Tuesday, February 21, 2006

Canadian Non-Conforming Mortgages

Years ago you had to go to the bank on the corner to apply for your mortgage. Basically beg the banker for a house. If you didn't fit the bank's criteria you didn't get approved. Sorry about your luck. NO! And there really wasn't anywhere else to go. Until now...
These days there are more lenders, more banks and more mortgage options.
One product we specialize in is the Non-Conforming Mortgage Loan. Specifically those mortgages for clients that have past credit issues (including bankruptcy) or are buying a unique property that doesn't fit into portfolio of the major banks or CMHC.


Our Non Conforming Mortgage Loan program helps people who...
Need a sub prime mortgage
Have less than perfect or bad credit
Have no established credit
Have tarnished credit
Have a previous bankruptcy
Are in consumer proposal
Are in credit counselling
Are recent landed or non-landed immigrants to Canada
Are recently self employed and can't verify their income
Are foreigners investing in Canadian real estate
Need an alternative mortgage lender


For these clients we have 2 options available (or more) and we can be very creative:
1 - First Mortgage
85-95% first mortgage with a mortgage bank or finance company
These programs are for clients that can verify consistent employment and income as well some slow but not really bad credit.
2 - First and Second Mortgage
65-75% first mortgage with a bank or trust company
10-25% second mortgage with a finance company or private investor

This program is for exceptionally tarnished credit, previous bankruptcies, unverifiable income, self employed for less than 3 years, recent immigrants to Canada and that sort of thing. In most cases mortgage financing up to 85% of the home's value can be arranged if the house is in a populated area of 25,000 or more. 80% in most other areas.
For your options fill out our quick online form or call 1-877-590-1961.
Apply for your mortgage online now or download the application and fax it to 1-888-332-9329.

Non-Conforming Mortgages are qualified based on the following:
Minimum Down Payment/Equity Needed
In a tough credit situation, the down payment is everything. If the mortgage loan goes in to collection, the down payment/equity provides a cushion for the lenders while they go through the legal proceeding to gain the right to reposes the home. Therefore, the lenders will look for a minimum of 15% of the value of the home in down payment/equity. (e.g. $200,000 X 15% = $ 30,000). Occasionally, exceptions are made whereby 10% down payment will be sufficient. That will depend on how the other aspects of the applicant's qualifications stack up such as income and the extent of the damage to the credit.

Income Requirements
The income requirements must be reasonable to service the loan. Reasonable in that the applicant must be working or self-employed and have income coming in. The income requirements tend to be flexible as the down payment/equity increases. The income requirements do not have to fit into the typical GDS/TDS ratio calculations. Self - employed clients quite often have to acquire their financing under this program as many do not show enough taxable income to qualify under mainstream guidelines. Obviously the longer a client can prove consistent income the better.

Property Requirements
The property is the most important component of a tough credit mortgage loan. In essence, the lenders are lending on the value of the home and as such will be insistent that the property is a good and marketable piece of real estate. This is their security that their investment is protected in case of default. The lender must be extremely comfortable that they can recoup their investment. Their comfort comes from evaluating an appraisal of the property that must be done by an accredited appraiser. If the property does not meet with their approval, a loan will not be offered. A property in a major urban center is easier to finance versus a farm in rural Canada. There simply are more buyers for urban properties and the chance of liquidating a reposed home is invariably easier. Properties on municipal water and sewer are easier to approve than those on well and septic.

Credit Requirements
The minimum requirement is that you have a credit rating. Different lenders have different lending thresholds. Some will insist that any outstanding bad debts be paid off before they will lend the money. Others will not care as long as the down payment/equity is increased to 20% instead of the usual 15%. Most lenders look at an absolute minimum beacon or credit score of around 480 to 500. More information on credit is available here.

