Unimor Capital Corporation

Tag: payments

  • Mortgage Payment Difficulties?

    Mortgage Payment Difficulties?

    Homeownership is a dream for many Canadians, but it can sometimes turn into a financial challenge when mortgage payments become difficult to manage. Whether due to unexpected financial setbacks, job loss, or other unforeseen circumstances, struggling to meet mortgage obligations is a stressful experience. In Ontario, there are specific steps and resources available to help homeowners facing mortgage payment difficulties. This article will provide a comprehensive guide on how to navigate these challenging situations and work towards a solution that keeps your home secure.

    Assess Your Financial Situation
    The first step in addressing mortgage payment difficulties is to gain a clear understanding of your financial circumstances. Create a detailed budget that includes all your income sources and monthly expenses. This will help you identify areas where you can cut costs and allocate more funds toward your mortgage payments. Additionally, compile a list of all your debts, including credit card balances, personal loans, and any outstanding bills.

    Contact Your Mortgage Lender
    Open and honest communication with your mortgage lender is crucial when facing payment difficulties. In many cases, lenders may be willing to work with you to find a solution. Contact your lender as soon as you anticipate or experience difficulties in making payments. Explain your situation and be prepared to provide documentation that supports your claim, such as proof of income changes or medical bills.

    Payment Deferral
    In response to financial hardships caused by the COVID-19 pandemic, the Canadian government introduced mortgage relief programs, allowing homeowners to defer their mortgage payments for a specified period. These programs may still be in effect or have been extended. Speak with your lender to explore the possibility of payment deferral, which can provide temporary relief by postponing your mortgage payments.

    Loan Modification
    If your financial difficulties are expected to be long-term or if you’ve fallen behind on your mortgage payments, discuss the possibility of a loan modification with your lender. Loan modification may involve changing the terms of your mortgage, such as extending the loan term, reducing the interest rate, or adding the missed payments to the end of the loan. Keep in mind that this option may impact the total interest you pay over the life of the loan, but it can make your monthly payments more manageable.

    Seek Financial Counselling
    Non-profit credit counselling agencies can provide valuable assistance in managing your finances and navigating mortgage payment difficulties. These agencies can help you create a debt management plan, negotiate with creditors, and offer advice on budgeting and financial planning. In Ontario, reputable agencies like Credit Canada and the Credit Counselling Society can provide these services.

    Explore Government Assistance Programs
    The Canadian government offers various programs to assist homeowners facing financial hardship. The Canada Mortgage and Housing Corporation (CMHC) administers some of these programs. The Homeowner Mortgage Assistance Program (HOAP) is designed to help eligible homeowners in Ontario who are at risk of losing their homes due to unforeseen circumstances. HOAP provides temporary financial assistance to cover mortgage arrears and property tax arrears.

    Legal Advice & Mediation
    If your mortgage lender is uncooperative or if you face foreclosure, it may be advisable to seek legal counsel. Consult with a lawyer experienced in real estate and foreclosure matters to understand your rights and options. Legal experts can negotiate with your lender on your behalf, explore legal defenses, and help you explore alternative solutions.

    Mediation is another option to consider. Mediation involves a neutral third party who facilitates communication between you and your lender to find a mutually agreeable solution. The Financial Services Regulatory Authority of Ontario (FSRA) provides information on mediation services for homeowners facing foreclosure.

    Investigate Refinancing
    If you have built equity in your home and your credit is still relatively intact, consider refinancing your mortgage. Refinancing involves replacing your existing mortgage with a new one, often with more favorable terms. This can lower your monthly payments and provide you with extra funds to address your financial difficulties. However, refinancing may not be suitable for everyone, so it’s essential to evaluate the long-term implications before proceeding.

    Sell Your Property
    If all else fails and you cannot secure a workable solution to address your mortgage payment difficulties, selling your property may be the best course of action. While this can be a difficult decision, it can help you avoid foreclosure and protect your credit score. If you choose to sell, work with a real estate agent who specializes in distressed properties to expedite the process and maximize your home’s value.

    Avoid Scams and Predatory Lending
    When dealing with mortgage payment difficulties, it’s crucial to be wary of scams and predatory lending practices. Unfortunately, some individuals and organizations may take advantage of vulnerable homeowners. Be cautious of anyone offering “guaranteed” solutions that require upfront fees or seem too good to be true. Always verify the legitimacy of any organization or individual before seeking assistance.

