What Does it Mean to Co-Sign a Mortgage?

There seems to be some confusion about what it actually means to co-sign on a mortgage and that confusion is exactly why you need to talk with a trusted mortgage professional that will seek to offer clarity.  First let’s look at why you may be asked to co-sign and what you need to know before, during and after the co-signing process.

Why are you being asked?  Last year we saw two sets of changes made to the mortgage world which can likely explain why you are receiving this request in the first place.

The first occurred early in 2016 whereby the overall lending standards were increased in regards to an individual’s management of their credit and the resulting responsibility of Canada’s financial institutions to ensure they are lending prudently.  We have seen an increase in requests for co-borrowers to help strengthen applications when credit or job stability is an issue.

The second happened in late 2016.  A new “Stress Test” rate applies which has especially impacted borrowers with less than 20% down.   They must qualify at a rate of 4.64% though their actual interest rate is much lower.  This has decreased affordability for many which means they could be looking for a co-borrower to increase how much home they can qualify for.

You need to ask questions as to exactly why the applicant needs a co-borrower.  If it is a credit issue then you need to assess if that is an acceptable risk – credit issue can be newly established credit or bruised credit. If it is a matter of not enough income, you need to assess that instead.  What is the exit strategy for you all from this joint mortgage?

What can you expect?  You will be required to complete an application and have your credit pulled.  As you are a borrower the banks will ask you for all the documentation that the main applicant has already provided.  This can include but will not be limited to:

  • Letter of Employment
  • Pay stubs
  • 2 year Notice of Assessments
  • Mortgage Statements on all properties you own
  • Bank statements if helping with the down payment
  • Property Tax bills
  • Divorce/separation agreement

In closing, the main point I want all co signers to fully understand is that the application is based on your Income and Liabilities only.  The purchaser Income and Liabilities is not taken into consideration on the application when a Co Signer is being used.

To fully understand your role as a co-signor, give me a call today!

Carolyn Munro

Cell: (204) 574-6353

Email: carolyn_munro@centum.ca

Home Buying: A Long Term Affordable Investment

One of the largest investments you make in your lifetime is a home purchase.  It can be scary and with all the media surrounding interest rates, housing costs and high level of debt Canadians are carrying it can make your head spin. However, buying a home is still an affordable, long-term investment espcially when you factor in today’s low rates.

Here is something for you to think about. In 1990, the average house price was $130,000, the average rate was 12%. This would mean your payment would have been $1,341.47 a month. The amount of interest paid over a 5-year term would have been $42,367.

Now, let’s compare to 2016. The average house price is $315,000 with a rate of 2.69%. You would be looking at a monthly payment of $1441.07. The amount of interest you would have paid by the end of your 5 year term would be $21,886!!!

The reason why I wanted to illustrate these scenarios was to offer some perspective on how affordable houses still are. While the initial down payment can be an obstacle for some, we do have programs that help you with a flexible down payment. And while a monthly rent payment helps pay down your landlords mortgage, a home purchase is a long term investment in yourself through the building of equity within your home. Today’s low rates allow you to apply more money to the principle payment on your house rather than the interest paid to the bank.

I can’t stress enough the importance of working with a mortgage professional like myself who can offer you insight and guidance. Call me today!

 

Carolyn Munro

Cell: (204) 574-6353

Email: carolyn_munro@centum.ca

The 5 C’s of Credit

When applying for a mortgage, it is common knowledge that you want to have good credit. But what does that entail? Below is a quick summary of what and how a financial institution examines your credit worthiness. It is separated into 5 categories, known as The 5 C’s of Credit!

1) Credit – The main way a lender can predict you are going to make consistent, on time payments is by reviewing your repayment history. They do this by reviewing your credit score to ensure you have a proven track record of managing money already borrowed to you.

2) Capacity – One of the most important of the 5 C’s, Capacity is the actual ability of repaying the loan. The lenders will review two things, the Gross Debt Service, as well as the Total Gross Debt Service. GDS is the costs of owning a home versus the gross income you make. TDS factors in GDS as well as any other monthly financial commitments (example a car loan or credit card payments).

