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Thursday, March 12, 2015

What NOT to do during your mortgage transaction!


What NOT to do during your mortgage transaction!

Four years ago I published this blog and I got a great response from it. I think it needs to be re-published as people keep making the same mistakes year after year. 
 

Having processed hundreds and helped our team process literally thousands of transactions in my career, I’ve come across so many different situations and it goes almost without saying that everyone’s situation is unique. Even more so, it’s important to note that as many things that this guide will educate you about mortgage products and the ‘right’ things to do to successfully obtain mortgage financing, there are also a few pitfalls that I’m happy to be able to help you avoid as well. Here’s a list of a few of the things that I’ve experienced in my career in helping clients with their mortgage needs… I’d recommend avoiding these during the timeline between starting the loan application process until your purchase, building or refinance transaction is complete:

Do NOT change jobs!

A job change may result in your loan application being denied by the lender, particularly if your new position pays less, you decide to go back to school, you’re shifting between fields of work, if by starting you’re placed on probation or if your income structure changes (lower base pay with commissions, full commission, etc…). I’ve seen this happen a few times and the main disconnect here is that borrowers believe that their loan is approved early in the process, lender’s won’t call to re-verify your employment prior to funding the loan. The reality is that lenders can, likely will and this could cause problems for you. Have any questions or concerns as they relate to your scenario? I’m here to help!

Don’t make any large purchases until your mortgage has funded!

A major purchase that requires a withdrawal from your verified down payment (furniture, electronics, vacations) or increases your debt load (vacations, car purchase, financing furniture, business loans, etc…) can result in your not qualifying for your loan. A lender may check or re-verify funds in the days coming prior to funding and your transaction could fall apart at the last minute.

Avoid switching banks or moving your money to another institution!

After your lender has verified your funds at one or more institutions, the money should stay there until needed for the purchase. Fund transfers can take time and if your money has “disappeared”, your approval could be cancelled on you. ** One exception of this is when you’re using invested funds (stocks, mutual funds) are held at a separate institution than your day-to-day chequeing account. As long as we can prove that you’ve owned the funds for 90+ days, we meet the federal anti money laundering requirement and you can safely transfer the funds between institutions.
If you have any questions please contact me .
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Tuesday, March 10, 2015

Are you making accenerated bi-weekly payments?



Over the past number of years banks have come up with a rather confusing set of payment frequency options that have left some mortgage clients a bit disappointed 5 years down the road.
Rather than the Amortization crushing ‘Accelerated bi-weekly’ plan which a quality Mortgage Broker will discuss with you, clients left to their own devices run the risk of opting for simply ‘bi-weekly’ payments.  Here is the math;
Let’s use a $100,000 mortgage amount (to make working out your own numbers simpler) with a 25 year amortization, a 2.74% interest rate and a 5 year term.
Monthly Payments: $460.01
Ending Balance 60 months later: $85,043.18
Now let’s calculate bi-weekly payments and the balance remaining at the end of the 5 year term.
Bi-Weekly Payments: $212.18
Ending balance 60 months later: $85,043.60
The balance is 42 cents higher.  This is because you did not effectively pay anything extra over the 60 months to the lender.  The sum of the annual payments is identical.  Now let’s insert
  
the word ‘ACCELERATED’ (bi-weekly) into the equation.
Accelerated bi-weekly Payment: $230.00
Ending balance 60 months later: $82,563.13
Ah-ha, now you have a $2,480.47 lower balance, and you have paid $163.87 less interest over the 5 years.  Excellent!
How did this happen?  When one opts for ‘accelerated’ in the above scenario, the payment increases by $17.82 per payment, or $463.32 per year.  For a total of $2,316.60 in additional funds going straight to the mortgage balance.
The big picture is improved as well, as you have effectively lowered your amortization from 25 years to 22 years and 5 months.
Shaving 2.5 years off a 25 year mortgage might not seem huge, but in 22.5 years it surely will make you happy.  Imagine having $460.00 more per month (per $100,000 of mortgage balance) to play with for 2.5 years.
If you started with a $300,000 mortgage, then we are talking about $1380.02 per month X 30 which is a total of $41,400.60.  All from one word ‘accelerated’.

 If you would like to try this with your own mortgage contact David Cooke , your Calgary mortgage broker at http://davidcooke.ca
 
 
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Monday, March 2, 2015

New Survey Reveals - Over Half of Canadians Have Never Checked Their Credit Score


TORONTO, ONTARIO--(Marketwired - Feb. 27, 2015) - According to a BMO Bank of Montreal report released today, many Canadians are unaware how their behaviour may be affecting their overall credit standing and the impact that can have on securing a loan, getting approved for a mortgage or getting qualified for a lease to rent an apartment.
A credit report is a record of how you've paid your debt. It shows how much debt you have and whether you've made payments on time.
The survey, conducted by Pollara, was designed to reveal the overall knowledge among Canadians on credit and how it is rated in Canada. It found:
  • More than half of Canadians (56 per cent) say they have never checked their credit score and only 14 per cent check at least once a year
  • Almost one third (31 per cent) lack knowledge about how to achieve a good credit rating
  • One fifth believe that checking their credit score can decrease their score
  • While Millennials (18 - 34 year olds) are more aware of their credit standing with 20 per cent checking at least once a year, over one-third (35 per cent) say they lack knowledge about how to attain a good credit score
The study also revealed that over half (52 per cent) of Canadians do not know what would be considered a good credit score, with one fifth (21 per cent) believing it to be below 600.
"A good credit score is generally considered in the range of 680 – 720," said Tony Tintinalli, Regional Vice President, BMO Bank of Montreal. "A poor credit rating results in significant financial limitations – everything from being approved for a loan to renting an apartment. A financial advisor can help advise you on the factors and behaviours that can build or maintain a good credit score."
Regional Statistics
National ATL QC ON MB/SK AB BC
Have never checked credit score 56% 57% 63% 54% 52% 46% 62%
Check credit score annually 14% 9% 13% 16% 15% 19% 13%
Unsure what's considered a good score 52% 53% 59% 48% 48% 49% 57%
BMO offers the following tips to help Canadians improve or maintain their credit score:
Pay bills on time. One of the best ways to improve your credit score is to pay your bills within the grace period. If you have past-due bills now, get current as soon as you can. If possible, set up an automatic bill payment schedule to help you stay on track. In the event you miss a payment, a call to your credit card or mortgage company to work out a plan can help save you unnecessary dings on your credit score.
Manage your credit cards; don't cancel them. A popular myth is that closing old accounts will increase your credit score; this is not necessarily true. Credit bureaus look at a combination of factors, including the total length of your credit history, which means it may be better to keep your credit cards but manage them responsibly.
Check your credit report. A credit report is a record of how you've paid your debt. It shows how much debt you have and whether you've made payments on time. You can order your own credit reports free from the three major credit reporting bureaus (Equifax, Experian® and TransUnion®) annually and check to see if there are any errors or problems.
The Financial Consumer Agency of Canada provides further information on understanding and improving your credit score and credit report.
The survey results cited in the Credit Card Study conducted by Pollara are compiled from a random sample of 1200 Canadians 18 years of age and over, of whom 1077 had at least one credit Card. The study between January 12th and 15th, 2015. A probability sample of 1,077 would yield results accurate to ± 3.0 per cent, 19 times out of 20. Results have been weighted using the latest census data to be representative of Canadians as a whole.
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