    Facing mortgage payment difficulties is a challenging situation, but it’s essential to remember that there are options and resources available to help you navigate this difficult time. Early communication with your lender, exploring government assistance programs, and seeking professional advice can all contribute to finding a solution that allows you to keep your home and regain financial stability. By taking proactive steps and seeking assistance when needed, homeowners in Ontario can work towards a brighter financial future even in the face o

  • How to Deal with Mortgage Arrears

    How to Deal with Mortgage Arrears

    These days, many Canadians are finding it hard to keep up financially, a result of the COVID-19 pandemic which caused many to lose income or their jobs altogether. Prices on many things have gone up and some are now being forced to go into arrears on their mortgage.

    If you signed your mortgage years ago, you would have had no way to predict such an unprecedented global event and now you have to adapt. The biggest fear for many borrowers is to go into arrears and lose their homes. There’s good news, however. Banks are well aware that people’s financial situations can change unexpectedly, especially in times like these. Because of that, there are various options open to you if you feel the need for extra support. In this article, we will cover the current state of mortgage arrears in Canada and options for those in financial trouble.

    After an explosion of mortgage arrears, Canada is slowly starting to recover.
    If you have gone into arrears on your mortgage, just know that you’re not alone. In October of 2020, the rate of mortgages in arrears in Canada peaked at 1.59%. This is the highest rate of arrears in Canadian history, after a previous peak in the 1980’s. In an effort to help borrowers during the pandemic, banks and lenders offered many deferrals on their mortgage payments. In addition, the rate of mortgages being extended went up greatly.

    We will go into deferrals and extensions in more detail below, but one thing important to know is that in the large part they are working. Canada Mortgage Housing Corporation data now shows that of the mortgages that went into deferrals during 2020, the vast majority of deferrals ended and were able to continue payments once again. Additionally, the rate of extensions on insured and uninsured mortgages is in decline.

    The figures for mortgages in arrears are now on their way back down from the peak. Generally, the rate of arrears can be an indicator of economic health. This means a lower rate of arrears indicates that more Canadians are in a healthy financial position, and our economy is recovering from recession.

    How excess mortgage lending puts Canadians at risk.
    For many years now, the ratio between the value of Canadian mortgage loans and the income of borrowers has been high. That means that today, a large amount of a household’s disposable income goes towards their home. This wasn’t helped by the recent boom in housing prices.

    Unfortunately, this puts some financial risk upon the borrower. A slim margin between income and the value of mortgages leaves little wiggle room when financial pressures crop up. This means it is easier than ever for Canadians to find themselves unable to keep up with payments.

    This is one reason why the government instituted the mortgage stress test, to ensure that lenders would be protected from borrowers falling into arrears. This is also why mortgages with a down payment of less than 20% are required to be insured.

    What to do if you are in financial trouble.
    The most important first thing you can do before going into arrears is to attempt to reduce your costs and contact your lender. Be upfront and honest about your current situation and ask about what arrangement you can come to based on what you are able to pay.

    Lenders will be more likely to help you come to an arrangement if you contact them before going into arrears. Therefore, do your best to contact them before you miss any payments if at all possible. If you can not reach a solution with your lenders, your next step should be to consult a lawyer or credit counsellor. They can help you explore alternative solutions that may be available.

    Common Options to Avoid Mortgage Arrears

    Payment Deferrals: A mortgage deferral is a special agreement that mortgage owners can make with their bank when they find themselves unable to pay their regular mortgage payments. The deferral lasts for an agreed period, during which time you do not have to make any payments.

    Once the period is up, you will once again begin paying your mortgage payments and will be responsible to pay off any missed payments and interest. Likely either your regular payment or amortization period will have to be adjusted as a result of the deferral.

    If you expect financial hardships to be a temporary situation for you, a deferral can help you out in a pinch. If you are likely to continue experiencing hardships after your deferral expires, it might not be the best option for you.

    Some of the factors that financial institutions consider when deciding if you are eligible for a mortgage deferral include:

    • Are you or your family unemployed due to the pandemic, or have you suffered a significant loss of income as a result of the pandemic?
    • Is your mortgage insured or uninsured?
    • Is your mortgage in otherwise good standing?
    • Is the property your principal residence or not?

    Payment deferrals can affect your mortgage in a big way. The effects of a deferral can impact your payments, your interest, and your mortgage principal. If you defer your payments, you are effectively keeping the same principal value on your mortgage while it accrues interest. At the end of the deferral, you will still need to pay the same amount plus any additional interest. The bank will collect your deferred interest after the fact by adding it to your mortgage principal, which is then used to calculate your future interest payments. In effect, this means after your deferral you may actually pay interest on interest.

    Extending the Amortization Period of Your Mortgage: By extending the amortization period of your mortgage, you are essentially agreeing to pay it out over a longer period of time in return for a lower regular payment. Depending on your situation, you may be able to extend out to a limit of 25, 30, or 40 years. The exact length available will differ between insured mortgages and uninsured mortgages. Remember that the longer your period, the longer you pay interest. This option may allow you to save on payments but can add up to thousands of dollars in interest.

