Know the Score: Three Steps to Better Credit

If you are looking to buy, invest in, or obtain a better rate on your current mortgage now or in the coming months, your credit is going to play a more significant role in today’s tight-fisted credit environment than it has in the past. It’s that simple. Would-be borrowers need to address any and all credit issues now to avoid having to pay for it later.

But, here’s the kicker: a great number of all credit reports contain errors of some kind. The credit reports contain mistakes so egregious that applicants could actually be denied credit! Don’t let this happen to you. Read more

Fixed Rates Officially Going Up, Variable Rates going down.

Great deals only last for a limited time. We all knew it was coming, we just didn’t know how soon…
Canada’s biggest banks are increasing key mortgage rates. Royal Bank of Canada announced the change on five-year, fixed-rate mortgages to 5.45%, an increase of 0.2%.

Bank of Montreal, Toronto-Dominion Bank, Bank of Nova Scotia and Canadian Imperial Bank of Commerce are following. The changes at RBC and BMO took effect on Tuesday this week, while new rates at TD, Scotiabank and CIBC were to be posted yesterday. ( I haven’t checked the news yet)

And those “special offers” from RBC, BMO and Scotiabank on five-year closed mortgages at 4.15% will also be subject to change without notice, reflecting a 0.2% increase.

On the other hand, variable rates are decreasing from Prime+0.80% to Prime+0.40%.
More info on variable rates on Canadian Mortgage Trends

Mortgage Matters: Fixed vs. flexible – Gazette

Last week, the gazette printed an interesting article on the factors to consider when chooing a mortgage. It says that, in the past choosing a fixed or variable mortgage has traditionally been which strategy would save the most money, and now that it’s not always the case.

Choosing a type of mortgage and term today may come down to what makes sense for the individual home owner rather than what saves cents.

“If you were buying a house 10 years ago, fixed versus variable was the biggest decision you made,” said Moshe Milevsky, finance professor at York University and executive director of the Individual Finance and Insurance Decisions Centre. “But now there are more important things in place. Equity prices are falling, housing prices are falling. I think there are three or four things more important than fixed versus variable now.”

In 2001, Milevsky’s study of five-year rolling interest rates between 1950 and 1999 showed that 88.6 per cent of the time homeowners would have been better off with floating or short-term mortgages rather than five-year, fixed-rate mortgages, saving an average of $22,000 on a $100,000 mortgage amortized over 15 years. Read more

What you need to know about credit scoring: Part II

Part II: The Five Factors of Credit Scoring

There are five factors that comprise the credit score. They are listed below in order of importance, just as an underwriter would look at the score:

1. Payment History: 35% impact. Paying debt on time and in full has a positive impact. Late payments, judgments and charge-offs have a negative impact. Missing a high payment has a more severe impact than missing a low payment. Delinquencies that have occurred in the last two years carry more weight than older items.

2. Outstanding Credit Balances: 30% impact. This factor marks the ratio between the outstanding balance and available credit. Ideally, the consumer should make an effort to keep balances as close to zero as possible, and definitely below 30% of the available credit limit when trying to purchase a home.

3. Credit History: 15% impact. This marks the length of time since a particular credit line was established. A seasoned borrower is stronger in this area. Read more on Credit Scoring

What you need to know about Credit Scoring

Part I: Good Credit Translates into Lower Rates for the Consumer

In the 1960s, Fair Isaac Corporation started working on a system lenders could use to evaluate the likelihood of receiving repayment on loans. Prior to that, it was really a matter of trusting an individual to be a “man of his word,” so to speak. Fair Isaac sought to take human error out of the equation with a reliable system that could determine whether or not consumers were truly worthy of credit, and thus FICO was born. This evolved to become the standard for lenders by the 1980s.

Credit scoring has an enormous impact on a borrower’s ability to purchase a home. It can mean the difference between getting a good interest rate and the home of their dreams, or whether they even qualify at all. For this reason, it is important for borrowers to understand the credit scoring process, and to know what their credit score is when they look to obtain mortgage financing.

What the credit scoring model seeks to quantify is how likely the consumer is to pay off their debt without being more than 90 days late on a payment at any time in the future. Credit scores can range between a low score of 300 and a high of 900. The higher the client’s score is, the less likely they are to default on their loan. Only 5% of the people in Canada have a credit score above 800. These are the slam-dunk clients that walk away with the best interest rates. On the other hand, approximately 4% of the people in Canada are faced with the possibility that they may not qualify for the loan they want because they have a score between 500 and 600.

Stay tuned for Credit Scoring, Part II: The Five Factors of Credit Scoring

Written by Danuta Levitzki.
Conseillère en Financement Hypothécaire | Mortgage Loan Specialist
Visit her website

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Ottawa is tightening mortgage insurance rules

The federal government said Wednesday that it is tightening the rules relating to government-guaranteed mortgages.

The new rules, set to take effect Oct. 15, are a “responsible and measured approach … to reduce the risk of a U.S.-style housing bubble developing in Canada,” the Department of Finance said in a news release.
The measures will apply to new, government-backed, insured mortgages. “Canadians who already hold mortgages will not be affected,” it said.

The changes include:
• Cutting the maximum amortization period to 35 years from 40.
• Requiring a minimum down payment of five per cent, whereas loans for 100 per cent of the price are possible now.
• Establishing a requirement for a consistent minimum credit score.
• Introducing new loan-documentation standards.

The government acknowledged that the proportion of bank mortgages in arrears is stable at 0.27 per cent, “near the lowest levels experienced since 1990 and well below the highs of 0.65 per cent experienced in each of 1992 and 1997.”

Source: CBC News

Why Deal with a Mortgage Broker?

Brokers search for the best lender package to suit your specific financial situation, whether it’s with a Chartered Bank, Trust or Insurance Company. There is a wide variety of options and features available to homebuyers today. To find the best offer takes a lot of time and effort. The mortgage process within today’s very competitive marketplace makes many Canadian homebuyers puzzled. It truly pays to work with a mortgage professional that will represent you and ensure the mortgage you get is the one best tailored to your needs.

NOTE: Choosing the wrong mortgage can cost you thousands of unnecessary paid interest money.

Why Should You Go To a Mortgage Broker First?

A professional presentation to a lender on the first application will get the best response and save you valuable time and money. Secondary applications with previous credit bureau inquiries may be more costly.
Often the success of obtaining mortgage approval depends on the way a proposal is presented and to whom it is sent. Your Mortgage Broker is trained to present your mortgage proposal to obtain the most immediate and positive result.

Example: You don’t call an insurance company for insurance – you use an insurance broker, because of their expertise, product knowledge and rates. So remember, call your mortgage broker first!

How Do Brokers Get Better Deals Than Many Banks?

Brokers often develop professional relationships with private sources of funds, termed private lenders. These lenders can provide many various mortgage products not available at conventional sources.

Can You Still Go Through Your Bank With Your Broker?

Yes, letting a Mortgage Broker represent you to your own financial institution can often result in a better rate than you could get on your own.

Written by Danuta Levitzki. Conseillère en Financement Hypothécaire | Mortgage Loan Specialist
For current interest rates or to get more information on mortgage financing feel free to visit her website or call direct at 1-800-605-6154.

Need a mortgage?

1. Let us help you find the best mortgage rate for you.
2. Your Name(required)
3. Email(valid email required)
4. Telephone(required)
5. Best time to call Contact me during the day Contact me in the evening

 

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