Unimor Capital Corporation

Category: News

  • Unlocking Mortgage Affordability

    Unlocking Mortgage Affordability

    As a trusted mortgage broker serving the vibrant city of Windsor, I understand the importance of helping prospective homebuyers determine their mortgage affordability. Buying a home is a significant financial commitment, and understanding how much of a mortgage payment you can afford is crucial for long-term financial stability. In this article, we will explore the rules of home affordability, discuss how your monthly payment is calculated, and shed light on other factors to consider when determining your affordable mortgage payment.

    The Rules of Home Affordability: Before diving into mortgage calculations, it’s essential to understand the rules of home affordability that guide borrowers:

    • Gross Debt Service (GDS) Ratio: The GDS ratio is the percentage of your gross monthly income that can be allocated toward housing costs. It includes mortgage payments, property taxes, heating expenses, and half of any condo fees (if applicable). Lenders typically prefer a GDS ratio of 35% or lower.
    • Total Debt Service (TDS) Ratio: The TDS ratio encompasses all your debt obligations, including housing costs, credit card payments, car loans, and other loans. Lenders generally recommend a TDS ratio of 42% or lower to ensure you can manage your overall debt load.
    • Mortgage Stress Test: Since 2018, borrowers in Canada must undergo a mortgage stress test. This test assesses your ability to manage your mortgage payments at a higher interest rate than the one you will actually receive. The minimum qualifying rate is the greater of the Bank of Canada’s five-year benchmark rate or the contract rate plus 2%.

    Calculating Your Monthly Mortgage Payment: To calculate your affordable monthly mortgage payment, follow these steps:

    1. Assess Your Financial Situation: Begin by evaluating your income, including stable sources such as employment, self-employment, or investments. Take into account your monthly expenses, including debts and other financial obligations. This assessment provides a clear picture of your financial health.
    2. Determine Your GDS & TDS Ratios: Calculate your GDS and TDS ratios by dividing your monthly housing costs and total debt obligations, respectively, by your gross monthly income. Ensure that your GDS ratio remains at or below 35% and your TDS ratio at or below 42% to meet lender guidelines.
    3. Consider Your Down Payment: Determine the amount you can allocate for a down payment. In Canada, a minimum down payment of 5% is typically required, but a higher down payment can lead to lower monthly payments and potential cost savings over the long term.
    4. Factor in Interest Rates & Terms: Consider prevailing interest rates and loan terms. Your mortgage broker can provide you with up-to-date information on interest rates and assist you in selecting the most suitable loan term for your financial goals.
    5. Include Additional Costs: When determining your affordable mortgage payment, consider other expenses related to homeownership. These may include property taxes, home insurance, maintenance costs, and potential condo or strata fees. These additional costs will affect your overall affordability.

    Other Considerations for Mortgage Affordability: While calculating your monthly mortgage payment is a crucial step, it’s essential to consider the broader financial context. Here are a few key factors to keep in mind:

    • Emergency Fund: Building and maintaining an emergency fund is vital. Unexpected expenses can arise, and having a financial cushion will provide peace of mind and ensure you can comfortably manage your mortgage payment even during challenging times.
    • Future Goals & Lifestyle: Consider your long-term goals and lifestyle when determining your mortgage payment. Assess how homeownership fits into your plans, such as career growth, starting a family, or other major life events. Balancing your mortgage payment with other financial aspirations is crucial.
    • Homeownership Costs: Remember that homeownership comes with additional costs beyond the monthly mortgage payment. These may include utilities, home maintenance, renovations, and potential increases in property taxes. Evaluating these costs will help you estimate the overall financial responsibility of owning a home.
    • Seek Professional Guidance: As a Mortgage Broker, I strongly advise seeking professional guidance throughout the homebuying process. A knowledgeable mortgage professional can help you navigate the intricacies of mortgage affordability, assist with pre-approval, and provide personalized advice tailored to your specific circumstances.

    Determining how much of a mortgage payment you can afford is a vital step in achieving your homeownership dreams. By adhering to the rules of home affordability, calculating your GDS and TDS ratios, and considering your down payment, interest rates, loan terms, and additional homeownership costs, you can establish an affordable monthly mortgage payment. Additionally, evaluating factors like emergency funds, future goals, and homeownership expenses will contribute to a well-rounded financial plan. As an experienced Mortgage Broker, I am here to provide expert guidance and support throughout your homebuying journey, ensuring you make informed decisions for a bright and financially secure future.

  • Protecting & Preventing Yourself Against Identity Theft

    Protecting & Preventing Yourself Against Identity Theft

    In an era where technology has become an integral part of our daily lives, it’s increasingly important to understand the risks and measures associated with identity fraud. Ontario, being Canada’s most populous province, is no exception. It is essential for its residents to be equipped with knowledge and tools to protect their identity.

    Identity fraud refers to the deliberate use of another person’s identifying information, usually for financial gain, through deception. This may involve credit card fraud, online scams, or even mortgage fraud. In 2021, the Canadian Anti-Fraud Centre reported over 50,000 instances of identity theft and fraud, with victims losing more than $107 million. And those are just the reported cases. Now more than ever, your identity is under attack as people look to seek out information for those unlawful purposes and it is important to protect yourself against those trying to get your information.

    How can you protect yourself?
    First, it is important to know that you are protected before something happens. It is important to look at your property insurance policy, as many insurance providers have included and offer additional coverages protecting you and your family in the event of identity theft. While some companies offer this additional coverage free, others have it optional for a minor cost which can be added to any homeowner or property policy, including a tenants policy. Typically, insurance providers will offer two variations of the coverage to specified limits of $25,000 and $50,000. While in the event of using this coverage would result in a ratable claim, depending on the severity of the claim, may be beneficial to you and your family.

    When you are protecting yourself, it is important to be vigilant and act cautiously. One of the most common ways of identity theft comes from the technique of phishing. This technique uses correspondence which looks official but is not. It comes in various forms from emails and text messages to phone calls and websites. These sites and communications are designed to look and sound similar to those of reputable sources, but will often times ask for personal information in which the real sites do not. In some cases, the phishing attempts will try to get the user to act swiftly and not think, anyone can be prone to these attempts.