Previously Bankrupt
If you have declared bankruptcy, you may still qualify for mortgaging. Your available down payment determines what and how much you will be approved for. CMHC requires that a previously bankrupt client be discharged a minimum of two years before an insured mortgage is offered with 5 or 10% down payment. Additionally, CMHC requires that you have re-established credit after the bankruptcy. This is not as difficult a process as it may seem. There are several lenders who will offer a secured credit card to previously bankrupt clients. Information on a secured credit card and application can be found here.

If your two year, post-bankruptcy waiting period is not yet past, you will be required to have a minimum of 15% of the purchase price, or you will be unable to get mortgage financing. The structure of the financing will be in the form of a first and second mortgage to 85% of the value of the home.

Lender/Broker Fees
Most times, for good credit clients, the bank pays a small commission to the mortgage broker. However, in bad credit situations, the compensation for the broker for the work done in securing financing, must be paid by the client. This fee is typically paid on closing and is a percentage of the financing arranged.
Almost always, there will be fees charged by a second mortgage lender. The fee amounts are determined by the lender based on their risk evaluation. A lender may consider reducing their fee if you agree to take a higher rate, in effect, amortizing the fee over the life of the mortgage term.
Our typical brokerage fee is 1-3% of the total financing amount.

Sunday, February 05, 2006

Types of Mortgage Loans, which one is best for you

The following describes mortgage options that may be available to you, individually or in combination.

Low Interest Rate Mortgage

Generally the best way to find the lowest rate is to shop around. But every time you go to a bank they pull your credit bureau and applying too many times can lower your beacon score. Going to a mortgage broker is the best way to find your best rate and terms. They pull your credit bureau once and will shop a wide variety of banks for you, determining the best rate and terms. A broker may also know of smaller lending institutions which offer much more competitive rates than a large bank or finance company.

Adjustable Rate Mortgage

With an adjustable rate mortgage (sometimes called ARM) your payments will change over time to reflect any current interest rate fluctuations. The interest’s rates are adjusted semi-annually or on an annual basis. If the rate goes down your mortgage payments will go down and if the rate goes up so do your payments. The initial adjustable rate is usually low as an incentive, but you take the risk of having the rate go up or down depending on the current rates at the time of adjustment. An adjustable rate mortgage can look fairly attractive with low rates in the beginning but can cost you more in the long run so consider it carefully.

An adjustable rate mortgage are generally suited for people with a little more risk tolerance who would be able to make a higher payment amount if the interest rate went up. Some Adjustable rate mortgages include the option to lock in the rate if the rates go up, be sure to ask.


Fixed Rate Mortgages

With a fixed rate mortgage your monthly payments will be the same over the term of the mortgage. Your payment amount will not change. Generally the interest rate is a little higher for fixed rate. Fixed rates work best when interest rates are staying fairly stable. If the interest rates drop you can not take advantage of the benefits as you can with the adjustable rate.

Fixed rate mortgages are generally suitable for people with less risk tolerance that have a set income and don’t expect it to change over time.

Interest Only Mortgage

An interest only mortgage is like a line of credit. You only pay the interest on the mortgage. You have more flexibility in the payment amount, but the debt will never be paid off. You can structure this so you only pay the interest in the first 5, 10 or 15 years, this will reduce your mortgage payment amount significantly. At the end of the term you you have the option to pay interest and principal at an accelerated rate or you can choose a Balloon Mortgage (Mortgage loan principal becomes due at the end of your term).

Interest only loans come with many different options such as a fixed interest rate for the entire term or and adjustable rate which carry a fixed rate for a certain number of years and then adjust every 6 months to a year.

Interest only mortgage loans are generally ideal for people whose income is sporadic, either because they are on commission or they are seasonal or self - employed. In some cases they have the option to make payments 6 months only out of the year at a higher re payment on the principal amount.

Balloon Mortgage

With a Balloon Mortgage you will pay regular payments until the end of the term and at that time the full amount becomes due (called the Balloon payment), you are likely looking at a term of 3 or 5 years. A balloon mortgage will only be subject to interest rate adjustment once after the initial rate is set. The initial interest rates are lower.

