Acceptable Down Payment Sources

General Pam Pikkert 19 Dec


                So there seems to be some misunderstanding about down payments.  It’s no wonder really given that there were a number of changes made over the last few years by the government in regards to all things mortgage.  This week we are going to take a look at acceptable down payment sources so you can achieve your dream of home ownership ASAP.

RRSP’s

You are able to utilize up to $25,000 of your RRSP for your down payment.  You will let you current RRSP provider know that you are using the funds for this purpose so that they can complete the process with the correct forms ensuring that you are not penalized for an early withdrawal.  We will need to show the lender a 90 history on these funds.  The expectation is that you will reinvest into your RRSP within 15 years.

Gift

Maybe your family is able to help with a gift?  That works too.  The gift must come from an immediate family member such as your parent, sibling or grandparent.  An official letter will be signed by all parties which states that the gift is never expected to be paid back.  You will also be required to show proof of the deposit going into your bank account.  Heads up on this one that some of our lenders now require verification of the funds in the account of your family member. 

Savings

The funds can of course come from a good old fashioned savings account or a TFSA.  Again, we will have to provide a 90 day history on this account and if you have been transferring from another account we will need a 90 day history on that one too. 

Sale of Assets

If you have a vehicle or a collection or a quad or any manner of asset that you are able to sell and we can properly document it through a receipt and proof of deposit, you have an acceptable down payment source.

Home Equity Line of Credit

Perhaps the mortgage on your current home is a Home equity Line of Credit?  If so we are able to use an advance against this for the down payment on another home.

Borrowed Funds

A few of our lenders will still allow you to borrow the down payment from an alternate source.  This could be a personal loan with set payments or a Line of credit where you are able to pay the interest only.  You must have strong credit and have been with your current employer for a minimum of 2 years to qualify for this.  We also have to factor in the repayment on the new loan as a part of your affordability ratios.

You have probably noticed a theme emerging.  We are required to provide a 90 day history of all funds being used for the down payment on a home to make sure that all funds have been legally sourced.  If you have a large deposit going into your account, the lenders will need to know where in the heck it came from. 

The minimum down payment for a purchase is 5% and you will also need to show you have an additional 1.5% of the purchase price available for the closings costs which include the legal fees, property tax adjustments, title insurance and others.

So there you have it in a pretty synopsis.  Have a great week!

Introducing new and Improved credit bureaus

General Pam Pikkert 13 Dec

                     

                You all know that when you meet with your mortgage professional a credit bureau will have to be pulled.  You are given a credit score based a set formula which uses a number of criteria to determine how you compare to everyone else in Canada when it comes to managing credit.  We have recently been informed that coming soon, your mortgage professional will be even better equipped to help you navigate the oft times tricky world of borrowing.  Changes are being made to the information we will receive when we pull your credit.  We will now have access to all of the credit scores which are used by the lenders.

Mortgage Information

                At long last your mortgage repayment history will be reported.  It seems strange that your largest debt has up to now not been included on your credit report but that is changing.   Potential lenders will now see at a glance how you are managing this debt.

The 2.0 Score

                I often meet with clients who have been proactive and pulled their own credit.  You can do so easily at Equifax.ca for a low fee.  You get a copy of your credit bureau and see your credit score. It’s a great tool if you are seeking to ensure that your credit providers have been accurate in their reporting.  But did you know that this score is often different from the score we get when we pull your credit?  It’s true. There can be a very wide spread between the 2.  But now, we will see the score that you receive through this site.

Bankruptcy Navigator Index (AKA Your BNI Score)

                This score is used over and above your other delinquency scores to determine your chances of going bankrupt.  It is relied on by credit providers offering unsecured credit like a line of credit or credit card.  If your current credit cards are all maxed out and you are applying for a line of credit this can be a red flag that you are in financial trouble and are seeking additional funds to meet your current debt obligations.

Trade Payment Information

                This score gives a comprehensive snapshot of your paying habits over the last 36 months.  If we can see an increasing tendency to pay things later and later or perhaps only the minimum due, a new credit provider may be concerned that you are getting in over your head.

Telephone Numbers

                In this day and age it is common for people not to have a home phone line and rely on only a cell phone.  Now, the numbers you provide when you apply for new credit will be a part of your credit bureau.  That means that past credit providers will be able to find you in case of delinquencies.

Cell Phones

                Now this one isn’t new but it is important my friends.  Your cell phone providers now report to the credit bureau agencies.  Pay your bill on time so that you are not negatively affected later.  How can a mortgage lender feel confident in your ability to repay your mortgage on time when you cannot manage a $100/month obligation?   Set yourself a monthly reminder on your phone to pay this and your other bills too.  The onus is on you to make sure you meet the due by date for this and all of your bills.

What this all means to you is that your mortgage professional will now be able to see exactly what he lenders and the mortgage insurers see.  We can help you mitigate any potential problems before you start house hunting or apply to refinance which can save you headaches and heartache later. 

 

Getting Rid Of debts

General Pam Pikkert 1 Dec

                                             How to Get Rid of that Pesky Debt

 

So let’s be honest, the upcoming holiday season may cause you to increase your debt load as you hunt for that perfect gift for everyone on your list.  You may be starting to get that sick feeling in your stomach when you let your mind skip ahead to when those bills arrive in January.  Don’t get overwhelmed.  There are proven strategies to pay down debt and this week we are going to take a look at a few of them so you can decide which one is best for your situation.

Consolidation

This one is pretty self-explanatory.  You apply for a larger loan which is used to payout all of the smaller debts.  The net result is that you have one payment per month which is often at a much lower rate of interest than those offered on your credit cards.  There are 2 types of loans that could be a fit for you.

Line Of Credit – You can head over to your local bank or mortgage professional and apply for this one.  The minimum payment on this is usually only 1% of the balance you carry and the funds are available to use again after you pay down the balance.  A note of caution is that if you only ever make the interest only payments you will always owe the same amount. 

Consolidation Loan – This type of a loan will have a set amount and a finish line.   That’s nice when setting a monthly budget.   It will not allow you to re-advance the funds after you pay it down which can also be a plus when you are working to get out of debt.

 

Refinancing Your Home

So the government came in a few years ago and made this much harder to do.  The maximum mortgage you can take on your home is 80% of its value through the mainstream lenders and up to 85% through the alternate ones.  The benefit is that you can pay out all of your debt and often end up with a substantial monthly savings.  The down side is that your debts are now payable over a much longer period which equals a higher total cost of borrowing.  You are also looking at legal fees, appraisal costs and possibly a penalty to break your current mortgage.  Factor in all the costs when making your decision.

Top Down

This method is a total do it yourself type of process.   It will require you be disciplined and methodical for sure.  You will first sit down and figure out which credit card has the highest interest rate.    Basically, you drop all of the other payments to the minimum amount those companies require.  You take the total amount which would have been paid to all the companies less the minimum payments and pay the first company a larger amount until you hit a $0 balance.   Once the first one is paid off you take that amount plus its now gone minimum payment and apply it all to the next account.  And so on and so on until you are debt free. 

Experts say that writing your goals exponentially increases your chance at success so be sure to do just that.  It’s also really important to celebrate your achievements.  Becoming debt free can be really hard so give yourself a pat on the back each milestone you achieve.

Now that you are enjoying you debt free existence make sure to be smart enough to put that money into a savings account then next Christmas you can pay cash and spare yourself the stress that this year brought.  Until next time.