29 Sep

Paperwork You MUST Keep

Mortgage Tips

Posted by: Bonnie Barker

As a mortgage professional there are things I wish more people were aware of which is why we are going to take a look into the paperwork we all need to hold onto to avoid frustration or even a decline when applying for a mortgage. Each of the following is taken from real life observations of everyday folks just like you and I.

1. Separation Agreement – When you apply for a mortgage one of the first questions we ask is marital status. If your answer is separated or divorced then the banks are going to want to see the official document. They are seeking to ensure that you do not have any alimony or child support payments which will make it difficult to pay the mortgage. The legal system only keeps these documents for 7 years after which you will not be able to get a copy. Your marital status is reported on your tax return which can trigger the request for this documentation long after it seems relevant.

2. Proof of Debts paid– Keep all records of debts you have paid! Here are three real world examples.
a) Client A has paid off her mortgage, receives verification from the bank and promptly destroys the paperwork at a mortgage burning party just like on the commercial. Due to a clerical error the debt as paid is not reported to land titles so the mortgage remains vested against the property adding additional steps when she goes to get a new loan.
b) Client B pays out his truck loan in full and receives a letter stating this. Due to a clerical error the interest accrued shows a small outstanding balance. The client believes all is well while the small debt quickly hits a written off status on the credit bureau and he is declined for a mortgage three years later.
c) Client C settles with a collection agency on a debt gone bad – The debt is not reported as paid to the credit agencies and the ‘ongoing’ bad debt causes a large drop to her score and she pays higher rates than she should. The collection agency has since gone out of business and there is no record of the payment to be found.

3. Bankruptcy/Orderly Payment of Debts – As with the separation agreement, the trustee will only keep a copy for 7 years. When you apply for a mortgage, the bank will want to ensure they were not affected by the bankruptcy and also to determine if there was a foreclosure. Even though this information is supposed to fall off the credit report that is not always the case.

4. Child Maintenance – whether paying or receiving child support, you will want to keep all correspondence in regards to this to ensure you are receiving the appropriate credit for monies paid or have been given all the money you were supposed to have received.

Emotionally you have valid reason to want each of these documents so far away from you but realistically you are likely to need them at some point. There are a number of online services such as Dropbox or Google Drive where you could scan these to yourself and save them digitally. Alternatively, you could spend a small amount of money on an accordion style file folder and go old school with actual paper copies of all of the above applicable to your situation.

If you have any questions, please contact your local Dominion Lending Centres mortgage specialist.

27 Sep

Credit Scores: Here’s what you need to know


Posted by: Bonnie Barker

The interest rate you pay on loans for every major purchase you make throughout your lifetime depends on various factors, and is dependent on your creditworthiness – everything from the mortgage on your home to your car loan or line of credit.

And, given today’s ever-changing mortgage requirements and rising interest rate environment, your credit score has become even more important.

Your first step towards credit awareness and well being is to know where you stand. Request a copy of your credit report online from the two Canadian credit-reporting agencies – Equifax Canada and TransUnion Canada – at least once a year.

This will also help verify that your personal information is up to date and ensure you haven’t been the victim of identity fraud.

Newly established credit

If you’re new to credit, you may wonder why your credit score pales in comparison to your friend’s.

Payment history is a key factor for both Equifax and TransUnion. As well, if you don’t talk to your friends about money, you may not realize that their financial situations are different from yours. Your friend with the better credit score may carry less debt than you, for instance.

Using credit properly helps keep your credit score healthy, as well as comes in handy when you don’t have the cash immediately on hand to pay for an expense. Planning for expenses helps alleviate reliance on credit – and the payment of interest.

If you use credit cards and lines of credit to your full advantage, you’ll never have to pay interest on these revolving credit products. In fact, you can use the borrowed money for free if the full amounts are paid on time.

Forgot to pay a credit card bill?

Your credit generally only takes a hit after you miss two consecutive payments.

You’ll likely see a drop of 60-100 points on your credit score instantly, and your credit card provider may end up increasing your interest rate.

Every point counts, however, so you obviously don’t want your credit score to take a hit, particularly if you plan on applying for a major loan – such as a mortgage or car loan.

Know your creditworthiness

Following are some key components that help determine your credit score.

  • Credit card debt. Aside from paying bills on time, the number one way to increase your credit score is to pay down your credit cards so they’re below 50% of your limits. Credit card usage has a more significant impact on credit scores than car loans, lines of credit and so on.
  • Credit history. More established credit is better quality If you’re no longer using your older credit cards, the issuers may stop updating your accounts. If this happens, the cards can lose their weight in the credit formula and, therefore, may not be as valuable. Use these cards periodically and pay them off.
  • Credit reporting errors. Always dispute any mistakes or situations that may harm your credit score. If, for instance, a cell phone bill is incorrect and the company will not amend it, you can dispute this by making the credit bureau(s) aware of the situation.


27 Sep

Bank of Canada Rate Change – Should I lock in?


Posted by: Bonnie Barker

This month, the Bank of Canada increased their lending rate for the 2nd time in as many months. The changes in the Prime Lender Rates means that those with a variable mortgage rates will have seen that their mortgages rates adjusted alongside the changes to Prime Rate. For those of you with variable rates, the first thing that probably crossed your mind was “should I lock in?”

Even though your interest rate may have increased, it does not mean that you should immediately lock into a fixed rate mortgage. An associate from B.C, Dustan Woodhouse had this to share about the increase:

“If your discount from Prime (now 3.20%) is 0.50% or deeper – then the variable rate product remains a really great place to be.

If your discount from Prime is 0.25% or less, then depending on which lender you are with you may consider converting to a fixed rate, BUT…

Keep in mind the penalty to prepay (i.e. refinance or sale of property) a variable early is ~0.50% of the mortgage balance, whereas if in a (4yr/5yr or longer) fixed rate mortgage the penalty can be closer to 4.5% of the mortgage balance ***depending upon which specific lender you are with and how long of a term you lock in for.

It is usually to the lenders greater benefit that you lock into a fixed rate, rarely is it to your own benefit.”

I could not have summarized it any better myself, so I won’t try.

So what should you do?
The first thing that you should be doing is avoiding the immediate draw or feeling of “I need to lock in”. There are several different aspects of your mortgage and personal financial situation that should be considered prior to locking in. There are many questions to ask yourself prior to locking in and most of which the lenders are unlikely to ask you. Your lender is re-active, not pro-active – you need to be pro-active. And sometimes being pro-active results in no action being taken at all.

Simply because the Bank of Canada increased interest rates twice, this does not immediately mean that they will do it again. There are many economic factors outside of their control that will impact their decisions regarding future potential increases.

Presently, the key is not to react quickly. If you have questions about your specific situation and how the increase may impact you, feel free to give Dominion Lending Centres mortgage specialist a call to chat about things in more detail. Allow us the opportunity to ask the questions that need to be asked prior to making a quick switch.

Food for thought…
Back in 2010 rates increased 0.25% three times, and that sat stagnant for nearly five full years before two 0.25% decreases back downward.

In other words the last time Prime was pushed as high as it stands today, it sat there for five full years. And was then cut.

The next Bank of Canada meeting is October 25, 2017.