Typically Balloon Mortgages are ideal for people who want to take advantage of lower interest rates and that are going to be in their home for a defined period of time. However there are disadvantages. If the interest rates go up refinancing may become more difficult and costly at the end of the term and you may have to re-qualify and have the home appraised again. It may end up that the appraised value is less than expected. So find out what your refinance options are.

Assumable Mortgage

An assumable mortgage is one that can be passed on from one owner to another. This can be an advantage if the current mortgage has a good rate compared to getting a brand new mortgage. You can only assume a mortgage if you have a down payment large enough to cover the difference between the value of the house and the amount of the mortgage.
If you don’t then you may have to look into a 2nd mortgage to cover the difference. Generally 2nd mortgages are at a higher interest rate.

Generally this mortgage type is a little riskier because you are assuming “as is”. You may not have all the options you would have with a brand new mortgage such as, prepayment privileges and payment frequency options.

Sunday, January 29, 2006

If you are thinking of or already have claimed Bankruptcy these are the things you need to know...

The Bankruptcy Nightmare and How to Re-establish your Credit

The Bankruptcy Nightmare
Maybe you lost your job due to downsizing, or a maybe you’ve gone through a recent divorce or split that made it impossible to pay back the debt you owe? Someone in your family might have got ill and you didn’t have insurance to cover the lost income. Even if you have lost a loved one and didn’t adequately plan for it, what ever your circumstance may be this can be the beginning of a long tiresome journey and will require some hard work to recover on your part.

Creditors on Your Back
There are many situations in which we find ourselves falling behind on our payments, not being able to even pay the minimum payment amount each month. We get so far behind that there is no way to catch up. It’s not a good feeling. Then the creditors start calling demanding their money when you just don’t have it, especially when they don’t seem to care or don’t even try to understand your situation, they just want their money and will use all kinds of scare tactics to get it back regardless of what your going through. Dont worry your not alone. There are many good people just like you that find themselves in these situations where there is just no other alternative but to claim bankruptcy.

Bankruptcy is not fun and it will affect all aspects of your life. Some people find themselves in the most difficult financial situations and have taken every course of action available to avoid bankruptcy, but end up having to. Others have the most minute problems and claim bankruptcy to solve their financial problems short term. Claiming bankruptcy is not a long term solution, it is a last resort or alternative if you have exhausted all other options.

Remember bankruptcy should be the last resort only when you have exhausted all other options! Not just for a small amount such as $10,000
There are consumer proposal programs available for small amounts.

However since life is not a bowl of cheerios many people find themselves in situations where there is just no other choice but to claim bankruptcy.

What to expect when Claiming Bankruptcy
Going through bankruptcy is tough, first you seek out a bankruptcy trustee, and then he gathers your information. He calls your creditors and lets them know you are claiming bankruptcy. Most times this doesn’t stop the creditors from calling they still want their money. Then depending on your trustee you will have to go to counseling meetings, these will be about how to manage your money and follow a budget so this won’t happen again. You are obligated to do attend these meetings and it is a requirement before you are discharged. The bankruptcy trustee will take your income tax return as part of payment. So you will get $0 of it. A discharge will be granted after the 9 months and the easiest part is over. Some creditors don’t stop calling you even if you have claimed bankruptcy. Even after you have been discharged some creditors still try to recover their money and may send it to a third party for collections. So there are a lot of problems associated with claiming bankruptcy. Most times you can’t keep your leased car through a bankruptcy even if you show the ability to keep up the payments, the car dealership will demand the car be brought back and yes they could even repossess it. So bankruptcy is not just your average nightmare and not easy to go through, so think about bankruptcy as your absolute last resort.

So it happened, how do fix it and make sure it doesn’t happen again?
Re-establishing credit after is a little trickier. It’s also embarrassing. Whenever you go to apply for any kind of credit or even to apply for a rental apartment they will see that you have claimed bankruptcy. So expect to be turned down wherever you go.

