The Mortgage Landscape: Forever Changing

So, as many of you know, coming January 1st new mortgage rules will implement a stress test for anyone placing 20% or more down.

What do I think of this?

Well, it does level the playing field with insured mortgages, which could be a good thing for first-time homebuyers who have less money to place down. But, it will also increase the income needed to purchase a home at a higher price. Making people drop down to the already “red hot” condo/townhouse market.

The new rules are not the only thing taking place. CMHC want to regulate “Shadow” Lenders.

This I already hate.

First, they call them “shadow” lenders to give them a bad connotation to the general public. The way they use rhetoric to portray a well above board and regulated business as “Shady”. Companies like Home Trust, First National, RMG, Street Capital, are not shady businesses that are making under the table deals.

Second, they are giving the big banks an even greater competitive advantage to further provide worse and worse services and products. At every angle, they are trying to stop monoline lenders from playing on the same field. Giving the big banks an upper hand spells monopoly.

Third, we need more choice as consumers and brokers. If we have only a few options that are actually viable to the majority, what stops those few from raising the price? Nothing. I know there is a fine line between options and regulations. The great the options the harder it is to regulate. I understand, but it seems to me more and more things in this great country are turning to fewer options.

BC, for example, hydro, insurance, transit, communications, all have one or few options. This cause prices to never drop or be competitive. What is the motivation for any of these industries to innovate? Absolutely nothing. There is no motivation at all. They know they will have clients forever. Now on top of these, we will get fewer options for financing as well.

I simply don’t agree with that.

What effects will all this have? Truly?

I guess we will have to wait and see.

Mortgage Rule Changes From OFSI!… Again…

Mortgage Rule Changes… Again…

 

So, OFSI has yet again introduced new mortgage rules to furthermore “cool down the market”.

They have implemented the following:

1.) New stress test for 20% or greater down payments.

2.) Refinance rule uses

3.) Restrictions on secondary financing

 

1.) New Stress Test

For anyone putting less than 20% down, we are all familiar with the current stress test for insured mortgages. Most people to avoid the stress test and qualify for more either saved more money or got a gifted downpayment from the bank of Mom and Dad. This is no longer an option… For anyone with 20% or more, you have to qualify at your contract rate + 2%. Therefore eliminating the possibility to afford more if you manage to save up for a 20% downpayment.

 

2.) Refinances?

Well, under these new rules the banks have more power over consumers… I know! right? Let me explain. If you have a current mortgage and it comes time to renew you will have to qualify under the new rules only if you move lenders or pull out equity. So, what does that mean? What if you don’t qualify? Well, now the bank knows you have no other options and therefore can use that against you by making you pay a higher rate.

 

3.) Secondary Financing Restrictions

Federally regulated banks are no longer allowed to use secondary financing to bypass loan to value limits. What does that mean? It basically will reduce your options to get creative and secure financing for that dream home you want. Secondary financing still allowed with private lenders… but that can be quite costly.

 

Conclusion: 

These rules will only curb hard-working, middle-class Canadians in their effort to afford homes. All these rules do is introduce new hoops for Canadians to jump through… They must be bored over there at OFSI.

Finding a Great Mortgage Broker

      Signs Of a Great Broker

 

  •  The first step would be to go online.

 

Try and find one online and look at their social media check out their Web sites and check out their reviews.

 

Take it a step further and then give them a call and set up an appointment. Pay attention to how they’re talking, speaking with confidence. Are they asking you questions not just taking rates?

 

Questions like,

  1. where do you see yourself in five years?
  2. What is your financial goals?
  3. How do you want to structure this mortgage?
  4. Are you going to be getting an inheritance, money and/or property?
  5. Do you get bonuses as at work?
  6. Do you want a lot of prepayment options?
  7. Are you planning to move in the next couple of years?
  8. Do you want to buy and then sell it in three years?
  9. What are what are your plans?

If he’s not asking you questions that’s a red flag. Mortgages aren’t things that happen for six months there are not things that happen overnight and forget about them.

 

People tend to forget the mortgages are 25 year commitments, sometimes 30 year commitments and they’re law! You could be locked in for five years. To really understand how we’re going to structure your mortgage a mortgage broker should be asking these important questions and seeing what your goals are.

