Debt Consolidation

General Monica Young 23 Jan

If you have accumulated multiple points of debt from credit cards and are also dealing with other loans (such as car loans, personal loans, etc.), you may be looking for a way to simplify your payments and help reduce them. Rolling them into your mortgage could be the perfect solution. Some of the benefits for consolidating your debt into your mortgage include:

1. Organize multiple monthly payments (credit card, line of credit, car loan, etc.) into a single payment for ease.
2. Interest rates tend to be lower on a mortgage versus credit card or car loan rates.
3. Take back financial control!

By consolidating your debt into your next mortgage cycle, you will not only free yourself from high interest rates and gouging interest payments, but will have a better overview of your monthly cash flow and be able to take back your financial control. Keep in mind, you need at least 20 percent equity in your home to be able to refinance and consolidate your debt.

For example:
If you have $30,000 of credit card debt, you are probably paying AT LEAST $600 per month – with $500 per month of that going directly to interest. If you let me help you to roll that debt into your home equity and monthly mortgage, your payment will drop to $125 per month, with interest being $70 per month. That is huge savings! Plus, it is easier to manage and pay a single monthly installment versus half a dozen loans and bills. 

While refinancing can increase your mortgage, your overall payments would be far lower and convert to a single payment versus multiple sources to save you time and stress. If you are looking for a way to simplify (or get out of) debt, please contact me today! I would be happy to take a look at your financial portfolio and current mortgage and help you come up with the best option to suit your needs.

 

Understanding Reverse Mortgages

General Monica Young 17 Jan

Did you know? Reverse mortgages are continuing to gain popularity for older homeowners in Canada!
For many Canadians who are looking to retire but currently facing high debt load and ongoing expenses,
as well as reduced income, it can be a challenge. This is where the reverse mortgage can help!
This product is also a great option for anyone wanting to assist their elderly parents. Instead of
selling the home and moving them to a care home or assisted living, a reverse mortgage is a terrific
way to access the equity in the home, month by month, to pay for in-home and ongoing care costs.
The goal of the reverse mortgage is to allow Canadians over 55 years to tap into the equity of
their home, which assists in comfortable financial living. With a reverse mortgage, however, borrowers
are not required to make regular payments. This allows them a considerable inflow of cash, without
having to pay off what they owe! The only time payment will be required is when you sell or move
out of your home.

Reverse mortgages are designed to allow you to access up to 55% of your home’s equity, thereby
allowing you to convert your home equity into cash. This can be done as either a one-time lump
sum payment, or you can choose to structure it to receive monthly payouts.

Beyond being able to cash in on your home’s equity, a reverse mortgage also has:
• No monthly mortgage payments
• No income or credit qualifications
• Very low / little paperwork required
• Title and ownership of property remain in homeowner’s name
• Flexible options to break term early if needed
• Penalty waived in the event of death or care home placement to preserve the estate

If you are struggling financially, or want to have a little extra equity on hand to pay off existing
debts, gift money to family, expand your quality of life or simply increase your investment portfolio,
contact me today! I would be happy to discuss the possibility of a reverse mortgage in further detail
with you and ensure it is the best product to suit your needs.

Q: My mortgage is up for renewal within the next 6 months, what can I expect during the renewal process?

Mortgage Tips Monica Young 27 Jul

A: Some big banks will send you a renewal letter within three months of your term, encouraging you to sign at the current posted rate to rollover your mortgage. It is important to work on your renewal as soon as possible so that your mortgage does not go past maturity. Once pass maturity, your mortgage will automatically go into an open mortgage which is at a much higher interest rate. I recommend that you speak to me to ensure you are exploring all of your options when it comes to your next mortgage term.

3 “RULES OF LENDING” – WHAT BANKS LOOK AT WHEN YOU APPLY FOR A MORTGAGE

Mortgage Tips Monica Young 14 Mar

Buying a home is usually the biggest purchase most people make and there are a lot of factors to consider. Our job is to provide you with a much information (as you can handle!!) so you make the best decision based your particular situation.

The 3 “rules of lending” focus on determining the maximum size of mortgage that can be supported by your provable (what you paid taxes on) income.

You need to consider two affordability ratios:

Rule #1 – GROSS DEBT SERVICE (GDS) Your monthly housing costs are generally not supposed to exceed 36-39% of your gross monthly income. Housing costs include – your monthly mortgage payment, property taxes and heating. If you are buying a condo/townhouse, the GDS will also include ½ of your strata fees. The total of these monthly payments divided by your “provable” gross monthly income will give you your Gross Debt Service.
Mortgage payments + Property taxes + Heating Costs + 50% of condo fees / Annual Income

Rule #2 – TOTAL DEBT SERVICE (TDS) Your entire monthly debt payments should not exceed 42-44% of your gross monthly income This includes your housing costs (GDS above) PLUS all other monthly payments (car payments, credit cards, Line of Credit, additional financing, etc.). The total of all your monthly debts divided by your “provable” gross monthly income will give you your Total Debt Service.
Housing expenses (see GDS) + Credit card interest + Car payments + Loan expenses / Annual Income

What about the other 56% of your income?? This is considered to be used up by ‘normal’ monthly expenses including: taxes, food, medical, transportation, entertainment etc.)

Rule #3 – CREDIT RATING Everyone who will be on title to the property will need to have their credit run. Your credit bureau is important because it shows the lenders how well (or not) you have handled credit in the past. This gives them an indication of how you will handle credit in the future, and will you be a good risk and make your mortgage payments as promised. If you handle credit well, you will have a high Credit Score and get the best interest rates from the banks/lenders. If you have not handled credit well, and have a poor credit score, you will either be charged a higher interest rate or your application will be declined.

To learn more, contact me today!