Steps Required in Re-establishing Credit



  • Apply for a secured visa, the day of your discharge!
You can apply for a Home Trust Secured Visa ($2000 minimum) online or you can fax the application. If both you and your spouse have claimed bankruptcy you both need to re establish credit. (Remember this is a stepping stone to help you re-establish your credit)




  • Keep all credit in good standing
Remember any bad credit, collections or judgments after bankruptcy will reflect extremely poorly on your credit rating and you will find yourself in a worse predicament than before because every creditor will be hesitant to extend you credit ever again. That means no missed payments, no slow payments and no going over your credit limit!!! *Very important to keep in mind.




  • Dont go applying everywhere for credit
All lenders can see where and how many places you have applied for credit from your credit bureau and decline you based on just that. Applying for credit too many times also brings your credit rating down. This means you have less of a chance getting approved and you will pay higher interest rates. So do some research first and see what each particular lender bases their lending criteria on and make sure it matches your situation.



  • Dont over extend yourself
Know your financial limitations and stick to a budget. Most financial lending institutions are happy to extend you credit regardless of what your circumstances may be in the future or if it would suit your long term objectives.

So be aware of what you are getting yourself into.
Ask yourself these questions:

Will I be able to afford this if…



  • There was a lost income in the household

  • Someone becomes ill and cannot work

  • The rent, hydro, gas prices go up

  • Unexpected household repairs or the appliances need replacing

  • Unexpected car repair expense

There are many more questions that will be unique to your specific situation. You should make a list and see if you can answer the questions truthfully. If you can’t then you should think about a lower loan amount to make sure you can afford it.



  • Talk to a credit counselor. If you are not sure of something speak with your local credit counselor, most of them will give free advice, most of them are non-profit organizations.
  • Plan; make a budget to make sure it doesn’t happen again. Maybe that means taking out some illness or disability insurance, but its well worth it in the end. Planning ahead makes things a lot easier and you have more control over your finances when you put a budget in place. Adequate planning may prevent a bad situation from turning even worse...
  • Keeping your credit in good standing for at least 6 -12 months after discharge will show that you are doing everything to ensure that it doesn’t happen again. The lenders may still charge you more in interest fees but this is your best chance of starting over.



Qualifying for a Mortgage after Bankruptcy

  • If you plan to apply for a mortgage 6-12 months after your discharge you must have 25% down and some reestablished credit.
  • To qualify for a CMHC insured mortgage without as much as 25% down you have to wait 2 years after discharge and you must have reestablished credit with no bad credit after discharge. If you and your spouse have claimed bankruptcy together both of you will need to have re established credit.

Some quick tips and advice:
Keep your credit cards under 75% of the limit. Keep a balance of at least 25% at all times. Make your regular minimum monthly payments + some on time, every time. There are not excuses for being late anymore. Sign up for online access through your bank and add the lenders to your payees list. Payment can be made with just a click. You can always get direct withdrawal to make things even easier, but make sure you write down on your calendar the date the payment will come out and make sure the funds are there. If you have insufficient funds you will get a bank charge form $35 to $50 depending on the branch and this will count as a late payment.


Good Luck and remember it takes a little work to recover after a bankruptcy so don’t expect it to be easy but if you follow the plan you can again be a respected by the lenders.

Author:
Rachelle Czartorynskyj Mortgage Professional

Mortgage Source Canada - Canada's online leading mortgage source for excellent rates and a wide variety of mortgage products. We specialize in home mortgages, refinances, debt consolidation and bad credit mortgages.

Monday, January 23, 2006

Mortgage Pre Approval Questionnaire

We will help you

Consolidate debts & lower your payments
Buy a new home, a second home or a vacation home
Achieve your financial goals so you can retire early
Take control of your largest asset. Your home!