    Below are several ways you can proactively protect yourself:

    1. Never provide your SIN, especially online or over the phone. Do not utilize it as a personal form of ID. Typically it will be only required during in-person scenarios. In the event someone is asking for it take precautions to ensure it is needed and it is a trusted source.

    2. Be cautious online and over the phone. Often if someone or something is rushing you, there is cause to be concerned and potential that you are being targeted for phishing. In the event that you feel you are, you can always end the call, or site navigation and contact the company or organization directly to confirm if it is valid.

    3. Keep your address current with all your mail in terms of bills, government agencies and any mail for that matter. Keeping your address current allows you to ensure that you are protecting yourself and that vital information from getting in the hands of the wrong people. You can take it a step further when protecting your address, when discarding mail you can cover up your address with ink, to ensure adequate protection. Shred sensitive documents and information when possible. Shredding is the safest way to protect sensitive information.

    4. Check and keep regular tabs on your credit cards as well as bank accounts. Credit cards are one of the most common forms of identity theft. With how quickly it is to make purchases, they can spend hundreds to thousands of dollars minutes. It is important to monitor your cards and ensure there are not any fraudulent charges and purchases. The quicker you report lost or stolen cards the better. With the popularity of mobile banking, you should easily be able to monitor purchases as well as freeze cards in the event they are lost or stolen.

    5. Take the precautions when you are online and signing up for various accounts. When it comes to passwords, it is important to not reuse passwords, while also utilizing multi-factor authentication when possible. When creating security questions, it is important to choose something which you will remember but also something that strangers would not be able to guess easily. This would include common questions like your mother’s maiden name, your pet names and other information in which you also may post online. It is also beneficial to continually update and change your passwords in-order to prevent your sensitive information being exposed and also prevents your passwords being subject to a data breach.

    6. Think digital, consider using a digital wallet as opposed to a physical wallet when possible. With how connected we are and how much we utilize our phones, making this switch will be an effective use of your time but also provides additional security measures in place. There is also the added benefit of not misplacing or losing your wallet and purse. Losing your wallet or bag, along with general transactions through a fraudulent or tapped terminal are common ways for identity theft. Typically, when utilizing a digital wallet, transactions are often tokenized and encrypted, making them safer.

    7. When possible, avoid using public Wi-Fi and when connected to public Wi-Fi, do not make any sensitive transactions such as mobile banking, logging into accounts or shopping. Typically, public domains are unsecure, and hackers can potentially see what it is you are doing and skim sensitive information from your session. This skimmed or stolen information can be utilized for fraudulent charges, opening false accounts and other forms of identity theft.

    8. While public domains are one thing, data breaches are another. While there is benefit to internet browsers, cellphones, computers, and other password storage locations, it is important to monitor those and ensure that your information has not been subject to data breaches. A data breach is when hackers target a database or organization with a specific attack to pry information from their online database. Sometimes you will get the alert on your iPhones or tablets that your information might have been subject to a data breach, and it is recommended that you take action to protect yourself. Going hand and hand, regularly changing your password, using strong passwords, utilizing a digital wallet and avoid conducting secure transactions on public domains are some ways in which you can prevent yourself from becoming a victim of a data breach.

    9. One of the other forms of data breaches and common forms of identity theft comes from malware. This comes from visiting an infected or untrusted website, downloading files with infected files embedded in the original download, or even simply opening an email attachment. Malware typically can install malicious software on your devices such as a keylogger, which monitors, tracks, and logs every stroke of the keys on your device. Being cautious on the links and websites you click as well as utilizing a password manager can help to prevent falling victim to malware.

    In conclusion, practicing caution and being aware of both your actions and surroundings are some of the easiest and simplest ways to take measures into your own hands and ensure that you do not fall victim to identity theft. In the event that you fall victim to identity theft, it is important that you contact your banking institution as well as local police and the RCMP’s Phonebusters by email at info@phonebusters.com or call 1-888-495-8501.

    Falling victim to identity theft happens, whether it was your fault or not, it is important to remain calm and not to be hard on yourself. Situations can be fixed over time, and it can also serve as a learning experience. As mentioned, banks, credit card companies and even your property insurance have put systems in place to help protect you from and prevent catastrophic losses.

  • Spring Has Sprung, Now It’s Time to Get a Jump on Your Spring Cleaning

    Spring Has Sprung, Now It’s Time to Get a Jump on Your Spring Cleaning

    With temperatures on the rise and the nice weather quickly approaching, time is running out to get your spring-cleaning chores completed before summer is here. We know you’d prefer to spend time with all of your friends and family for the entertaining season, then think about cleaning the gutters or washing windows. So let’s jump into spring cleaning before the party starts.

    Spring cleaning in general refers to a specific seasonal time to complete chores around your house and property that you typically only get to once a year, both inside and outside. The best time to get started is March through May, before the warm weather is here to stay and you’d rather be sitting on your patio enjoying the warm sun. Some of the most common chores to get done are cleaning windows, airing out your mattress and cleaning out closets or the garage. But let’s take a step back before you get overwhelmed.

    Where do you start?
    Start with the basics. Eliminate the clutter before making more. Everyone’s home is different and in different shape but starting to clean out your fridge, pantry, closet and other odds and ends is a good start. It’s also rewarding to see progress made and empty space from the decluttering process, which will keep the momentum going. Once you have decluttered prepare yourself—ensure you are stocked up with ample cleaning supplies and assess the situation, develop a plan ranking which area needs to be prioritized. Whether it’s high traffic areas first or the dirtiest area first, everyone has a different starting point, but it’s important to develop a plan so as not to get sidetracked or distracted in the process. Every destination features a road map on how to get there.

    Keep yourself entertained. Whether you are getting children involved or have an audiobook, a podcast, or a playlist of your favourite jams, make the most of the situation. Something small like this can help take your mind-off the task at hand and eliminate distractions or the desire to quit prior to completion.

