the past few months. Economists have said the slight jump in sales recorded in August is likely to prove a blip in a declining trend.

Canadians like change, so perhaps the standard 5 year term is not always the best product, even if the buyer and their bank seem to initially think otherwise. Buck the trend…make your own decision that suites your lifestyle and long term goals. Next time you sell and buy a home consider a shorter term and save thousands on prepayment penalties. A shorter term will generally offer lower discounted mortgage rates.

13 Sep

Know Your Credit Score…Own Your Home!


Posted by: Michael Hallett

In the new era of financial lending the Canadian government is trying harder than ever to control Canada’s debt load in order not to repeat what happened in the USA last year. 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 mortgage and consumer debt.

There are two major credit reporting agencies in Canada, Equifax and TransUnion. An account with usually both these credit reporting agencies is created when a consumer applies for credit. 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. There are very few situations in which the extension of credit to a consumer does not result in a report going to the credit reporting agencies.

The credit reporting agencies then track all the credit information reported to them and thus create the consumer’s credit profile. The credit information collected reflects the amount of credit an individual has accumulated, minimum amount of payments, the regularity of payments, any missed payments, credit judgements against them, etc. 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 report also lists their employer, or if self-employed, occupation, address, date of birth and social insurance number, who has extended the credit, to whom the consumer has requested credit from, and often any former names  or aliases.

Since Equifax is used most commonly by brokers, I will refer primarily to the BEACON SCORE. TransUnion refers to their calculation as IMPERICA; beacon score makes more literal sense – in my mind! The assessment of the consumer’s credit worthiness by the credit reporting agency is based on statistics and various calculations that are translated into a credit score. A credit score is a risk assessment. It is a prediction of the consumer’s probability or likeliness to default on a debt over a 2 year period. The lower the credit score, the higher the risk of default. GOOD NEWS, your credit report is a working document and you repair any damaged credit over time to increase your beacon score. A beacon score can range from 300 to 850. Creditors usually interpret the score as follows:

680 – 850: good to superior credit

600 – 679: average to good credit

570 – 600: below average credit

Below 570: poor credit

There are 5 main factors that influence the beacon score:

The mortgage products and interest rate that you qualify for are often determined by your credit score. It is important to note that a high beacon score and relatively new credit profile may not necessarily lead to a credit approval. The creditor may not view the short period of credit history as sufficient evidence of the consumer’s ability to handle debt repayment. Don’t have too many credit cards or credit inquiries as this will work against your credit profile. A mortgage consultant, such as myself, can help you obtain a copy of this report and go through it with you to verify that all of the information and help you fix any bad debt.

For any questions related to your personal credit report or mortgage inquiries, I can be reached at 604 616 2266 or mhallett@dominionlending.ca – evenings and weekends, not just bank hours and my services are FREE!