Unimor Capital Corporation

Category: News

  • How You Can Benefit from Other Home Buyers’ Mistakes

    How You Can Benefit from Other Home Buyers’ Mistakes

    Most homeowners admit to making at least one mistake when they purchased their home, according to the 20th Annual RBC Home Ownership Poll. Listed below are the top mistakes made by first-time home buyers:

    The Property Needed Work
    Even those buyers with home inspections encountered issues after they moved in.

    Not Having a Bigger Down Payment
    A small down payment meant that many buyers found themselves overwhelmed by the costs of keeping a home.

    Not Getting a Home Inspection
    By skipping this step, some buyers found themselves faced with astronomical repair costs. Particularly those who had purchased older homes with ancient plumbing and wiring.

    Not Knowing the Closing Costs
    Some ill-informed buyers didn’t account for additional costs such as the land transfer fees, the title fee, lawyer’s charges etc…

    Not Getting Pre-approved for a Mortgage
    By not obtaining a pre-approval, many home buyers fell for homes that were out of their price range.

    Falling in Love with the Wrong House
    Buyers found they ignored obvious structural or electrical problems because the home had 10’ ceilings or a great stone fireplace. Beware of buyer’s remorse.

    Not Checking the Market Value of the Neighbourhood
    Some purchasers paid too much for homes that were renovated above and beyond neighbouring properties. This may price them out of the market when it comes time to sell.

    Focusing on Interest Rates
    New buyers felt compelled to buy because mortgage rates were low. Experts recommend buyers focus on the mortgage product that works for them instead of just trying to score a super-low rate.

  • What Do Mortgage Lenders Look For?

    What Do Mortgage Lenders Look For?

    When lenders like banks and credit unions are assessing your ability to qualify for a mortgage, they will look at two factors.  First, they want to make sure you have the ability to make the mortgage payments.  Second, they want to measure your willingness to make the mortgage payments.  These two factors are categorized and are simply known as the Five C’s of Credit.

    Following is a brief explanation of each of the Five C’s:

    Capacity
    Are you able to repay the loan? This is the most critical of the Five C’s. Lenders assess your capacity by reviewing your debt and payment history, something usually found on your credit report.

    Capital
    This is the amount of money that you have to invest in the property yourself. A lender likes to share some of the financial risk with the borrower. Under some circumstances, a lender will grant a loan with little or no capital if there is exceptional strength in the other four C’s.

    Character
    This is a grey area. It’s an impression of how trustworthy you are to repay the mortgage. Lenders look at your length of employment to establish how secure you are, and they will look at your ability to save and to manage your credit as keys to your character.

    Collateral
    This is a guarantee in the form of security for the loan. In the case of a mortgage, it’s the property itself.  Collateral can also come from a third party who will guarantee the loan.

    Credit
    This is your credit history. This is essentially the only way a lender can predict your willingness to make future payments.

  • How to Calculate Mortgage Payout Penalties

    How to Calculate Mortgage Payout Penalties

    Understanding how to calculate a mortgage payout penalty can help you decide whether or not it’s wise to go that route.

    There are two types of mortgage payout penalties. The first is Interest Rate Differential, or IRD. The second is three months’ interest. If mortgage rates are lower than when you got your mortgage, the lender will usually charge IRD. If rates are higher than when you got your mortgage, the lender will usually charge a three-month interest penalty.

    When calculating a penalty, you need to know your current mortgage rate, the lender’s posted rate on the term closest to the remaining time on your mortgage term and your mortgage balance.

    As an example, let’s use the following conditions: mortgage balance today of $200,000; interest rate at the time the mortgage closed 5%; three years left in the term; three-year posted rate is 3%.

    Calculating the IRD:

    Mortgage balance x (difference between mortgage rates) x remaining years in term = payout penalty
    $200,000 x (0.05 – 0.03) x 3 = $12,000

    Calculating Three Months’ Interest Penalty:

    Mortgage balance x 3 months’ interest = penalty
    $200,000 x (0.05 x 3/12) = $2,500

    These calculations are to be used as a guide only. Your mortgage lender may use slightly different values. Please speak with your mortgage professional to confirm actual penalties.

