When unforeseen financial circumstances impact your ability to make regular mortgage payments, it’s important for you to take quick action. With early intervention, cooperation and a well executed plan, you can work together with your mortgage professional to find a solution to your financial difficulties.
What Can I Do to Help?
If you find yourself facing financial difficulties as a result of job loss, family income reductions, or for other reasons, it can be an overwhelming experience leaving you feeling uncomfortable and unsure of what to do. By following these three simple steps, you can make a big difference in resolving your financial difficulties.
1. Talk to your mortgage professional:
- To increase the chance of successfully managing your financial situation through early intervention, call your mortgage professional at the first sign of financial difficulty.
- Ask the mortgage professional about information on the options available for managing your financial situation; and
- Keep the mortgage professional informed as circumstances evolve.
2. Clarify the financial picture
To help your mortgage professional fully understand your financial situation, before meeting with them, prepare a detailed list of financial obligations including any credit cards, loans, household bills with the amounts owing and their due dates. Be sure to include information about your current income, savings accounts, investments, and any other assets.
3. Stay informed
The more information you have at your disposal on managing your finances, the easier it will be to make the right decisions. Take Charge of Your Debts is an online tool from the Government of Canada that is designed to help borrowers like you understand debt problems, and includes information on making a budget, budget counseling, credit repair, etc.
Log onto www.igc.ca (Industry Canada) and search for "Take Charge of Your Debts".
How Can Mortgage Professionals Help?
Your mortgage professional wants to establish and maintain a positive relationship with you over the long term, and is fully trained and equipped with the tools to help you deal with the temporary financial setbacks you may be facing.
Please feel free to call me at (250) 862 1806 or email [email protected].
Many people worry about what their credit score looks like, especially if they have missed a payment or two, or worse, claimed bankruptcy. The truth is, credit agencies use several factors to determine your credit score. Understanding how credit agencies look at your credit is the first step in figuring out how to maintain or repair healthy credit. You will need to make a firm commitment to taking positive, proactive steps toward managing your debt in order to achieve financial stability.
How Much Debt You Carry
One major component in assessing overall credit fitness is how much debt we carry against how much debt we're allowed. For example: If we qualify for $5,000 on a credit card and our balance stays slightly or far above $2,500 on a regular basis, this reflects very poorly on our credit score. That's why if you currently owe more than you can repay, it will be hard to repair your credit balance without first dealing with the level of debt you owe. Reducing the level of debt to a healthy balance should be your first priority.
What Credit You Use
Next, it's important to understand a few rules about the type of credit you should use to maintain your card balance at a level that will reflect positively on your credit and help you maintain, recover and build a healthy credit score. Here are some tips to ensure you manage your debt in a way that will positively impact your credit:
1) Credit Cards Should Be Treated as Debit Cards
Too often, credit cards are used as loans to be paid back over time. The best way to maintain or build good credit is to regularly pay credit cards off. For example, paying credit cards off every ten days ensures that one never gets too far behind on an allotted balance.
Credit cards can be great if managed like a debit card because they often give rewards points, cash back or travel perks. Another notable point to remember is that when credit cards are paid off, the high average interest rate charged by most credit card companies disappears. This does not take away the annual or maintenance fee for having the card but it does significantly reduce the amount of interest paid towards the card company.
2) Credit History
One major factor credit agencies use in the determination of credit score is credit history. The longer the history of stability, the better the credit score.
Here are a few ideas to build favorable history:
- Open a credit card with a small balance, purchase a small item, pay it off, and keep it open without making further purchases.
- Take out a small personal loan from the local bank, make your payments each month in full and on time, and keep it for the full period. Credit agencies don't usually see prepayment as favorable. Keeping a small loan for the full period will really help build great credit.
- Pay specific attention to medical and cable bills. These often slide under the radar but are generally the quickest to report delinquent status to credit agencies.
3) Good Debt vs. Bad Debt
Debt management is all about balance. There are definitely types of debt that can help in building a solid credit score, and there are also debt situations that can destroy healthy credit. The key is knowing which are which and how to capitalize on the good, without dealing with the bad. Here are a few simple ways to accomplish this:
Regular Credit Card Balance
High Interest Credit
These are just a few examples, but good debt is usually connected with a life need (house, car, education, etc.) and can often carry a favorable interest rate. It is generally a good idea to keep these in play and to pay them on time, every month.
Bad debt is credit that costs a great deal of money to maintain. The primary example of this would be a high interest rate debt. The lower the credit score, the higher the interest rate, because of the high risk a lending agency is taking to loan.
Remember, however, that even good debt, when used excessively, can become bad debt. Don't overextend yourself with too large a car loan or mortgage and make sure you begin to pay off your student loans early.
Having a healthy credit score is a major factor in getting a low interest rate on a loan. This is why it is so important to recover, build or continually maintain a strong credit score.
Here are a few of the many major steps you can take to improve your credit if it is currently below par:
- Pay bills on time every month.
- Keep a credit card with a zero balance open, or pay credit cards off multiple times throughout the month.
- Keep debt payments to a total of half, or less than half, of monthly take home pay. This ensures that you limit your credit to a level that is considered healthy by most lenders.