    As mentioned, spring is here, and summer is knocking at the door. And with summer knocking at the door so too are the dinner parties and entertaining, which means people in the kitchen. Often overlooked, the cupboards in the kitchen can be something so quick and easy to clean and organize. We don’t realize how much time is spent in the kitchen, which is why it’s so important to be spotless. Take pride in your home. Doing a deep clean annually positions you for success and makes it easier to maintain throughout the year. Most people don’t enjoy cleaning, but why not make it easier where you can.

    Areas to focus on…
    With just 24 hours in a day, more time is spent in your bedroom than any other room in your home. With that in mind, it’s time to recharge your mind and body. We all know the feeling of a good night’s sleep so what if we can do something to make that feeling better and more consistent?

    Utilize spring cleaning as an opportunity to do so. Remove those winter sheets, blankets and quilts and toss them right in the washing machine before putting them away until the fall. From there, take it a step further, throw your pillows in the wash and give them a good cleaning, prolong their life, and getting rid of any allergens. This is also a good time to wash your mattress protector and flip or rotate your mattress. Having a fresh, clean bedroom could help you sleep better, and your body will thank you.

    Don’t forget about the ceiling fan and don’t be afraid to move stationary furniture around to get rid of the dust and debris that accumulates over time. You don’t want to see what it looks like if you skip this spring-cleaning task and leave it to next year. Moving furniture and cleaning every spot in the room also provides you an opportunity to make sure there are no leaks within the room, no mold, mildew, or other spots of concern.

    The Forgotten Areas…
    Wait, there’s more, every house has a dark corner that’s forgotten about. While in the kitchen, do not forget about the freezer. Go through it, getting rid of expired or freezer burnt foods, see the inventory of food you have, you never know what’s hiding in there! All of those hard-to-reach spots, like your light fixtures, ceiling fans or curtains, could also use some love as well. Give them a good scrub and you’ll breath a little easier, no really… a clean house can help with allergies. Eliminating any particles in the air can improve the breathing quality in your home.

    Feeling overwhelmed or overworked?
    Any progress is forward progress. Whether it’s a whole days worth of cleaning or a few hours. Any time spent is positive time and is an improvement. Don’t worry if there’s still things left, take your time. Rome wasn’t built in a day and if you rush yourself cleaning you won’t do a good job and it will just pile on next year.

  • Planning & Establishing a First Home Savings Account

    Planning & Establishing a First Home Savings Account

    Saving up for your first home can be stressful and challenging in this ever-changing market. Recently the federal government of Canada has created a way to help make the process a little easier, so you can begin saving sooner.

    In the 2023-2023 budget, they announced several measures to help Canadians who are trying to save money for a down payment on the purchase of their first home, by creating a First Home Savings Account (FHSA). This new savings account is open to eligible taxpayers starting in April 2023.

    Contributions to the Plan

    This new benefit is open to any resident of Canada who is at least 18 years of age and has not lived in a home which they own in any of the current or previous four years. If criteria are met, you are able to open the plan, contributing up to $8,000 annually. Contributions can be made annually, ending at the end of the calendar year. Unused portions of contributions can be rolled over into the following year. Regardless of the timeline, the maximum you can contribute to this plan is $40,000. Contributions under this plan are similar to contributions made to RRSP accounts.

    Withdrawing from the Plan

    On a qualifying purchase (when money from the fund is used to make a purchase of a qualifying home) the money contributed, as well as any investment income, are able to be withdrawn tax free. The plan holder must have a written agreement to buy or build a home located in Canada before October 1 of the following year. The plan holder also must intend to occupy that home within one year of buying or building it.

    Other Information

    Individuals who open a FHSA have 15 years from the opening date to use funds in the account on a qualifying purchase.  If the money is unused in the account after 15 years, or at the end of the year when they turn 71), the account must be closed with funds either being transferred to a RRSP or RRIF (Registered Retirement Income Fund) on a tax-free basis.

    This plan is an addition to the existing Home Buyer’s Plan (HBP), which allows an individual to withdraw up to $35,000 from their RRSP and use those funds to purchase a first home. Any funds withdrawn through the HBP however must be repaid over the next 15 years. Both plans are options for buying your first home, however an individual is not permitted to withdraw from both FHSA and a HBP withdrawal in respect to the same qualifying home purchase.

  • Creditworthiness: Why it Matters When Getting a Mortgage

    Creditworthiness: Why it Matters When Getting a Mortgage

    When it comes to obtaining a mortgage, creditworthiness is one of the most important factors that lenders consider when deciding whether to approve your loan application. In simple terms, creditworthiness is a measure of your ability to repay a loan. The higher your creditworthiness, the more likely you are to be approved for a mortgage loan and to receive a lower interest rate.

    Creditworthiness is based on several key factors, including your credit history, income, debt-to-income ratio, and employment history. Lenders use these factors to determine your risk as a borrower and to determine whether you are likely to repay your loan on time.

    Here’s a closer look at each of these factors and why they matter when it comes to obtaining a mortgage.

    1. Credit History: Your credit history is a record of all of your borrowing and payment activity. Lenders use this information to see how you have handled credit in the past, including whether you have made payments on time and how much debt you have accumulated. The better your credit history, the higher your credit score and the more likely you are to be approved for a mortgage.
    2. Income: Your income is another important factor in determining your creditworthiness. Lenders want to know that you have a stable source of income that will allow you to make your mortgage payments on time each month. If you have a high income, you are more likely to be approved for a mortgage, but even if your income is low, you may still be able to get a mortgage if you have a good credit score.
    3. Debt-to-Income Ratio: Your debt-to-income ratio is the ratio of your debt payments to your income. Lenders use this ratio to determine whether you are carrying too much debt relative to your income. If your debt-to-income ratio is too high, it may be difficult for you to get a mortgage, because lenders may see you as a riskier borrower.
    4. Employment History: Your employment history is another important factor that lenders consider when determining your creditworthiness. Lenders want to know that you have a stable source of income, so they look at your employment history to see whether you have a steady job. If you have a stable job with a good salary, you are more likely to be approved for a mortgage.