    Switching to a Blended or Extended Mortgage: A blended mortgage means that your financial institution will allow you to benefit from current, possibly lower interest rates. Now, they won’t give you a lower interest rate outright. Rather, they will blend your current rate with the lower one, thus the name. Unfortunately, this option will only be available if a better rate exists to blend with. In addition, you can often extend your mortgage term to take advantage of the lower rate for longer.

    Locking in a Fixed Rate: If you have a variable rate mortgage, you may be able to opt to convert it to a fixed rate. Technically you can do this any time as a security measure to protect yourself from fluctuating variable interest rates, but it will only save you money if you lock into a lower fixed rate than your current variable rate. If you decide to take this option, make sure you act promptly, as rates can change often.

    Skip a Payment or Make Interest-Only Payments: Your bank may offer other payment options that stop short of a complete deferral. One such option is to skip only one or two payments. This is essentially like a mini-deferral. Another option is to agree to lower your payments temporarily, without stopping them altogether. A third option allows you to pay only interest for a period while deferring the principal payments to be paid later.

    Home Equity Line of Credit (HELOC): A HELOC allows you to borrow and pay back credit against your home’s equity. HELOC’s have a variable interest rate and the credit limit can change at any time as well, so they are not the best option for paying mortgage payments.

    Other options beyond working with your lender include getting a loan or assistance from family, renting out a portion of your home for extra income, selling off valuable assets to raise funds, or taking on a second job. It can be a stressful and scary situation to be in arrears on your mortgage payments. The biggest takeaway is to remember that many people have been there before you. That’s why lenders have many measures in place to help you recover in hard times. If you find yourself in this position, consult your bank as soon as possible on the best options for you.

  • Is Your Credit Score Good Enough to Buy a Home?

    Is Your Credit Score Good Enough to Buy a Home?

    Three little digits can make a big difference when you’re trying to get a mortgage you can afford.  Whether you can land a mortgage with a low interest rate or even get any home loan at all often comes down to three little digits: your credit score.  Does your credit score need some help? And could it keep you from buying a home? Let’s find out.

    How do credit scores work?

    Canada has two main credit bureaus — Equifax and TransUnion — that collect and share data about how you’ve used credit in the country.  These private companies draw up credit reports that summarize your activity and use it to assign you a credit score.  Lenders like banks rely on your credit score to tell if you’re a good investment.

    Credit bureaus assess a lot of information in their reports, such as:

    • How long you’ve had a credit card
    • Whether you miss payments
    • Whether you stay close to your credit limit
    • The number of times you apply for credit
    • The size of any outstanding debts

    Credit scores range from 300 to 900 and they play a big part in being approved for a mortgage.  A higher score means you’re managing your credit well and making payments on time.  A lender will be more likely to let you borrow their money.  A low score suggests you’re a risk, so you could be refused outright.

    When your credit score is decent but not spectacular, a lender will compensate for that risk by saddling you with a higher mortgage rate.  A higher interest rate means a higher monthly payment and steeper total interest charges over the life of the loan.

    How do I know if my score is too low?

    Plenty of third-party services and a few banks will give you a free look at your credit score online.  Other companies will ask you to sign up for a paid service that may have other benefits, like credit monitoring and support.  According to Equifax, most lenders smile when they see a score of 660 or higher.  Anything above 760 is excellent. Anyone with a score below 560 will struggle to get a decent interest rate and may not get a loan at all.

    Each lender has different standards, and those standards can change depending on what’s happening in the mortgage market.  Some private lenders won’t be as demanding as major banks but may offer far worse deals to compensate. These “subprime” lenders work almost exclusively with people who have low credit scores.

    If your credit score needs work, you’ll want to carefully consider whether the cost of a higher interest rate is worth it. You may decide it’s better to delay your home purchase to give yourself time to improve your score.

    How do I raise my score?

    The easiest way to bring up your credit score quickly and snag that mortgage is to obtain copies of your credit reports from the major credit bureaus and make sure everything on them is accurate.  Canadians are entitled to a free look at their credit report at least once per year from both Equifax and TransUnion.  If you find any mistakes, dispute the errors so they can be removed.

    Paying bills on time, even if it’s just the minimum payment, is one of the most important factors.  Contact your lender right away if you fear you might miss a payment, and don’t skip a payment even if it’s in dispute.

    Try not to use too much of your available credit.  The federal government suggests using a third or less of what you could be using, even if you always pay off the balance.  Paying down your credit cards to cut your credit utilization can give your credit score a nice boost.