About the Author:
Douglas Hoyes, Founder & Trustee of Hoyes, Michalos & Associates, B.A., C.A., CIRP, CBV
Doug Hoyes has extensive experience resolving financial issues for Canadian citizens. He is a Chartered Professional Accountant (CPA), Licensed Trustee and Chartered Insolvency and Restructuring Professional and Business Valuator. He regularly comments on a variety of TV, radio and other media outlets on topics surrounding bankruptcy and consumer proposals and writes a column for Huffington Post. Hoyes previously held roles at PricewaterhouseCoopers and KPMG as a CPA. He testified before the Canadian Senate's Banking, Trade and Commerce Committee in 2008. Hoyes has been serving as an OSB (Office of the Superintendent of Bankruptcy) Oral Board Examiner since 2013.
Once you’ve settled into your new home, you may start seeing things you’d like to change or repair. Maintenance, repair and renovations are a normal part of home ownership.
Get to Know Your Home
One of the best things you can do is get to know your home.
Every adult member of your household should know the location of the following:
- Main shutoff valves for water, fuel and natural gas
- Emergency switch for the furnace or burner
- Hot water heater thermostat
- Main electrical switch
- Fuse box or circuit breaker box
Home improvements can make a home more pleasant to live in and may also increase its value.
Here are some things to keep in mind:
- Think about changes that would appeal to someone buying your home in the future.
- Updating the bathrooms and kitchens in an older home can increase its resale value.
- Updating the paint on the outside of your house, installing a new roof, redoing your walkways and driveway, adding attractive mailboxes and landscaping will improve your home’s appearance.
- Some renovations can pay for themselves, especially if they result in savings on utility bills, a higher selling price or years of greater comfort and enjoyment in your home.
- Think about improving your home’s energy efficiency for comfort and savings.
Secure Your New Investment
- Change all the locks when you buy a new home.
- Add dead-bolt locks and window locks where necessary.
- Consider getting a security system.
- Use outdoor lighting. You can get lights that turn on automatically every evening or motion-sensor lights that come on when someone walks by.
- When you are away from home, use lights and radios on automatic timers and arrange to have your mail and newspapers picked up or stopped.
- Get to know your neighbours and keep an eye out for each other.
When you move into a new home, it is always important to:
- Have a fire evacuation plan and make sure everyone in your home knows how to get out of the home from every room.
- Ensure that fire extinguishers are easily accessible at all times (if you have a two-storey home, there should be one on each floor).
- Locate and test the smoke detectors in your home every six months.
- Locate and test the carbon monoxide detectors. They will detect high levels of carbon monoxide in your home, and can save you from illness or death.
- Make sure that any fire hazards, such as paper, paint, chemicals and other clutter, are stored in a safe place.
- Collect your important papers and store them in a safe place.
- Keep a list of emergency numbers close to the phone and make sure your kids are aware of it.
If you have any questions or need mortgage information please call 250-862-1806 or email me [email protected]
For most of us, our ideas about mortgages have been instilled by years of past experience with traditional
products in traditional institutions. Long-held beliefs sometimes include the idea that mortgage brokers are only for people who have bad credit or were turned down by a bank. Unfortunately, anyone with this kind of outdated thinking could be losing thousands of dollars! All homebuyers and homeowners can save time and money by enlisting the services of a broker.
A mortgage broker has access to many competing lending institutions, including banks, pension funds, trust companies and even private individuals. Since mortgage brokers do not have to sell the products of any one lender, they can be completely unbiased in recommending a mortgage that has the most attractive rate and features for their clients. While you may arrange a mortgage every five years, a mortgage broker and his or her firm are completing thousands of mortgages each year. This enables them to negotiate better interest rates based on that volume, which can be passed on to their clients.
There are other potential cost savings. On any given day, a particular lender may have a special rate offer for a specific mortgage term. If you are rate shopping on your own and don’t know who is sponsoring the offer, you can’t take advantage of the special pricing.
At renewal, many homeowners take the renewal quote and choose a term and rate offered by the lender without realizing that a mortgage broker may be able to save them up to one percentage point off the posted rate. This can translate into thousands of dollars in savings over a five-year term. To ensure you get the best rate, it’s best to contact a mortgage broker at least four months before you renew or consider a new home purchase. Starting early can be a money saver because your broker can usually guarantee an interest rate for 90-120 days. Should rates drop in the meantime, you would of course get the lower rate.
If your credit rating is important to you, then you also need to consider that when you shop from lender to lender, there is an accumulation of inquires on your credit bureau report, affecting your credit rating and ultimately the rate and terms of your mortgage. This isn’t the case with a mortgage broker who only does one inquiry yet can still get many competing lenders to quote on your business.
And finally, an important misconception that should be discussed – fees. Some people think that using a broker will be costly, and that there will be an upfront fee. In most cases, there is no fee because the lender that provides the mortgage pays the mortgage broker a fee for originating and negotiating the mortgage. As you would expect, a fee may still be charged to clients with impaired credit, or when private money is used, although this compensates for the time and effort required to negotiate the mortgage.
To find out more, visit the Canadian Association of Accredited Mortgage Professionals. (CAAMP) Web site.
Read more Home Finance articles
- Selecting the right mortgage planner May 17
- Home Buyer RRSP May 3
- Why test your indoor air quality? Apr 5
- CMHC to increase insurance premiums Mar 22
- How to save money with the way you pay Mar 8
- Good news for small mortgage lenders Feb 22
- Three last-minute RRSP tips Feb 8
- Selling your home faster and for more Jan 25
- Access your money more quickly Jan 11
- Tips to get approved for a mortgage Dec 28
- The joy of handmade holiday cards Dec 14
- Why you need a mortgage broker Nov 30
(Click for RSS instructions.)