    In conclusion, creditworthiness is a critical factor when it comes to obtaining a mortgage in Ontario. By understanding the key factors that determine your creditworthiness, you can take steps to improve your chances of being approved for a mortgage loan and getting the best interest rate possible. If you are looking to buy a home, it is important to focus on improving your credit score and lowering your debt-to-income ratio to increase your chances of being approved for a mortgage.

  • 5 Money Personality Types: Which One Are You?

    5 Money Personality Types: Which One Are You?

    Like almost everything else in life, your response to money is largely dictated by your personality. But have you given much thought to how you behave in regard to your finances and how that behavior affects your bottom line?

    Understanding your money personality is the first step and will help you shape your approach to spending, saving, and investing.

    KEY TAKEAWAYS

    • It may be useful to understand the various money personalities when finding the right approach to investing, spending, saving, and the overall management of your finances.
    • Five common money personalities are investors, savers, big spenders, debtors, and shoppers.
    • Debtors and shoppers may tend to spend more money than is advisable.
    • Investors and savers may overlap in personality traits when it comes to managing household money.
    • Big spenders and shoppers often have similar habits, but big spenders tend not to worry about debt, and shoppers may spend more time hunting for bargains.

    The Five Money Personality Types
    Character traits regarding money can be classified into specific groups. This subject has been analyzed in a variety of ways, and many people can identify with parts of several of these money personality profiles. The key is to find the type that most closely matches your behavior. The major profiles are big spenders, savers, shoppers, debtors, and investors.

    1. Big Spenders
      Big spenders love nice cars, new gadgets, and brand-name clothing. People with a ‘spending’ personality type aren’t typically bargain shoppers; they are fashionable and always looking to make a statement. This often means a desire to have the latest and greatest mobile phone, the biggest 4K television, and a beautiful home. When it comes to keeping up with the Joneses, big spenders are the Joneses. They are comfortable spending money, don’t fear debt, and often take big risks when investing.
    2. Savers
      Savers are the exact opposite of big spenders. They turn off the lights when leaving the room, close the refrigerator door quickly to keep in the cold, shop only when necessary, and rarely make purchases with credit cards. They generally have no debts and may be viewed as cheapskates. Savers are not concerned about following the latest trends, and they derive more satisfaction from reading the interest on a bank statement than from acquiring something new. Savers are conservative by nature and don’t take big risks with their investments.
    3. Shoppers
      Shoppers often develop great emotional satisfaction from spending money. They can’t resist spending, even if it’s to buy items they don’t need. They are usually aware of their addiction and are even concerned about the debt that it creates. They look for bargains and are happy when they find them. Shoppers are varied in terms of investing. Some invest regularly through RRSP plans and may even invest a portion of any sudden windfalls, while others see investing as something they will get to eventually. Money personality traits are always not one-size-fits-all, and it may be possible for people to have overlapping characteristics when it comes to managing their finances.
    4. Debtors
      Debtors aren’t trying to make a statement with their expenditures, and they don’t shop to entertain or cheer themselves up. They simply don’t spend much time thinking about their money and therefore don’t keep tabs on what they spend and where they spend it. Debtors generally spend more than they earn and are deeply in debt while not putting much thought into investing. Similarly, they often miss taking advantage of the company match in their RRSP plans.
    5. Investors
      Investors are consciously aware of money. They understand their financial situations and try to put their money to work. Regardless of their current financial standing, investors tend to seek a day when passive investments will provide sufficient income to cover all of their bills. Their actions are driven by careful decision-making, and their investments reflect the need to take a certain amount of risk in pursuit of their goals.

    Make These Changes to Your Money Personality
    Once you determine which of these personality types describes you the most and have put some thought into how you approach money, it’s time to see what you can do to make the most of what you have. Making small changes can often yield big results.

    Spenders: Shop a Little Less, Save a Little More
    If you love to spend, it’s likely that you are going to keep doing it, but you should seek long-term value and not just short-term satisfaction. Before you splurge on something expensive or trendy, ask yourself how much that purchase is going to mean to you in a year. If the answer is “not much,” skip it. In this way, you can try to limit your spending to things you’ll actually use. When you channel your energy into saving, you have another opportunity to think long term. Look for slow and steady gains as opposed to high-risk, quick-win scenarios. If you really want to challenge yourself, consider the merits of scaling back.

    Savers: Use Moderation
    Ben Franklin once recommended “moderation in all things.” For a saver, this is particularly good advice. Don’t let all of the fun parts of life pass you by just to save a few pennies. Tune-up your savings efforts, too. Pinching pennies is not enough. While minimizing risk is any investor’s prime goal, minimizing risk while maximizing return is the key to investing success.

    Shoppers: Don’t Spend Money That You Don’t Have
    A critical step for shoppers is to take control of their credit cards. Unchecked credit card interest can wreak havoc on your finances, so think before you spend – particularly if you need a credit card to make the purchase. Try to focus your efforts on saving the money you have. Learn the philosophy behind successful savings plans and try to incorporate some of those philosophies into your own. If spending is something you do to compensate for other areas of your life that you feel are lacking, think about what these might be and work on changing them.

    Debtors: Plan Your Finances and Start Investing
    If you are a debtor, you need to get your finances in order and set up a plan to start investing. You may not be able to do it alone, so getting some help is probably a good idea. Deciding on who will guide your investments is an important choice, so choose any investment professional carefully.

    Investors: Keep Up the Good Work
    Congratulations! Financially speaking, you are doing great! Keep doing what you are doing and continue to educate yourself.

    The Bottom Line
    While you may not be able to change your money personality, you can acknowledge it and address the financial challenges that it presents. Managing your money involves self-awareness; knowing where you stand will allow you to modify your behavior to better achieve your financial and life goals.