 

There is a multitude of different strategies. If your goal is to keep the apartment for three years then sell and buy a home. Why are we putting in a five-year fixed? That’s a huge question. We should be putting you in a three-year fixed and then worst-case scenario, after three years you want to keep the apartment and go longer we refinance and put you in another three years or two years or whatever the scenario is at that point. But trying to structure something that not only is going to fit you now but it’s going to fit you in five years from now is huge.

 

Let’s say you get a five-year term and then you want to sell in two years or three years. You have a penalty to pay. And it’s not a small penalty especially with some of the chartered banks. So, these things are what you should be looking at.

 

  • Maybe you were referred to a broker?

 

Ask the person that referred you the broker have they used them? How long have you used them for? If the person been going back to this guy every five years like clockwork or any time he needs a new mortgage or buys an investment property that is for a reason. Clients that go back every time to the same broker speaks volumes.

 

  • Social Media a huge asset to us nowadays.

 

I’m not saying rely solely on social media but take a look at their social media and see what they post. Can you work with this person because most likely you’re going to be working with this person for maybe a month, two months sometimes even longer.

 

 BONUS TIP: Ask them questions!

 

See what their answers are. Are they answering it with confidence? Are they being honest. Are they trying to make up answers to not seem like they don’t know?

 

BOUNS TIP #2: Are they answering their phone?

 

Are they not picking up and then calling you two days later? Are they efficient/quick getting back to you? I understand people have busy lives and they’re busy brokers. But if they don’t get back to you within 24 hours of you either text, e-mailing, or calling them that’s not a good sign.

 

 

The internet is your best friend. It really is. Check online. You’ll have tons of recommendations and tons of reviews that you can look at and really see who you want to work with.

Credit Score Repair: The Do’s and Don’ts

Credit Score Repair 101

Hi,

 

Today I’m going to be talking about credit score repair because recently I’ve got a couple of questions on how/what do I do? And What are the steps? I’m going to run through a couple of little points and details that you can use to improve your own credit score.

 

#1. Always pay your bills on time

It’s kind of obvious but some people don’t know utility bills won’t report on your credit bureaus like cable and electricity, although some cell phone bills will report late payments to your credit agencies so do not miss your cell phone bill!

 

#2. Try to pay your bills in full on the due date.

Don’t do partial payments, like on credit card, try to pay on the due date fully. Do not miss payments at least.

 

#3. Try to pay off your debts as quickly as possible.

Pretty simple. So if you’re going to use your credit card use a hundred bucks, then trying to pay off the 100 bucks within that week, if you can. If you can’t, do the minimum payment. Do not miss payments! (Yes, I know it contradicts #2…)

 

#4. Do not max your credit card. 

That’s is huge. Don’t even go close that credit card limit. The basic rule of thumb, don’t go more than half. So, if you have a $2000 limit don’t go more than 1000 because that will impact your credit score.

 

#5. Reduce the number of credit applications.

Do not just give out your social insurance number to any person to apply for credit cards because when lenders/potential lenders look at your credit score it will have a negative effect on your score. You’re looking at your own credit score it will not have a negative effect. But when lenders pull your credit that will have a negative effect on your credit score. So, the more applications you make the lower your credit scores are going to go. Not by a lot but if you do many it’s going to hurt your credit score.

 

#6. Make sure you have a credit history.

A lot of people have bad credit scores because they don’t have a credit history. They may just have a phone bill on there.They either have a bad credit score because they have no credit history or they have a fantastic credit score because they have a little credit history (aka one line of credit). So, make sure you have a credit history. Make sure you have some sort of a history.

 

Those are the main points. Honestly, it’s that simple for credit scores. It’s nothing too crazy nothing too drastic.

Additional Info

Also, no loopholes exist for credit companies. There are no tricks. There’s nothing like that no credit company can do anything you can do yourself. Everything they’re going to tell you is pretty much what I just told you. There is nothing that they can do, in Canada at least, that you can’t-do.  The only way to rectify poor credit is literally by adopting sound credit practices for an extended period of time. No company can be like “hey, pay us three grand and we’ll get rid of stuff” that simply doesn’t happen like that.

 

Those are the basics of credit reports and ways to bring back your credit/fix your credit.

Keep good practices to keep good credit!