We have a wide variety of mortgages from over 50 of Canada’s top lenders.
Banks, trust companies, private lenders and more.

Your mortgage approval is just a phone call away! 1-877-590-1961

Even if you have been turned down by the bank before do not hesitate to call. We are experts at creative finance!

Our non-conforming mortgage program can help if you have bad credit, a prior bankruptcy or other difficult situation.


Fill out our short questionnaire to see if you qualify for a mortgage today.

Sunday, January 22, 2006

Refinancing your mortgage

Refinancing your mortgage

Dispelling the top 7 mortgage myths

Dispelling the top 7 mortgage myths

The top 9 questions to ask when applying for a mortgage

The top 9 questions to ask when applying for a mortgage

Should you use a mortgage broker?

Should you use a mortgage broker?

Today's News from MSNBC - MSNBC.com

Today's News from MSNBC - MSNBC.com: " Video: They're watching while you Google"

Thursday, December 29, 2005

Mortgage for Self-Employed, Business for Self or Commissioned?

Mortgages are tough to qualify for when you are self-employed or commissioned. Even with a good credit history, getting a mortgage from a major bank is sometimes frustrating.
Over 20% of Canadian income earners are self employed, business for self or are 100% commissioned. With this large of a segment of the population working for themselves you would think the mortgage banks in Canada would be a little more accommodating.

Well they have! Finally.

Most people in business write off expenses before declaring their income. That's the advantage of being in business for yourself. You pay income tax on a lesser amount but when you need to prove income for a mortgage approval, your tax returns make it look like your income is low and you can't afford the mortgage you deserve.
Qualifying for a Low Documentation Mortgage is easier than you think. You can purchase a new property or re-finance your existing home up to 90% of its appraised value. The lender bases their mortgage approval on your good credit history instead of your net income.
Requirements for a low document mortgage:
A clean credit history with no slow payments, collections, judgments or bankruptcies
Proof of self employed status for the last 2 to 3 years through Incorporation papers, GST returns or business registration papers
Property must be located near a major urban centre
The last 3 years Notice of Assessment (NOA) from Canada Revenue Agency to prove no tax owing
If your credit score is low you may be required to provide the last 12 months of bank statements to show regular deposits to prove your 'stated income'
We regularly deal with equity mortgage lenders and sub-prime mortgage lenders. We work with unique situations everyday, give us a call first!

Contact us today about a Low Doc or No Income Mortgage!

Advantages of dealing with a Mortgage Broker








What is a Mortgage Broker?
A mortgage broker is an independent professional who works as the liaison between the borrower and the lender to negotiate mortgage loans. We are mortgage loan specialists. Whether you are purchasing a new home, switching your mortgage, or refinancing you existing mortgage, many factors must be considered. Its our job to analyze specific needs and find the best mortgage product that satisfies your budget and goals.

Why use a Mortgage Broker?
We have access to numerous lending institutions and investors. We will make sure to get the best loan possible: the best interest rate, conditions, and prepayment privileges. You won't have to deal with any financial institution yourself. We deal with the same lenders you're used to dealing with. Including the 'Big Banks' and Trust Companies. We deal in great volume of mortgages and pass on the savings to you. We also deal with some innovative broker-only lenders who can offer even more attractive rates and features.

I've Been Turned Down by the Bank. Can You Help?
Maybe. Don't get discouraged if you are turned away by a bank - you might still be able to obtain a mortgage. Your bank has a certain set of criteria that you don't meet but other lenders, including some large institutions, may still take you as a client. We can advise you on how to fix your current situation so that you may qualify for a mortgage in the near future. We also have access to private lenders ranging from individual investors to mortgage investment corporations that use a different set of criteria to make mortgage decisions.

How Fast Can a Mortgage Broker Work?
We strive to provide you the fastest and most reliable service possible. Operating with the up to date software and technology, we can offer a quick turn around time on applications. We will explain your terms and conditions including the interest rate, prepayment privileges and clarify all of your questions. We build our reputation on timely service, reliability, creative thinking and a conscientious attitude towards your needs. At the very least we'll treat you like a human being, and not a number!