     

  • Combat Inflation with 5 Easy Steps

    Combat Inflation with 5 Easy Steps

    Inflation. The new but not so pretty buzz word. You’ve likely heard it millions of times over the last several months and you’ve definitely experienced it, within your bank account. The price of everything has gone up. And it’s not just high-ticket items; it’s groceries, it’s gas, it’s everyday items that fuel your household and your lifestyle. Feeling broke lately? You’re not alone.

    Due to a number of factors, including supply chain issues following global Covid-19 pandemic lockdowns and the Russian-Ukrainian conflict, inflation is making all kinds of goods — from groceries to gas — much more expensive than they were even a few months ago. In June, inflation hit 8.1%, the highest year-over-year increase seen since the 1980’s.

    Even when it’s not at a high-point, inflation is an unavoidable reality for all Canadians. No matter the economic conditions, the price of goods eventually rises over time and your money will buy less than it once did. The amount that increase occurs (expressed as a percentage) is the rate of inflation.

    Where inflation really starts to impact the average Canadian is when the increase in the price of goods outpaces the increase in wages, compromising your purchasing power. When inflation hit that 8.1% mark in June, hourly wages rose just 5.2%.

    How to Hedge Against Inflation
    So, what can the average Canadian do about these rising costs? Fortunately, you don’t need to earn a finance degree or enlist a financial advisor to deal with inflationary woes. In fact, advisors recommend using the same sensible money-saving tactics they share during boom times, such as tracking expenses, tackling debt, and avoiding risky investments.

    1. Track Your Spending Closely
      Budgeting is the mainstay advice of personal finance advisors everywhere but keeping to a rigid plan is more difficult than ever. How do you keep to a predetermined limit when the price of everything from milk to Mercedes’ are rising every month? While you may be able to hold off on buying a Benz, the price of essentials, like groceries and gas, have increased, too.Eating is an expensive habit, and it’s not something we can cut from our budget — we’ve got to eat. When we hit up the grocery store, inflation is hitting us back.While you can’t simply buy less food, going to the grocery store armed with a list and your calculator app can help you save. By considering unit pricing, this is the cost per measurement, usually by 100 grams at grocery chains like Food Basics or Metro, you can get more of your favourite foods for less.
       
      The results of a little math are often surprising. Family deals can be more expensive than smaller purchases and sometimes that’s on purpose. Shrinkflation, where brands shrink the size of a product but keep the price the same, can bite.
       
    2. Tackle Debt as Fast as Possible
      Canadians owe a lot of money. In fact, StatsCan estimates the average consumer owes $1.73 in consumer credit and mortgage liabilities for every dollar of their income. This high debt-to-income ratio isn’t new, but the Bank of Canada’s current overnight rate of 2.5% (which is 10 times higher than it was at the end of 2021) is making interest rates on loans higher, meaning those debts are even more expensive to pay off.And, of course, inflation means there’s less spare cash to pay off your loans. If you are spending more money on food, rent and gas for your car, that leaves less money to service your debt. The first tip to surviving inflation, unsurprisingly, is to tackle consumer debt as fast as possible to avoid the snowball effect of interest rates overwhelming your finances.
       
      If you have multiple debts, you should tackle the one with the highest interest rate first. This means a payday loan repayment, which could have the equivalent of a 500% interest rate, should take priority over a credit card with a standard 19.99% rate.
       
      Once you’re free of your largest debt, turn your attention to the one with the next highest interest rate. But what happens if you can’t pay everything back? If reducing your expenses or getting a side hustle isn’t enough to destroy your debt, asking your bank for a balance transfer offer may help.
       
      The premise is straightforward: if you transfer a balance to your credit card up to its limit, you can keep it on the credit card at 0% interest for anywhere from six to 12 months. Taking advantage of something like that during this climate is amazing, this is a way to still pay down your debts, and pay them down faster, without the crazy interest rates.
       
    3. Use Cash Back Credit Cards or Bank Accounts
      Earning cash back on essential expenses like gas and groceries can be a simple way to put money back in your pocket. It’s a way to make sure that every dollar you spend is coming back to you in some way. Typical cash back credit cards will give about 1% to 2% back — not a whole lot, but certainly better than nothing. However, some cards can give up to 5% back on groceries, for instance, and others have welcome offers offering 10% back in your first few months.
       
      If you go the credit-card route, keep all of your everyday expenses on it to reap the maximum rewards possible. However, make sure to do your research and avoid overspending. Your cash back won’t really be a win if you end up paying interest charges or a hefty annual fee.
       
    4. Learn to Love Coupons
      You probably need all the help you can get with your grocery bill at the moment. Fortunately, major chains like Metro, Loblaws, and Walmart still offer flyers—perhaps you know, the ones your parents or grandparents read religiously for the latest deals—but you don’t have to grab a paper copy every week just to see where you can save the most. Coupon apps allow anyone to save on food, even food that’s close to its expiry date, but still edible. Some of these apps double as grocery lists. Unfortunately, there are downsides to coupon apps, handy as they may seem. Oftentimes, it encourages you to buy things that you wouldn’t otherwise buy, ultimately, it’s up to the individual to make sure they’re sticking to their grocery list and ideally, having some sort of a meal plan.
       
    5. Avoid Volatile Investments
      Despite 2021’s relatively brisk performance, inflation is souring in world markets. Tech giants like Shopify and cryptocurrencies like Ethereum have lost billions of dollars in valuation over the past year, while central banks are warning of impending recession. But that doesn’t mean the stock market is a complete write-off.Investors should look very carefully at companies with a lot of debt. Interest payments are rising, of course, and a company that owes money is paying it back at a much higher rate than they did a year ago. Pick companies with solid financial performance, you want to buy stocks in companies that are likely—and I use that word ‘likely’ very carefully—to perform better than other companies in a rising rate environment. A utility might be more attractive to an investor right now than a tech company or a bank if the latter is holding a lot of debt. Investors aren’t likely to see much in the way of returns if a company’s CEO is forced to spend a lot of their revenue just shoring up existing debt.
       
