16 Nov

3 WAYS TO ESTABLISH HEALTHY CREDIT

General

Posted by: Tracy Price

We were very happy to hear this week, that finally, the youth of Ontario will be learning about financial literacy as part of their school curriculum. The details are yet to be rolled out, but it’s a step in the right direction.

As it stands, we learn our financial habits primarily from our parents and self-education. We spend years in school memorizing math equations that are rarely ever applicable in the real world. Yet, the fundamental principles of earning money, saving, establishing and using credit wisely, are things that are not taught in school. It sounds like that’s about to change, and hopefully soon.

We see it all the time. Consumers who have overextended themselves with credit card debt, lines of credit, car loans – you name it. And we aren’t just talking about young, inexperienced people. Professionals earning hundreds of thousands of dollars find themselves in the same boat quite regularly and often have trouble establishing and maintaining a strong credit score.

We often help our clients whom have equity in their property, by refinancing to consolidate debt, saving thousands in interest. Lenders often put conditions on refinances that require credit cards and lines of credit to be paid off and closed. They want to mitigate risk that clients will find themselves maxed out again, unable to carry the payments, resulting in default.

We agree with this in some cases, but we fight to enable our clients to keep their credit in tact, and help encourage them change the behaviours associated with credit. Good credit habits last a lifetime and it’s never too late to improve.

HERE ARE 3 WAYS TO STRENGTHEN YOUR CREDIT:

  1. MAINTAIN AT LEAST 2 CREDIT CARDS. Lenders need to see that you handle credit responsibly so rather than closing everything, pick and choose wisely. Keep your 2 oldest credit cards – the longer you’ve had them, the better it looks on your credit bureau.
  2. FOLLOW THE 2/2/2/RULE. Lenders want to see 2 trade lines (credit cards) with a minimum $2000 limit, paid on time each month. They also need to stay within the limit – don’t max it out. The more room there is between the balance and the limit, the better.
  3. USE REGULARLY, WITH RESPECT. These 2 trade lines need to be actively used. Set yourself up with a monthly gym membership charge, or cell phone bill. Then set yourself up to pay it off in full every month.

Following these steps and teaching them to your kids and grandkids will help in the long run. Contact us for a mortgage and credit check-up, we’ll be happy to help.

16 Nov

DROWNING IN DEBT? EQUITY IN YOUR HOME? CALL US FIRST.

General

Posted by: Tracy Price

Sometimes terrible things happen to wonderful people. Life has a funny way of throwing a curveball when we least expect it, and sometimes, unforeseen circumstances mean that incurring huge expenses and not being able to keep up with the payments.

We see this scenario all too often. Recently, two sets of clients came to us for help with similar stories, at different stages of their stressful ordeal. In each case, a spouse fell sick and had to stop working. Treatment and medical supplies put them into debt, which was way over their heads. Neither couple had Mortgage Protection Insurance or Critical Illness Insurance. Had they been covered, they would have been able to stay above board financially.

John and Nancy came to us for help, not knowing what their options might be. They were current clients of ours and we had arranged their mortgage on their home just 3 years ago. Luckily, with property values up, they had a good amount of equity in their home. Their credit beacons had taken a hit because of some missed credit card payments, but luckily, they had never missed a mortgage payment.  We were able to find a prime lender that empathized with their story and refinance them so that they could pay off the medical debts and re-build their credit. THEY GOT TO KEEP THEIR HOME BECAUSE THEY CAME TO US FIRST.

Moyra and Hugh read one of our articles in the Welly and decided to call us to see if we could help them. They thought it was likely too late, but they called anyway. When Moyra had become ill and their debt load was out of control, they thought their only way out was to sell the home they’d been in for 30 years. They stopped the bleeding, but they had lost their home. Again, luckily, they had never missed a mortgage payment. We were able to find a lender who empathized with their situation and extended a short-term mortgage with a slightly higher interest to them. This will allow them to rebuild their credit and then move back into a prime mortgage in a couple of years. They had unnecessarily endured the stress of selling their home, and moving twice, while Moyra was ill and recovering. At least we were able to help in the end.

Make sure you do everything you can to make every single mortgage payment and make sure you call us FIRST. We can find a way to help get you through this rough patch.

1 Nov

FREE YOURSELF FROM DEBT!

General

Posted by: Tracy Price

Debt has now become a nightmare in the mortgage world. Prospective homeowners have to be very careful about the debt they accumulate because they could find themselves becoming eliminated from the housing market.

The federal government recently changed the rules surrounding unsecured lines of credit, so now lenders must use 3% of the balance as a payment when calculating debt service ratios.  Recently, we had a client trying to buy a house. His line of credit balance was $35,000 with a minimum monthly payment of only $400.

However, for mortgage qualifying purposes the payment must be stated as 3% of the balance, which is a whopping $1050.

This is a fictitious number, which completely skewed his debt service ratios and disqualified him from being approved for a mortgage. He now has to scramble to try and pay this right down so that his ratios work.

Another big ‘debtmare’ we often see are vehicle loans. It’s easy to get caught up in the moment when looking for a new vehicle.

Leasing is actually better for debt service purposes when buying a home because payments are considerably less and the purchase price is much lower.  While it seems like a good idea to purchase a vehicle with a loan, consider the amount you are borrowing and keep the payment as low as possible, especially now that the qualifying rate for mortgages has been increased to 4.64%.

Above all, do your best to live within your means and not incur consumer debt. Debt is like a yoke around your neck, which gives control of your life to your creditors.

If you need help with consolidating your debt load so you can get a fresh start, the time has never been better. 30 year amortizations are still available until the end of this month.