Dealing with mortgage payment difficulties

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No matter how low the mortgage rates are when you take out a home loan, unforeseen financial changes can make keeping up with your payments an obstacle. Our lives are not static, and something as innocuous as a plumbing bill or abrupt as an emergency car repair can make staying current with a monthly mortgage payment difficult. Fortunately, there are a number of strategies to deal with mortgage payment difficulties.

The first thing a borrower should do if they find themselves facing financial trouble is speak to their lender. Mortgage lenders want to keep their investment safe, and they will work with a borrower to manage whatever financial difficulty has arisen. By being proactive and getting in touch with your lender at the first sign of trouble, you can begin exploring options and receiving help before things get out of hand. Continue reading

Obtaining a mortgage when you’re self-employed

Being your own boss can be a rewarding experience, but it can also pose certain challenges when it comes to taking out a mortgage. Lenders are wary of financial risk when providing home loans, making it more important for self-employed individuals to show that they are a stable investment.

While most borrowers can show proof of steady income from an employer, self-employed individuals must go the extra mile to show that their income is just as secure. This means that self-employed borrowers should provide tax returns showing steady income. Since self-employed individuals are able to obtain more tax breaks, it can make it look as though they possess less income. It’s important to find the right balance between saving money on taxes and being able to show that you’re taking in steady amounts of revenue.

Self-employed borrowers should also be wary of irregular income. If there’s a large disparity between annual income, it can make a borrower seem inconsistent and incapable of keeping up with regular payments. Continue reading

Home buying for newcomers

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Buying a home can be stressful at the best of times, let alone if you’re purchasing property in a new country. Fortunately there are a number of ways for newcomers to Canada to make home buying an easy and affordable process.

Determine what you can afford
No matter where you are buying a home, the first step should always be determining what you can afford. In addition to the costs associated with taking out a mortgage, potential home buyers should account for expenses such as property taxes, utilities and home maintenance.

One easy way to help determine what you can afford is to use a mortgage calculator. These tools require a minimum amount of information regarding your home loan in order to provide borrowers with an idea of how much their monthly payments will come to. Continue reading

Foreclosure and bankruptcies don’t guarantee a lifetime of renting

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Whether housing trouble or spotty credit histories are the result of tough economic times, poor financial decisions or a tricky market, damaging events like foreclosures and bankruptcies don't automatically relegate the delinquent borrower to a lifetime of rentals and apartments. The road to improved credit isn't likely to be paved with gold or rainbows, but it doesn't mean that without a bit of hard work and strict money management the person can't one day buy again – and this time, have better luck and know-how.

According to The Globe and Mail, more than one in eight Canadians will either declare bankruptcy or negotiate a debt settlement with creditors – both of which are surefire ways to get into a sticky credit situation. But for people who want to better their chances of someday obtaining a mortgage, there are a few steps to take that repair credit and make homeownership a real possibility in the future.

Get tips from local experts
Nobody says you have to go it alone, so don't hesitate to reach out and get help from mortgage brokers, financial experts or lenders. Not only will the pros be more likely to understand your unique situation, but they may have added advice that apply directly to the local area or personal financial history. This can be especially important, as lenders are increasingly wary of which hopeful buyers they allow to obtain home loans to avoid the risk associated with subprime and non-prime borrowers. Continue reading

Get to know your credit report: Easy tips from the FCAC

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Regardless of whether people know anything about their credit scores – or the complicated math formulas that go into determining them – the three-digit numbers are a part of life, just like death and taxes.

As intimidating as it may be to get judged on a credit score, it can be somewhat reassuring to know that the score changes over time. Did you receive a score that made your head spin and dashed all hopes of ever owning a home? It is possible to improve scores so lenders feel comfortable enough to loan a first-time homebuyer money, improve interest rates and even offer higher credit limits. People's scores may also improve as their lives progress, which may include changes to their jobs and number of assets in their name.

OK, this is great, but what's even in a credit report, anyway?
We're all familiar with how online banking provides a history of transactions which ultimately affect the account's balance, right? Well, a credit report is kind of similar in the sense that it takes all credit-based transactions into account and the "balance" is the credit score.

The credit score range in Canada is 300 to 900 – the higher the number, the better. However, a credit report includes more than simply a three-digit number. It also includes nitty gritty details about specific credit cards, loan balances, missing or late payments and exceeded credit limits. Continue reading

Put away the plastic: Canadian consumer debt levels are through the roof

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Whether Canadians are aware of it or not, many of them are living beyond their means and buying anything their little hearts desire. New car? Why not! Who cares about the stacks of bills that need to be paid when there is an opportunity to drive around the city in style?