      If you’re looking to build a diverse investment portfolio that preserves capital, GICs are also an option. At EQ Bank for example, customers can lock in a 1-year GIC at 4.35%. Since a GIC guarantees repayment of the deposit plus interest, it can be a great way to ensure some cash down the road. Plus, the current interest rate situation is actually a boon for them right now.
       
      But one of the most important pieces of advice — can be summed up simply: stay the course. The markets don’t just move up in a straight line, you’re going to get a lot of bumps along the way. And this is just another bump.

    Following Financial Common Sense
    With a recession likely on the horizon, it is easy to panic and assume you need to find a brilliant hack to survive these inflationary times with your finances intact. But tried-and-true financial wisdom will do just fine.

    In fact, even if inflation conditions improve by the time, you read this article, you should consider adopting the suggestions above to keep you on track.

    If we implement these things as part of our lifestyle, then when we see the economy shift — when we see inflation shift — we’re already equipped, and we don’t have to try to scramble to change things.

  • How to Get a Mortgage with Poor Credit

    How to Get a Mortgage with Poor Credit

    Faced with high inflation and rising interest rates, more Canadians are finding it difficult to qualify for a mortgage. The problem can seem even worse if you struggle with poor credit. The good news is that even if your credit history is less than stellar, you may not have to put off buying a home, although you will likely pay more for your mortgage.

    Do You Know Your Credit Score?
    One of the biggest mistakes people make before getting a mortgage is not knowing their credit score before applying. Recent reports have revealed that more than 50% of Canadians have never checked their credit scores. If you’re only finding out that you have bad credit when you apply for a mortgage, it may be too late to do something about it.

    What is a Good Credit Score?
    While lenders can set their own minimum credit score guidelines, the following generally applies:

    • 800 or above: Excellent
    • 720 to 799: Very Good
    • 650 to 719: Good
    • 600 to 649: Fair or average
    • Under 600: Poor

    To obtain a mortgage with a Prime lender (banks and credit unions), you will likely require a credit score of 600 or higher. In fact, any mortgage with less than 20% down must also be approved by Canada’s mortgage default insurance providers, i.e., CMHC, who require at least one borrower to have a minimum credit score of 600 or higher. If your score is below 600, you will most likely need to deal with an alternative or private lender, come up with a 20% down payment, and be subject to a higher mortgage interest rate.

    How to Get a Mortgage with Poor Credit
    If you struggle with a bad credit score, there are still ways to qualify for a mortgage loan:

    Increase Your Down Payment Amount
    If you have bad credit, you can improve your chances of being approved for a mortgage by coming up with a larger down payment. While it’s possible to obtain a mortgage in Canada with as little as 5% down, if your credit score falls below 600, you won’t qualify for mortgage default insurance, and a 20% down payment will be required. A larger down payment has other benefits as well. By avoiding the hefty CMHC premiums, you will save thousands of dollars during the life of your mortgage.

    How to Find More Money for Down Payment

    • Gift from a family member. You can receive a part, or all, of your down payment as a gift from a family member. The lender will require them to sign a gift letter to confirm that the funds aren’t borrowed and that there is no expectation of repayment.
    • Withdraw RRSP funds under the Home Buyers Plan (HBP). If you are purchasing your first home, the government of Canada has a program that allows you to withdraw funds from your RRSP to use towards your down payment. The current withdrawal limit is $35,000. You will have to repay the amount you withdraw into your RRSP, but you have 15 years to do so, beginning in the second year after the year in which you removed the funds.
    • Delay your mortgage application. If you have tapped out all potential down payment sources and are still short, you may have to delay your mortgage application while you save more money. Can you hold off for six months or a year? Consider a side hustle to increase your income and your savings rate.

    Improve Your Debt Servicing Ratios
    In addition to having an adequate down payment and credit score, mortgage lenders must determine if you can afford to make the monthly mortgage payments. To do this, they use two calculations, Gross Debt Servicing (GDS) and Total Debt Servicing (TDS).

    Your total debt servicing (TDS) measures your total monthly obligations as a percentage of your gross monthly income. This includes your mortgage payment (PIT) and any other loans or credit card payments you might have. Your TDS ratio should not be more than 40%, although lenders may accept TDS as high as 44%.

    You can increase your approval chances by lowering your TDS. There are a few ways you can do this:

    Increase Your Income
    I alluded to this earlier but consider ways to increase your income. The easiest is to make more money at the job you already have, by asking for a raise, or getting promoted. If that’s not an option, think about a second job, keeping in mind that a mortgage lender will require you to be off probation before they can use your income for debt servicing purposes. Side hustle income is also great, but it likely can’t be used to qualify for a mortgage.

    Pay Down Existing Debt
    To improve your mortgage affordability, think about ways to free up cash flow by reducing your debt load. Among the worst culprits are huge vehicle loan payments, which have surged to record levels in recent years.

    Avoid Taking on Additional Credit
    You’ve heard the saying, “An ounce of prevention is worth a pound of cure.” It’s easier to say NO to more debt than dealing with the debt you already have (like that massive pickup truck loan.) If you’re in the market for a mortgage, it may be best to avoid taking on other debt. If you do, ensure it will not impact your chances of being approved for the mortgage.

    Go Through a Private Mortgage Lender
    If your credit is so bad that no A or B lender is willing to approve your mortgage application, talk to your mortgage broker about going through a private lender. Private lenders aren’t just ‘bad credit mortgage lenders.’ While they do a lot of bad credit mortgages, they also lend to borrowers who may have decent credit but whose application falls ‘outside the box’ of a bank or credit union.

    Your broker will bring up the private lender alternative before you do. Understand that private lenders charge much higher interest rates than A lenders, but the idea is to deal with them for a year or two and then move the mortgage to a prime lender.

    Obtain a Co-Signer
    If your credit score prevents you from getting a mortgage, another option is to obtain a co-signer. A co-signer must have very strong credit, a solid net worth, and enough income to support the mortgage on their own should the primary applicant fail to make the payments.

    The downside to obtaining a co-signer is that it ties you to that person financially, potentially for several years, in the case of a mortgage. It can also be challenging for the co-signer themselves, as they must include your mortgage PIT whenever they apply for credit, even though they are not making the mortgage payments. For these reasons and more, I don’t recommend using a co-signer, except in rare instances. But it is an option.