3) Capital – This is determined by what you as a buyer have for an investment in the property, known as a down payment. 5% is the minimum down payment requirement.

4) Character – Is best described as a borrower’s trustworthiness of repaying a loan. This trustworthiness is proven through your length of employment and ability to save. Essentially the bank wants to see an active track record that you use your credit responsibly.

5) Collateral is considered additional security provided to the lender. The property itself and its value, location and characteristics can be considered as security, but collateral can also include outside properties or land owned, which helps lender feel “Secure” in loaning the funds.

By knowing what lenders are looking for in an application you can prepare and improve your position when it comes to purchasing your dream home. With so many products and options available, I am great a resource for information and for any questions you may have. Give me a call at (204)720-1225 and thank you for reading!

View More: http://studio78.pass.us/centummichelle

 

 

 Michelle Desmond, Mortgage Broker

 Office: (204) 727-2177

 Cell: (204) 720-1225

 Email: michelle_desmond@centum.ca

What it Means When Prime Rate Changes

With the recent increase that TD has made to their Prime rate, it leaves a lot of mortgage holders with a variable rate questioning what this means to them. Let me tell you.

First, it is only TD that has recently changed their Prime rate from 2.7% to 2.85% – so far anyway. Typically once one lender makes that change, the rest will eventually follow but for now, this only affects you if you have a variable rate mortgage with TD bank.

When a bank decides to raise their Prime rate, it could mean you will have an increase in your mortgage payment to cover the extra interest but each bank does have the option to leave your mortgage payment the same and instead adjust the amount of your mortgage payment that will go toward your principle balance vs your interest. Meaning, a little more of your mortgage payment will be going to interest and a little less to principle. This will cause you to pay more interest over the term and will leave you with a higher balance at maturity.

This is just one of the many changes that have happened in our mortgage world over the last few weeks. If you are concerned with how these changes may affect your ability to buy, your current mortgage or even your future renewal options, please don’t hesitate to contact me.

Naomi 1

 Naomi Hamm, Mortgage Broker & Partner

 Office: (204) 727-2177

 Cell: (204) 724-7290

 Email: naomi_hamm@centum.ca

Home Inspections

What are their purpose and why are they important?home-inspection

The purpose of a home inspection is to reveal any defects or flaws that a property has, so that potential buyers can make an informed decision and avoid costly surprises down the road. During an inspection, the inspector will investigate every room in the home to identify and assess possible underlying health and safety issues; they will look for structural issues, water damage, working appliances, insect or pest problems and even forecast potential future expenses.

What do they mean for homebuyers?

An inspection report can help a homebuyer decide if a property is a good fit for them or if it has too many problems to deal with, and they should consider re-evaluating. It can also be useful during pricing negotiations because it discloses issues that would likely cost the buyer additional money above the purchase price to repair; buyers can use the report to request the seller to make the necessary repairs or reduce the asking price.

Who should attend the inspection?

It’s a good idea for the buyer and their REALTOR® to be present during the home inspection so that they can ask questions and fully understand any issues if they are discovered.

Are home inspectors licensed?

In Canada, only two provinces have licensing requirements for home inspectors: British Columbia and Alberta. The Canadian Association of Home and Property Inspectors (CAHPI) has established standards of practice and codes of ethics and will award a professional designation to inspectors who meet all of the regulations.

What are the top issues to consider when purchasing a property?

Any property can host a variety of defects, but some of the pricier issues that you need to be on the lookout for include:

  • Structural problems
  • Pests and termites
  • Water damage or plumbing defects
  • Mold and asbestos
  • Wiring and electrical issues
  • Heating and air conditioning malfunctions
  • Well water complications
  • Roof leakage

 

Appraisals: What are they and Why do you need them?

Appraisals

1) What is their purpose?