In time, that falsely lavish lifestyle is sure to come crashing down. The credit cards are maxed out. Interest on the multitude of non-mortgage loans and payments is enough to fund an extra car payment or two, and it's hard to keep up with the payment schedule – let alone afford to keep the lights and water on.

That may indeed be a dramatic example of out-of-control problem consumer spending, but experts are a bit worried. Actually, more than just a bit worried, considering consumer debt levels are the highest they've been – 150 percent of after-tax income per household – according to a recent report by TransUnion. Continue reading

If at first you don’t succeed, follow these tips and reapply for a mortgage

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After making the responsible decision that it's time to buy a place of your own – whether you have an affinity for home improvement or you're tired of spending so much to rent a place that isn't even yours – and taking the mortgage application plunge, a loan denial can feel like a kick in the gut. Ouch.

Before you swear off of ever owning your own home with a renovated kitchen, think long and hard about why you may have been denied. Perhaps a long-ago spending binge left you with more credit card debt than is desirable, or maybe you don't even use a credit card because you're extremely wary of creating personal debt.

To save yourself from endless questions or confusion post-denial, it may be best to consult with a financial professional or mortgage broker and find out exactly why you were denied. Depending on what risks you posed as a potential borrower, there are some tips to follow that may improve your chances in the next application. Continue reading

Subprime borrowing on the rise in Canada

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Another sign that Canada may be following the United States on the path to recession: The number of subprime mortgages on the market is rising – fast.

Increasing levels of consumer debt has been a hot topic in Ottawa and around the country in recent weeks. By some calculations, the average consumer now has a debt-to-income ratio of 1.5-to-1. While credit cards and auto loans certainly play their part in the debt trend, low interest rates have fueled a boom in the housing market as more Canadians take out home loans. While the perception of the Canadian borrower is typically one of restraint and caution, that may not actually be the case, Canadian Imperial Bank of Commerce economist Benjamin Tal recently told the CBC.

Most of the home loans in Canada are insured by the Canadian Mortgage and Housing Corporation, a Crown corporation set up to oversee the housing industry. The monetary value of the mortgages CMHC is allowed to insure has been capped at $600 billion, and finance ministers say they are unwilling to raise that cap. As the agency approaches its limit, lenders are becoming more discerning with their loans, offering the best mortgage rates to consumers with excellent credit. As a result, some would-be borrowers with otherwise decent credit are seeking alternative mortgages, according to the CBC. Continue reading

Are more restrictions the best policy for responsible Canadian borrowers?

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As the debate continues over whether to slow the Canadian housing market, one mortgage consultant argues potential homeowners would be better served by fewer restrictions on lending practices, not more.

In response to the American housing collapse of the last few years, Canadian finance ministers began tightening the rules for mortgage borrowing by increasing minimum down payments from nothing down to 5 percent and gradually shortening amortization periods from 40 years to 30 years. This had the effect of weeding out some would-be homeowners who may not have been entirely ready for the financial responsibilities of a mortgage.

But so long as the Bank of Canada maintains low interest rates, mortgage rates are likely to remain lower than average as well, encouraging borrowers to take out home loans despite the new restrictions. To counter this effect and further reduce the risk that mortgage applicants might later default on their mortgages as many Americans did, a number of financial experts have recommended additional restrictions on mortgage lending, including a 7 percent minimum down payment, 25-year maximum amortization period and means testing for applicants. Continue reading

How to avoid a credit repair scam

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From the time we get our first job to when we get our hands on our first credit card, we are constantly informed of the importance of maintaining a strong credit rating. In Canada, just like many other countries throughout the world, people with good credit are more likely to obtain financing for a car loan, mortgage, insurance or another big-ticket expense than individuals with poor credit.

Credit can be a needed boost, but it can also be debilitating. Learning how to protect yourself from becoming a victim of fraudulent activities is one way to keep your credit score and report in strong standing.

Several companies make the bulk of their money by targeting poor-credit consumers with promises to clean up their credit report. A promise many hurting consumers will believe because they need assistance to qualify for a new home or expense. But in most cases, the companies cannot deliver on their promise, leaving the consumer with more debt and in a worse hole than when he or she started the process. Continue reading