    Improve Your Credit Score
    Ultimately, if your credit score is standing in the way of getting approved for a mortgage from any lender, your only other option is to address your low credit score. And while it won’t happen overnight, there are several steps you can take to improve your score.

    How to Improve Your Credit Score
    If you are struggling due to poor credit, there is hope. Here are seven steps you can take to improve your credit score.

    1. Pay off any unpaid collection items. If you have unpaid collections showing up on your credit report, you need to settle them as quickly as possible. These are debts in such high arrears that the lender has sent them to a collection agency to pursue repayment. Generally speaking, no bank or credit union will lend money to someone with unpaid collections showing on their bureau. If you have multiple collection items, I recommend that you start by paying the lowest balance owed first.
    2. Pay your bills on time. If you have bad credit, continuing to make late payments will only worsen matters. Take steps to ensure timely payments going forward. Remember that most companies report late payments as soon as they are 30 days in arrears.
    3. Avoid making excessive credit inquiries. Each time you apply for credit, it counts as an inquiry on your credit report, and your credit score could drop as much as five or ten points, albeit temporarily. If your account shows multiple inquiries over a short period, say six to twelve months, potential lenders may view it as evidence of credit-seeking behaviour, and cause for concern.
    4. Keep Your Credit Utilization to a Minimum. Credit bureaus, like Equifax and Transunion, keep track of your credit utilization: the percentage of available credit you’re using. For example, if you have a credit card with a $10,000 limit and you carry a balance of $5,000, your utilization is 50%. When your credit utilization exceeds 30%, it’s a sign that you might struggle to manage your credit. Credit utilization is a determining factor for your credit score, so try to pay off balances in full, or at the very least, keep them under 30%.
    5. Don’t close longstanding credit accounts. One of the things that strengthen your credit score is the length of time a credit product has been reported to the bureau. When you close a longstanding credit card or line of credit, it may shorten your history and lower your score. And while it’s often beneficial to reduce the number of credit cards you hold, think twice before closing a longstanding account. If you feel like it’s the best choice, wait until after your mortgage application has been approved and finalized.
    6. Check your credit score regularly. What gets measured gets managed, but it could also be stated that what gets measured gets improved. If you check your credit report regularly, you can take corrective action if you notice any downward trends. You can also proactively correct errors and check your account for fraud.

    How Do I Find a Lender Who Will Approve My Mortgage?
    If you’re looking for a mortgage and are concerned about your credit score, your best bet is to consult a mortgage broker. Mortgage brokers have access to dozens of lenders, not just the big banks. They can shop your application to alternative and private mortgage lenders, in addition to the banks and credit unions, giving you the best chance for approval.

     

  • What Does Mortgage Pre-Approval Mean?

    What Does Mortgage Pre-Approval Mean?

    There’s a common misconception among some homebuyers that if you’ve got a pre-approval, your mortgage is basically guaranteed. This usually isn’t the case. Having a pre-approval doesn’t guarantee the lender will fund your mortgage. Below, let’s explain what a mortgage pre-approval is and whether it’s worth getting one.

    What is a mortgage pre-approval?
    A mortgage pre-approval is a conditional approval granted by a lender based on a preliminary review of your financial situation and creditworthiness. Conditional approval means that they are approving you based on some conditions/assumptions that will have to be confirmed later on.

    While this preliminary approval usually requires a credit check, information about your debts and income are based on details you provide to your broker, which are then shared with the lender. A pre-approval is often based on that information alone, without the lender verifying the documents or knowing which property you’re going to buy.

    For these reasons, a pre-approval isn’t binding until a lender has a chance to do its own due diligence and fully verify your financial information. It will also have to review details of the property you plan to purchase, which can include requiring an appraisal and/or inspection. A mortgage pre-approval is sometimes called mortgage pre-qualification. Each lender can have its own definitions for what it means and what is needed to get one.

    Where do I get a mortgage pre-approval?
    You can get preapproved by different kinds of mortgage lenders and mortgage brokers. A mortgage broker can help you quickly compare and choose from many of the following types of mortgage lenders:

    • Big Banks
    • Credit Unions
    • Mortgage Companies
    • Trust Companies
    • Insurance Companies

    Each lender will have its own mortgage offerings that you need to compare. Aside from the interest rate, ask your mortgage broker about the fees, penalties, and other costs. Ask about mortgage prepayment options and find out about the kind of customer service that they offer. For example, does your mortgage company provide online access to your account? Is there an app where you can track your balance and payments? Is it easy to contact them to make changes or inquiries?

    What do I need to get a pre-approval?
    Your mortgage broker can give you specific details on the documents needed. Each lender will have different expectations, and some documents might not be needed right away.

    Your mortgage broker will need to understand:

    • Your income
    • Your debts
    • Your assets
    • You may be asked to provide documents for your pre-approval, including things like:
      • ID (driver’s license, passport, etc.)
      • Proof of employment (such as a recent pay stub)
      • Proof of your down payment
      • Proof that you can pay for closing costs (usually 1.5% of the purchase price)
      • Information about your other properties if you own any
      • Separation agreement, child support information, student loans, and car loan information

    What Happens After I Get Pre-approved?
    Once you are preapproved, you should make sure you understand the terms of the pre-approval. You will need to know:

    • How long the pre-approval is valid (usually 60-120 days)?
    • What happens if rates go down? Will your rate drop also?
    • Anything else you don’t understand about the lender or mortgage.

    Also, once you have a pre-approval, you should avoid the following:

    • Don’t change jobs before you move, even if the new job has a higher pay.
    • Don’t apply for other credit, including store credit for furniture, vehicle loans, credit cards, etc.
    • Don’t make any major purchases without checking with your mortgage broker first.

    Pros & Cons of a Pre-Approval

    The Pros:

    • The process is generally quick, and a lender can let you know roughly how much you qualify for based on the preliminary financial information you provide.
    • Peace of mind while house-hunting. Having a pre-approval can give you greater confidence when shopping for your house, as you can set an appropriate budget based on the mortgage you qualify for.