ZERO DOWN PAYMENT MORTGAGE–DOES IT EXIST?

General Monica Young 6 Mar

Did you know that you can buy a home with ZERO down payment?? If a home purchase is your goal this year but you aren’t able to save up enough of a down payment, you may qualify for a low or zero down payment mortgage. One of our Lenders is offering a great zero down program.

What is a Flex-Down Mortgage?
A Flex-Down Mortgage is a mortgage product that has a flexible down payment amount. There is still a down-payment required, but it will vary based on the property value.

  • For a property valued under than or equal to $500,000, 5% down payment is required (sources available below)
  • For a property valued at greater than $500,000 and less than $1 million –5% down payment is required up to $500,000 with an additional 10% down payment on the portion of the home value above $500,000.

Flex-down mortgages can only be on first mortgages, not second or third or used in refinance situations. As noted above, the total property value has to be less than $1 million. This type of mortgage will also have insurance included with it—the premium will be lesser of the premium as a % of the total new loan amount or the premium as a % of the top-up portion additional loan based on the rates at that time.

Those that choose to go with this type of mortgage product will have to meet requirements, just like any other mortgage. There are a few specifications with this product:

  • You must show that you have standard income and employment verification papers
  • A credit score of 650 or higher is highly recommended
  • You must have no previous bankruptcies
  • Some lenders may still require you to have some of the down payment from your own resources

Those considering this type of mortgage are recommended to have very little debt and be able to accommodate the additional cost of higher mortgage insurance (due to the higher risk to the lender on this type of mortgage). Typically, the insurance premium would be 0.2% higher on a flex down mortgage.

How it Works
You can borrow your 5% payment from a Line of Credit or even a credit card. This can then be used for your down payment. You have to disclose this to the Insurer and it will be on the application that goes to the Lender.

This is perfect for someone just getting into a new high paying job or for someone who is renting and can afford higher monthly payments but would take forever to save up the 5% down payment. This type of mortgage product can be an excellent option if you don’t quite have enough for the down payment. Are you interested in learning more about this mortgage product? Contact me to learn more!

5 C’s of Credit to get a Mortgage

General Monica Young 17 Jan

Whether you are buying your first home or have been a home owner for years, when you are looking at purchasing a property, finding the best mortgage solution for your specific situation can be an intimidating experience.

Working with a licenced mortgage broker will ease that tension, along with knowing the basics of what lenders are looking for will help you better understand the process.

The Five C’s of Credit/Mortgages
The five Cs of credit is a system used by lenders to gauge the creditworthiness of potential borrowers. The system weighs five characteristics of the borrower and conditions of the mortgage, attempting to estimate the chance of default and, consequently, the risk of a financial loss for the lender.

Higher Risk = Higher Rates!

Know Your 5 C’s:

Every client has individual mortgage needs when buying a home and my goal is to find a mortgage loan that’s right fit for your situation! The first step in getting the mortgage process started involves understanding what lenders are looking for in order to get mortgage approval.

The approval process is called the Five C’s of Credit and they consist of:
• Collateral– the property that you are planning to purchase
• Credit – do you have good credit? Do you have a good history of repayment for all loans?
• Capacity – Proof of being able to pay for your mortgage with your provable income
• Capital – How much equity do you have in the property? The borrower’s net worth
• Character – The borrower’s willingness to repay the loan and their reliability

1. Collateral
Collateral reflects the strength of the property itself. Lenders look at if the property is owner occupied (do you live there) or is it a rental dwelling? Is the property a home, condominium or cottage? Is the property located in a metropolitan neighbourhood or a rural area? Is there a single family living in the home or multiple families? All these factors are considered by the lender for marketability when rating your property. An appraisal is one of the tools that will be used to assess the value of the property.

2. Credit
Shows the lender a snapshot of what the borrower’s repayment history has been over a period of time. This is the only way a lender can predict the borrower’s propensity to make future payments. The credit score (also called credit history, credit report, credit rating) is the primary measurement factor.
When you borrow money, your repayment history is reported to the credit bureau – this rating is called your credit score. How do you pay your bills – always on time or sometimes a few days late or not at all, will determine what type of credit rating will apply. Some other factors that affect your credit rating are if your credit card balance is greater than 25-50% of your credit limit, if any accounts have gone to collection, or if there have been multiple inquiries into your credit.

3. Capacity

The most important by far! How are you going to pay for your mortgage? The lender’s main concern is how you intend to repay your mortgage and will consider your income (from all sources) against your monthly expenses. Proof of income will differ depending on your employment status: salaried, commissioned, self-employed, full time, or part time. Lenders will determine what types of documents are required to confirm your provable income and how much mortgage you can qualify for. This is represented as TDS Total Debt Service Ratio and GDS Gross Debt Service Ratio.

4. Capital
Capital refers to your personal net worth and how much equity you have in the property. Where is your down payment coming from? In Canada your minimum down payment is 5% for a “high ratio” insured mortgage* or a “conventional” mortgage with 20% down. The downpayment money can come from your own resources or can be gifted from a family member.

5. Character
Character is a subjective rating and basically reflects a combination of the above four factors. Your character tells a story to the lender about your individual situation. Lenders want to know that as a borrower, that you are trustworthy and will meet your payment obligations to them. Lenders will take factors such as length of employment, your tendency to save and use credit responsibly to establish your character and determine whether you are a borrower that they can trust with their mortgage.

The goal is to get a yes with your lender. The Five C’s of credit outlined above determine a borrower’s ability and willingness to make payments. Understanding what a lender is looking for allows you to set yourself up to put your best foot forward.

There you have it – the 5 C’s that lenders analyze when reviewing a mortgage application.

If you have any questions or concerns feel free to contact me!

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