A home appraisal determines the professional opinion of a property’s true market value, whether it’s a house, condominium or vacant land. Typically, appraisals are used to assist in the decision making process of purchasing, selling or refinancing a home.

2) Why are they important to have?

An appraisal helps a seller list their home for a fair price. If the value is too low, the home may sell quickly but might not retrieve the highest dollar amount possible. Alternatively, if the price is too high the home could stay on the market for months. An appraisal is just as important for buyers who need to know that the value of the home they want to purchase matches the price tag. For homeowners looking to refinance their home, an appraisal determines the amount of funds that can be withdrawn from the property.

3) What do they mean for a bank or mortgage lender?

A bank or mortgage lender assesses attributes of a property such as neighbourhood, remaining economic life and value. An appraisal will determine how much money a bank or mortgage lender will lend someone for a mortgage. Appraisals are being more commonly used as the real estate itself is the collateral for the mortgage being provided. If the value of the appraisal is lower than the purchase price offered, the buyer is responsible for making up the difference between them.

4) What is the difference between an appraisal and a home inspection?

As we mentioned before, a home appraisal determines the professional opinion of a property’s true market value.  A home inspection gives you the current condition and economic life of the different parts of the home you’re considering.  This helps you understand the current overall condition of the house so that you know of any upcoming maintenance or repairs you may need to consider.

5) Who owns the appraisal and why?

Prepared using the guidelines of the specific bank or lender, the appraisal report is considered to be the property of the bank or lender. Even if a homeowner pays for an appraisal, the lender is still considered to be the appraiser’s client and has control over whether the appraisal is shared with the homeowner or not.

6) How is value estimated?

Cost Approach
Based on the current price of materials, the cost approach estimates what the cost to reproduce a new building identical to the subject property would be. The appraiser then subtracts any accumulated depreciation due to wear and tear and adds land value.

Income Approach
The income approach determines the value of an income producing property based on the income generated. Typically, this is calculated by dividing the net operating income of the rent (gross revenue minus all operating expenses) by the capitalization rate.

CAPITALIZATION RATE = ANNUAL NET OPERATION INCOME / COST (OR VALUE)

Direct Approach
This approach compares similar properties that have sold and/or active listings. The appraiser will take comparable properties that have recently sold and consider adjustments for differences. The variations in the comparable properties will have a value determined by the appraiser based on market evidence. Example: If the property being appraised has 4 bedrooms, and a comparable property has only 3 bedrooms, an adjustment for the amount of value the extra bedroom is worth would be added to the property being appraised.

 

We hope this helps explain why an appraisal is important in the home buying process. If you have any questions, please don’t hesitate to contact any of our qualified brokers.

 

How to Use Prepayments to Be Mortgage Free, Faster!

Using your mortgage prepayment options can drastically reduce the total amount you spend on your mortgage and shorten the time it takes to pay it down.. If you follow these three steps, you can be mortgage free sooner than ever!

1. Know your prepayment privilegesMORTGAGEPAYMENT
Most mortgages have allowances for you to prepay down your mortgage faster. The standard prepayment amount allowed per payment can vary depending on your mortgage provider.

We can work together on your goals to ensure you have the flexibility you require to pay your mortgage faster. Your mortgage provider may be able to increase and decrease your prepayment privilege at any time throughout the life of your mortgage.

This means that if any life event occurs and you need to reduce your payment to the minimum, you can with ease. Most mortgage providers allow this free of charge, but with some providers you can only change your payments a set number of times throughout the year.

2. Increase your payments
Anytime you increase your payments, the excess that you pay per payment goes directly onto the principal portion of your mortgage. This is a great way to drastically reduce the interest you will have to pay over the term of your mortgage.

Typical prepayments allow you to add between 10% to 20% of your payment amount to each payment, depending on your lender. Some lenders also allow the use of “double up payments” which let you double each payment!

Here’s an example of prepayments being used on a typical mortgage:

All calculations are based off of a $400,000 mortgage with a 5 year term and 25 year amortization at a rate of 2.59% with monthly payments.