  • What First-Time Home Buyers Need to Know

    What First-Time Home Buyers Need to Know

    With record-low interest rates that may go away in the distant future, many would-be first-time home buyers are considering their options with regard to buying a home. In preparing to purchase a home, it will help to know what lenders are looking for when buyers apply for a mortgage with them. There are four components: down payment, credit, income and assets, and appraised value of the property.

    Down Payment – Putting down at least 25% is ideal, in that buyers can avoid having to purchase mortgage default insurance on their loan. The higher the loan to value ratio, the more risk the lender is being asked to take on. This will result in higher interest rates for the buyer.

    Credit – There are several components to this, including total debt, recent payment history, and ability to manage credit over time. These items give the lender a picture of the buyer’s ability to manage obligations over time. Of the above items, recent payment history is probably the most important. Prior to taking on a mortgage, buyers who are having issues making monthly payments such as those on a car will face questions as to how they will be able to manage after they move into a home.

    Income & Assets – Lenders are looking for two to three years of stable employment history from borrowers. They use two ratios to determine if buyers qualify from an income perspective. The first is the GDSR, or Gross Debt Servicing Ratio. This is the ratio of total shelter expenses (mortgage, taxes, insurance) to gross income. Lenders are looking for this number to be in the 30% to 32% range. The second ratio is the TDSR, or Total Debt Service Ratio, which is the ratio of all financial obligations to gross income. Lenders here are looking for 40% to 42% maximum.

    Ideally buyers will obtain a mortgage in which the principal and interest components of the payment amount will remain constant for as long as possible.

    Should property values decrease, even if the income of the buyer remains the same, being able to refinance the mortgage at the end of the term could prove to be out of the question, at any rate. As far as assets go, the lender will want to know where the down payment is coming from, which could be from the buyer’s savings or perhaps via a gift from a close relative.

    Property Value – The lender needs to know if the property is worth what the buyer and seller think it is worth. If there is a difference between the appraised value of a property and the contract price, the lender will take the lower of the two.

  • What You ‘Should’ Do with Your Tax Refund

    What You ‘Should’ Do with Your Tax Refund

    If you’re getting cash back this year from filing your income taxes, hold off on booking those plane tickets. There are ways to get the most ‘bang’ for your refund bucks.

    1. Contribute to a Registered Retirement Savings Plan (RRSP)

    If you spend your RRSP refund… you unknowingly end up investing less than you started with, and less than most think. If you spend your RRSP refund, you are converting dollars that have already been taxed into RRSP dollars that will be taxed again later when you withdraw the funds. Many people mistakenly think that if they put $3,000 in their RRSP and spend their refund, they’ve added $3,000 to their retirement fund. But if you’re in a 40% tax bracket and spend the $1,200 refund, you’ve only invested $1,800 of the $3,000 you started with. And if you reinvest that $1,200, you’ve already contributed $4,200.

    2. Pay Down Debt

    Attack those high-interest debts first. Credit cards and unsecured credit lines can charge interest ranging from 6 to 21% and can be a real strain on cash flow, preventing you from getting ahead. With credit cards typically charging 19 to 21% on unpaid balances, you are unlikely to find an investment that will guarantee you a higher return to justify investing rather than paying off debt.

    3. Put the Money Towards Your Mortgage

    This isn’t necessarily for everyone, but there are good reasons to consider making a lump-sum payment. Even though mortgage rates are very low, we know they will go up eventually. By putting a lump sum down on the mortgage now, the payments when you renew the mortgage may still be manageable. Using your tax return to pay down your mortgage will not only give you a guaranteed rate of return, but it will also ensure that you’re mortgage-free sooner and save you thousands in interest over the life of your mortgage.

    4. Open or Contribute to a Tax-Free Savings Account (TFSA)

    If your income is currently below where you project it to be at retirement, you may want to look at maximizing your TFSA. Similar to an RRSP, this account allows you to earn investment returns tax free. Although you receive no tax deductions, you are consequently not taxed on withdrawals. Not having any contribution room left for an RRSP is another argument for contributing toward a TFSA.