    The Cons:

    • Not all lenders offer pre-approvals, which could limit rate options somewhat for those wanting a pre-approval.
    • A pre-approval usually isn’t a guaranteed approval, so it is still wise to have a financing condition included in your offer.

    Should you get a pre-approval?
    Yes, you should always plan ahead and know what you can afford. Pre-approvals are often a good starting point when shopping for a mortgage.

     

  • How to Refinance Your Mortgage

    How to Refinance Your Mortgage

    [vc_row type=”in_container” full_screen_row_position=”middle” scene_position=”center” text_color=”dark” text_align=”left” overlay_strength=”0.3″ shape_divider_position=”bottom” bg_image_animation=”none”][vc_column column_padding=”no-extra-padding” column_padding_position=”all” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_link_target=”_self” column_shadow=”none” column_border_radius=”none” width=”1/1″ tablet_width_inherit=”default” tablet_text_alignment=”default” phone_text_alignment=”default” column_border_width=”none” column_border_style=”solid” bg_image_animation=”none”][vc_column_text]Do you want to refinance your mortgage? There are many factors to consider when deciding whether it’s worth it or not. Let’s go over all the pros and cons of refinancing your mortgage, plus the 4 steps you can take to get it done right.

    What is mortgage refinancing?
    Refinancing your mortgage is when you fully pay off your mortgage by taking out another loan. The aim is to get more favourable terms on your new mortgage, such as lower interest rates, access to your home’s equity, or a different type of mortgage altogether (i.e. fixed rates instead of variable). In most cases, you’ll need to have at least 20% of your mortgage paid off already, and you’ll likely be hit with prepayment penalty charges.

    The Pros of Refinancing Your Mortgage
    So why do people consider refinancing their mortgage? Here are 3 of the main reasons:

    • It could save you money.
      The biggest reason someone may want to refinance their mortgage is the potential to save money over the long term. This usually happens when you can get a lower interest rate on the new mortgage. There’s one major thing to keep in mind when making this calculation though – the prepayment penalty. Paying off your mortgage early will usually incur some hefty charges, so you need to factor those into the total savings in order to make sure you come out on top.
    • Consolidating debt.
      If you have multiple sources of high interest debt, sometimes debt consolidation is an option to help you make the repayment not only easier, but also cheaper in the long run. By refinancing your mortgage with a larger loan than the original, you can use the extra cash to pay off your other debts in full. Then you’ll continue to pay off your mortgage at the lower interest rate, and only to one place.
    • Access the equity in your home.
      The equity in your home is the part of the cost that you’ve paid off already. If you refinance your mortgage or open a Home Equity Line of Credit (HELOC), you can gain access to this equity. If you do this, it basically acts as a low interest secured loan you can use whenever you need it. This could be useful for things like unexpected medical expenses or tuition.

    The Cons of Refinancing Your Mortgage
    But if refinancing your mortgage were a perfect solution, everyone would do it… so what’s the catch?

    • You can be hit with major penalties.
      The extra fees associated with refinancing your mortgage are often the tipping point when it comes to deciding whether or not it’s worth it for you. The major issue is prepayment penalties. Since you need to pay off your previous mortgage to refinance it, you’ll need to pay above the agreed-upon monthly payments that are in your contract. Your lender can charge a penalty when you choose to do this, since it’s essentially taking away interest payments from them.How much your prepayment penalty will cost depends on several factors, including: how much is left on your mortgage – both dollar amount and time, your interest rate, and the method used to calculate your fee. There are two main methods your lender can use to calculate your prepayment penalty. The first is simply charging you 3 months’ interest on what you owe. But they can also use interest rate differential, whichever option is higher.
    • Debt consolidation or accessing equity aren’t always financially healthy decisions.
      While saving money on your mortgage can seem like a financially healthy thing to do, there are some concerns that come up when talking about consolidating your debt or taking out secured loans. While debt consolidation can make it easier to track your loans and save you even more on interest – you have to be absolutely sure you can make the new monthly payments. Taking out a loan to pay off another loan could turn into a vicious cycle instead of addressing the actual problem: debt.And while your home equity can give you some impressively low interest rates on loans, you’re putting your house at risk if you aren’t able to pay back what you borrow.

    How Do You Refinance Your Mortgage?
    So after considering all the pros and cons of refinancing your mortgage, what are the steps you need to take to get started?

    Step 1: Decide if refinancing your mortgage is right for you.
    Learning about refinancing your mortgage is one thing, but it’s important to look at your own situation and figure out if it’ll work for you. A good place to start is with your current mortgage – what are the terms that you agreed to? It may be beneficial to talk to a licensed mortgage broker. They’ll be able to give personalized and professional advice based on your own unique situation.

    Step 2: Shop around for rates.
    Once you’ve decided that you want to move forward with refinancing your mortgage, get an idea of what current mortgage rates are on the market. Offered rates tend to rise and fall with the market, since they’re based on the prime rate in Canada. If you see that the current rates are higher than what you have in your mortgage contract, you may want to wait things out to see if you can get a better deal.

    Step 3: Calculate the cost.
    If you find a better mortgage rate, the next step is to figure out what (if any) prepayment penalty you’ll owe. This is a key part that will determine whether you’re actually going to save any money or not. Compare the total cost over the cost of your mortgage based on your current term and the new term you’re hoping to take on. Remember to include any prepayment penalty. If the penalties outweigh the savings, then you may want to wait until your mortgage is up for renewal to switch lenders or change your terms.

    Step 4: Apply and review the new terms.
    Once you’re ready to finalize everything, speak with your lender (or mortgage broker) and get the new agreement signed. You’ll also need to break the previous contract, which will require paperwork of its own (your new lender will generally take care of it). You’ll be guided through this by your lender or mortgage broker, so don’t be afraid to ask questions and take your time when reviewing the new terms. If everything looks good? Then apply for your new mortgage and start saving!

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