No Prepayments:
Monthly payments: $1,809.84
Principal paid over 5 year term: $60,836.51
Interest paid over 5 year term: $47,753.89
Mortgage amount remaining: $339,163.49
Years remaining on mortgage after 5 years: 20 Years

Adding a 15% Prepayment:
Monthly payments: $2,081.32
Principal paid over 5 year term: $78,201.00
Interest paid over 5 year term: $46,678.20
Mortgage amount remaining: $321,799.00
Years remaining on mortgage after 5 years: 15 years & 9 months

As you can see, the mortgage was reduced by $17,364.49 and saved $1,075.69 in interest! The mortgage term was reduced by 9 years and 3 months in only 5 years!

3. Make a lump sum prepayment
Making a large payment can be a great option for paying down your mortgage, but may not be ideal for everyone. Lump sum payments help you reduce the amount of interest you will be required to pay on your mortgage. They can also be used to reduce your mortgage amount before selling your home and will reduce the penalty you will be required to pay.

Lump sum payments are usually between 10% – 25% of the mortgage total. Typically, you can make a lump sum payment onto your mortgage once a year. Every mortgage provider has their own specific guidelines for how you can make a lump sum payment in a calendar year. Your provider may require you put down a minimum amount for a lump sum prepayment, or you may only be eligible for one on the anniversary date of your mortgage.

If you decide that prepayments are for you, you can achieve mortgage freedom sooner than ever!

Contact me today and lets set your goals into motion.

IMG_2894 Chris Turcotte, Owner/Broker

 Office: (204) 727-2177

 Cell: (204) 720-4002

 Email: chris@christurcotte.ca

 

5 Ways to Damage Your Credit Score

1) Making Late Payments

  • In general, your payment history has the strongest impact on your credit score. About 35 percent of your Equifax Credit Score, for example, is based on your payment history. That means that any late payments – whether on your credit cards, an auto loan, your mortgage, or another credit account – could cause you credit score to take a dive. Your late payment history will stick around on your credit report, too. For example, one delinquent payment that is 30 days late can remain on your credit report for up to seven years.
    • Tip: Paying your bills in full and on time should reflect positively on your credit score. To avoid a late-payment blemish on your credit report, consider using automatic payments or setting up electronic payment reminders on your phone or computer.

2) Racking Up High Balances

  • Your credit score also takes into account your credit utilization (how much of your available credit you are using). A high debt-to-creidt ratio – meaning that you are borrowing a significant portion of available credit – will generally have a negative impact on your credit score.
    • Tip: Work on keeping your ratio of debt to available credit as low as possible to help boost your credit score. Avoid carrying a balance of more than 30 percent of your credit limit because if you take on any more debt, lenders may view you less favourably. If you are carrying debt, work on paying if off as quickly as possible. Paying off your current debt may open up some of your available credit

3) Applying for a lot of Credit at Once

  • If a creditor or lender accesses your credit report because of a transaction you initiated, it will trigger a hard inquiry on your credit report. If you apply for too much credit over a short period of time, triggering many hard inquiries, your credit score could drop and lenders may view you as a higher risk.
    • Tip: Because credit scoring models consider your recent credit activity to evaluate your need for credit, only apply for credit when you really need it to avoid overextending yourself.

4) Closing an Account

  • Closing one of your credit accounts could reflect negatively on your credit score because if will change your credit utilization. If you close an account, you may lower the combined credit limit on all of your accounts, making your debt-to-credit ration appear higher.
    • Tip: While positive credit behaviour – such as paying your bills on time – will reflect positively on your credit score, you don’t need to carry a balance on all of your accounts. Instead of closing an account, consider paying off a small purchase on the account every few months, which will generally get reported to the credit reporting agencies.