    Another option is to enroll the help of a free credit monitoring service. You’ll get instant access to your score and be able to check your credit history regularly.  You have a few other options — like using different types of credit rather than just credit cards, keeping old accounts active and trying to limit the number of credit checks — but these basic steps will put you well on your way to home ownership.

  • You Might Pay More Than Expected to Renew Your Mortgage…

    You Might Pay More Than Expected to Renew Your Mortgage…

    New accounting rules adopted by the banks mean they’re paying closer attention than ever before to your financial situation and your home’s value when you renew a mortgage. Mortgage renewals used to be utterly routine – a virtual rubber stamp. Now, if your credit score has taken a hit or your home has fallen in value, you might not qualify for the best available rates. The new accounting rules are called IFRS 9; IFRS stands for International Financial Reporting Standard. One effect of these rules is to cause banks to pay close attention to early warning signs that clients may run into trouble paying their mortgage.

    “Let’s say the bank has noticed that your credit score went from 750 to 580 and/or your loan-to-value ratio has gone way up,” said Robert McLister, founder of RateSpy.com. “Anything that worsens risk in a lender’s eyes is going to potentially warrant a higher rate at renewal.”

    Mortgage brokers estimate that anywhere from fewer than 5% to 15% of borrowers may be negatively affected by the new rules. The borrowers most vulnerable to getting an elevated mortgage rate are in expensive cities, such as Toronto and Vancouver, where young owners must juggle expensive mortgages and daycare if they have children. It’s difficult to track what banks are actually doing because there don’t yet appear to be any standardized policies. But mortgage brokers report that banks are in some cases doing soft credit checks, which means peeking at your credit file to see whether your credit score has worsened. Banks may also do appraisals on renewal to ensure that the ratio of the amount of your outstanding mortgage to the value of your home is declining as it should be.

    The risk of having to renew at higher rates just keeps growing for these and other lenders. Well-discounted five-year fixed-rate mortgages are close to one percentage point higher than they were last summer. Also, we’ve seen the emergence of a trend where mortgage rates today are higher for some people than others. For example, someone with a down payment of less than 20% now gets a rate that on average might be 0.35 of a point better than someone who puts down 20% or more. Below 20%, the borrower is required to pay for insurance that protects a lender against default.

    Mortgage stress tests for borrowers also influence rates. The stress tests are designed to see whether you can afford mortgage rates that are higher than current levels. If you’re renewing a mortgage and want to move to a new lender, you must be able to pass the stress test. If you can’t do that, you’re stuck with a current lender that has no need to offer you its best possible discount. Today’s reality of home ownership is that that those financial struggles of home ownership matter. If your credit score drops or your home falls in value, there can be consequences.

  • Pay Off Your Debt Faster & Save Money

    Pay Off Your Debt Faster & Save Money

    Below is one of the most effective methods for paying off your debt faster and saving yourself thousands of dollars. This technique will save you the most money when used on mortgages; however, it can also be used to pay down other debts quickly – like car loans or even credit cards.

    Pay Bi-Weekly Rather Than Monthly

    Making bi-weekly mortgage payments rather than monthly payments will usually reduce the time it takes to pay off your mortgage by several years.  Here is how this trick works.  Let’s say Mike and Cindy obtain a mortgage that has monthly payments of $1,000.  Instead of paying $1,000 per month, Mike and Cindy could ask their bank to chop their mortgage payment in half and pay $500 every two weeks instead.  Even though this doesn’t feel any different to them, it will shave 3.5 years off of their mortgage and save them more than $21,000 over the life of their mortgage (assuming that their interest rate stays the same).

    Here is how Mike and Cindy will save.  If they made monthly payments, their bank would take $1,000 from their account twelve times a year (12 months x $1,000 monthly payments = $12,000 in annual mortgage payments).  Now when they cut their monthly payment in half and their bank to withdraws $500 every two weeks, they end up making what amounts to one extra monthly payment each year (26 bi-weekly payments x $500 every two weeks = $13,000 in annual mortgage payments).  This happens because two months in every calendar year have a fifth week.  If you’re paid bi-weekly, these are the two months each year where you get three pay cheques instead of two.

    Assuming a mortgage of $172,000 at 5% interest over 25 years
    Type of Mortgage Payment Monthly Payment Accelerated Bi-Weekly Payment Accelerated Weekly Payment
    How it works… This is what your lender determines that you must pay each month. Divide your monthly payment in half and
    pay that amount every
    two weeks.    		 Divide your monthly payment into quarters and pay that amount every week.
    Payments $1,000 $500 $250
    Years to pay
    off mortgage    		 25 years 21.4 years 21.4 years
    Savings over
    the life of the mortgage    		 $0 $21,536 $21,774