    5. Get Smart About Saving

    If you have children, keep in mind just how costly their post-secondary education is going to be. By catching up on RESP (Registered Education Savings Plan) contributions, you can receive up to a 20% matching contribution from the Canadian Government in the form of a Canadian Education Savings Grant. That’s an impressive rate of return on investment without taking any risk. Another option is to spend the funds on your own education as a means to improve your skill set and move up the ladder or transition to another career altogether.

    6. Look into Life Insurance

    It can be hard to see the benefits of this investment, but it’s worth remembering that anything can happen. Life insurance is essential, especially for young families. You need to cover your debts and protect from loss of income to ensure the well-being of surviving family members. Even though life insurance can be inexpensive, some young families have a difficult time finding the cash flow to pay for it. Using a tax refund to fund the annual premiums can be a way to not affect day-to-day living expenses but still ensure you and your family are protected in the event of premature death.

  • Discover How Your Credit Score is Calculated

    Discover How Your Credit Score is Calculated

    Credit scores are based on a calculation system derived by FICO (Fair Isaac Corporation):  a company that developed a rating system to apply to your credit report that predicts how good or how risky you are with your credit.

    Scores are between 300 and 850 and just like your high school report card, the higher the number the better your score. There are five categories within the model that have specific weightings:

    Payment History: Your payment history makes up 35% of your credit score. It scores on how you’ve repaid your credit cards and loans. Missed or late payments and collections lower your score. Bankruptcy, credit counselling, settlements and liens also lower your score.

    What You Owe: The amount you owe is 30% of your credit score. The amount you owe on credit cards, credit lines and other revolving credit is compared to your total credit limit. On loans, the amount you owe is compared to the original amount borrowed. If you owe more than 75% of your total credit limit, your score drops.

    Length of Credit History: The length of time you’ve had and used each account is 15% of your credit score. The amount of time since the last activity on the account makes up part of this score.

    New Credit: The new credit section is 10% of your score. It consists of recent credit inquiries and the time since the inquiries were made. The new credit section also scores on accounts recently opened and the time since they were opened. An important part of this score is how you’ve rebuilt your credit after credit problems.

    Types of Credit Used: The type of credit used is 10% of your credit score and reports on the types of loans or revolving credit you’ve used.

  • How to Make Tax Time a Little Less Stressful

    How to Make Tax Time a Little Less Stressful

    Filing taxes without preparation is like running a marathon without training. It is a long, hard go. With good preparation, filing your next tax return will be more like a walk in the park. So start getting ready now and learn how to make tax time a little less stressful!

    Develop a System
    Create a practical filing system for your financial papers. First, make files for the categories required on your tax return. When next year’s deadline comes, everything will be pre-sorted. Group non-tax-related items into categories, and make a file for each category.

    Record Income & Expenses
    Keep a day-by-day record of all money coming in and going out. Close acquaintance with your financial situation leads to easy tax filing and eventually to prosperity. Keep receipts for everything, and make notes of small cash outlays. Update your records at least once a week. Pay bills on time and send invoices promptly. Acquiring this habit saves money and reduces bookkeeping.

    Use Software
    With simple bookkeeping software, easily track and calculate financial data. Spreadsheet programs, such as Excel and Numbers, provide tremendous flexibility and portability.

    File the Backlog
    File any piled-up documents for previous tax years. Get the job done with least effort by following this rule: If you touch a paper, file it.  Securely dispose of any unnecessary documents.

    Get Help
    The assistance of a professional bookkeeper or accountant is valuable for saving time and effort, as well as for ensuring accuracy. On the Internet, you’ll find many qualified, low-cost virtual assistants who will help you to set up a good system and to keep it running smoothly.

  • Mortgage Approval Tips

    Mortgage Approval Tips

    For some buyers, getting financed can be a daunting task. It’s even more difficult if you’re self-employed. Working with an expert to navigate the application and fulfillment process is crucial. The following are several ways you can maximize your chances of getting approved for a mortgage:

    • Disclose all the properties you own. You have to tell your mortgage agent about all the properties you own and the mortgages involved.
    • Keep your taxes up to date. Lenders may decline your application if you owe taxes to Revenue Canada.
    • Communicate your reason for purchasing. Showing that you know what you’re looking for will make it easier to get the financing required.
    • Make sure your property meets minimum requirements. Each lender has different guidelines; we can help to make sure these are all met.
    • Know your down payment source. This is critical, as lenders want to know that the deposit is liquid and accessible.
    • At the time of application, keep your current financial situation stable. For the best rates, all income needs to be verifiable.
    • Be conservative with the value of a property. Purchasing a house beyond your means can become problematic in the future when you leave yourself with little to no disposable income.
    • Don’t look for the lender with the cheapest interest rate and then try to fit the lender’s policy. We can help you plan your financing and structure your loan with the features you need.
    • Use a mortgage broker. The paperwork that lenders require can be significant, and it’s important to get it right. We are here to guide you through the whole process.
  • Pay Off Your Mortgage Early

    Pay Off Your Mortgage Early

    Paying off your mortgage may be the best investment you can make. A recent Canada Mortgage and Housing Corporation (CMHC) survey found that 68% of homeowners felt they could pay off their mortgage at a faster rate. You could be one of them; here are some ways to save money and pay off your mortgage early.

    Accelerate your payment frequency
    This is a very popular way to pay off your mortgage sooner. If you’re making monthly payments on a $300,000 mortgage with a 3.00% interest rate amortized over 25 years, it will cost you $125,920.44 in interest. By increasing your payment frequency to accelerated bi-weekly payments, you will shave off nearly three years of your amortization schedule and save $16,058.57 in interest.

    Round up your mortgage payment
    This also can be relatively painless. Every dollar counts when it comes to paying off your mortgage. If your accelerated bi-weekly mortgage payments are $543, consider rounding up to $600 instead. The extra $57 will save you thousands of dollars in interest over the term of your mortgage, and you’ll barely notice the difference in your monthly budget.

    Refinance to a shorter-term amortization
    You can refinance into a mortgage for 10, 15 or 20 years. Your payments will be higher on a longer-term loan, but perhaps not as high as you think, especially in the current low-interest rate environment.

    Make lump-sum payments
    Adding just $1,000 extra to your mortgage per year will allow you to pay it off four years sooner, and combined with accelerated bi-weekly payments, it will slice off an additional $8,000 in interest. You won’t miss the $1,000, especially if you save it up over the year.

    Consider a lower rate
    With today’s low mortgage rates, it doesn’t hurt to negotiate a better rate. The difference between a 2.99% rate and a 3.20% rate adds up to about $6,000 in interest over the mortgage term.

    Paying off your mortgage early may not seem like a big deal, but when you’re ready to retire, you will thank yourself!

  • What Does ‘Pre-Approval’ Mean?

    What Does ‘Pre-Approval’ Mean?

    Getting pre-approved by a lender makes it easier for buyers to find the home they want within their price range. However, it does not guarantee you’ll get the mortgage. It is simply a certificate saying that through a quick calculation of your finances, the lender has determined what you can afford.

    During the pre-approval, the lender will also fix the interest rate, which is usually good for between 60 and 90 days. If a better rate promotion occurs during the buyer’s fixed period, the buyer is usually eligible for that as well. It is likely the pre-approval will lead to a mortgage, but there have been situations when this has not been the case. The best way for buyers to ensure success is to understand what the lenders look for and to be prepared. Another way is for buyers to work with their mortgage broker, who can flag any potential challenges.

    A lender will determine a buyer’s debt load by calculating the Gross Debt Service (GDS) Ratio and Total Debt Service (TDS) Ratio. The GDS Ratio is the proposed housing costs, including mortgage payments, taxes, heating costs and 50% of condo fees, if applicable, and shouldn’t be more than 32% of the buyer’s gross monthly income. TDS calculations take into account all the buyer’s other debt obligations and shouldn’t be higher than 40%.

    Once a buyer has made a conditional offer on a home, the lender will gather all the documentation required to approve the mortgage, including a credit report. Other items a lender will need are a letter from an employer confirming the buyer’s salary, information about other sources of income, bank accounts, loans and other debts, proof of financial assets, sources of the down payment and deposit, and proof that the buyer has the funds for closing costs.

    Problems can crop up during the mortgage approval process. For example, the buyer’s credit score may be too low, the buyer might not have the right source for the deposit funds or the closing costs may not have been deposited in an account. The buyer’s GDS and TDS ratios might also be too high.