5) Having a Short Credit History

  • About 5 to 7 percent of your Equifax credit score is based on the length of your credit history, and the score considers both the age of your oldest account and the most recent account opened. If you do not have at least one credit account open for at least six months or if you do not have at least one credit account in the last six months, you man not have a credit history or credit score. Without a credit history, it is difficult for creditors to determine your creditworthiness when making decisions about extending you credit.
    • Tip: If you plan to borrow money in the future, start thinking about establishing your credit history now. If you don’t have a credit history or you have a thin file, consider opening a retail, gas or low-interest credit card in order to start building a positive credit history.

Know where you stand: as you work on boosting your credit score, make sure to regularly monitor your credit report so you know where you stand. If you spot any errors on your credit report, file a dispute with the necessary agency to have the erroneous information corrected as soon as possible. 

 

Source: Equifax.com

Our 2016 Pledge To You

2016 Pledge to youFor most people, the purchase of a home is the single largest financial investment they will make.

This means that the process can be very stressful without the right support.

As a consumer, you have a lot of options when it comes to selecting the right team of real estate and mortgage professionals.  Surrounding yourself with experts who understand the market and industry can make a huge difference in your journey to home ownership.

As your Mortgage Professionals, we will work closely with you to ensure that your needs are our top priority.  We want your home buying experience to be as smooth as possible, so that you can focus on this exciting new chapter in your life.

Our pledge to you is simple.  We will:

1) Present you with options so that you can make informed decisions.

2) Communicate clearly with you throughout the mortgage process.

3) Treat you with respect and understanding.

4) Look Out for Your Best Interest®.

A home is more than just a roof and four walls.  It is an investment in your family’s future, and a place where memories are made.  It is important that you are able to make decisions based on as much information as possible so that when you look to the future, you are confident that you have done everything you can to protect your investment.

Our duty is to find you the best rate, and to ensure that your mortgage is flexible enough for your specific financial needs and goals.  We work with multiple lenders so that you can decide the best fit for your financial requirements. 

At CENTUM Mortgage Choice, our business and client relationships are built on integrity and honesty.  Our relationships are the reason we can proudly say that we are Manitoba’s premier mortgage brokerage brand.

 

The best gift for your Holidays? Keep your credit history in shape!

Credit Card PileWinter has already hit Canada, and we are approaching the Holidays very quickly.  With Holidays come the purchasing of presents and quite often credit utilization. As credit history is one of several main components of a qualifying for a mortgage, budgeting for the Holidays and, furthermore, not maxing out your credit can avoid negative surprises in 2016.

While building a budget, you need to ask yourself one of the many important questions: “What is my Holiday budget, based on my current financial situation?” The answer to this question will take into consideration your credit utilization and your future projects and goals. Several elements are considered when it comes to your Credit Score also taking into consideration your homeownership goals.  As a first time home buyer, are you or will you be saving for a Down Payment? As an existing homeowner, maybe you will be looking at refinancing or renewing your mortgage?

A few key questions should be asked in order to determine a budget for the Holidays:
1-    How much can you (and are you willing to) spend?
2-    Who are you going to purchase presents for?
3-    What does my credit utilization look like? Have I made any late payments recently? What is my actual percentage used of my credit limits?
4-    Will I have the funds during all celebrations to pay these purchases in time?
5-    How will these purchases affect my long term financial goals?
6-    How can I track my Holiday spending?

Getting by making the minimum payment is not enough. Add on Holiday spending, and even your minimum payments can become no longer affordable. Keep in mind that credit delinquency appears for 6 years on your Credit Report, therefore maxing out your credit might not be worth it. Just remember, your friends and family wouldn’t want you to go into debt for the holidays. After Christmas, to get a handle on credit card debt, make a list of your unpaid balances, match them with their interest rate, and pay down the one with the higher interest rate first.

Some of us may not have immediate home ownership or refinancing projects, but the Holidays happen every year. For those planning on ownership and refinancing, CENTUM Mortgage Professionals are always looking for your best interest and can help you accomplish your projects.  If you have any questions or require assistance we have access to tools, services and education needed to improve your credit score along with guidance on how to get there.

 

 

Source: Centum.ca