Sunday, December 18, 2005

How to Build or re-build your Credit...


Build or re-build your credit in Canada, even if you've had credit difficulties in the past, or have never had a credit card before! An excellent opportunity to establish your credit rating.

Virtually all Canadians are approved. Find out more here...

What can you expect to pay for your Mortgage?


Our Mortgage Payment Calculator will show you how different rates and payment frequencies can affect your mortgage.

How much can you afford? What payments can you expect to be making on your mortgage? Simply fill in the form and click the "Compute Payment & Balance Summary" Button.

Saturday, November 19, 2005

Horoscope - MSNBC.com

Horoscope - MSNBC.com

MSNBC - Harry Potter


For the Harry Potter Fans MSNBC - Harry Potter

Thursday, November 17, 2005

Adjustable Rate vs. Variable Rate Mortgage - What is best for you?

The Adjustable Rate Mortgage is quickly becoming one of the most popular options for consumers. There is a tremendous spread between the prime interest rate and a fixed long term mortgage. This spread can be as much as 3% and with the average mortgage in Canada approaching $130,000, this difference in interest rates can be tremendous.

How does an adjustable rate mortgage work? The adjustable rate mortgage is quite different than traditional mortgages in that long-term mortgages are priced according to Bond market, while the adjustable rate mortgage is priced in accordance with the prime interest rate.
The longer the term, the higher the interest rate. This is not always true but generally speaking it does hold true. By selecting a longer term mortgage you are agreeing to pay a higher interest rate for the term. It is similar to paying an insurance premium to guarantee the interest rate but the insurance premium is the higher rate.
An adjustable rate mortgage gives you total control. Your mortgage would renew every 3 months at a fixed interest rate. If you change your mind and decide to convert to a longer term, you would be guaranteed a minimum discount off the banks posted rates.
The variable rate mortgage allows you to have the best of both worlds. Short term pricing with the ability to lock in your rates at any time.
There are over 70 variable rate or adjustable rate mortgage products in the Canadian market right now. Let us explain your best mortgage options.

Below is just one of the options available:
Prime less .80% for the mortgage term
Maximum 95% Loan To Value
Semi-annual compounding
Five year term delivered in automatically renewed three months fixed rates periods
Prior to conversion open for repayment on payment of three months interest.
Monthly, weekly, or bi-weekly payments available
15% and 15% prepayment/payment increase
Ability to convert to a 3, 4, or 5 year term at any time at a guaranteed discount
The discount off Royal Bank Prime is guaranteed for the renewal periods
Guaranteed 1% discount off banks posted 3, 4, or 5 year rate a time of lock in

Rachelle Czartorynskyj www.mortgagesourcecanada.com

Wednesday, November 16, 2005

Your Credit Score - What you should know

Your credit score is an important indicator of your creditworthiness.
The higher your score the better chance you have at getting credit extended you. While many lenders use bureau scores to help them make lending decisions, they also take other aspects into consideration.

Lenders will use your credit score to determine if you are likely to pay your bills and also help them place you with the appropriate repayment plan. For example if you have claimed bankruptcy in the past they might place you at a significantly higher interest rate.

The following is used to calculate your beacon score:

Payment history- This indicates if you have made your payments on time
Amount owed - Comparison of what you owe to your credit limits with various lenders
Length of time - This indicates how long you have had credit accounts
New Credit - Shows how often you are looking for new credit
Type of credit - Considers the type of loans you have - car loans, lines of credit, credit card balances
I can't stress the importance of keeping your credit clean and checking your report periodically. This could mean the difference of thousands of dollars when you apply for any kind of credit including a mortgage.

Common mistakes that are made:
From my experience I have seen time and time again, where a client has applied for credit through more than a few lending institutions because they keep getting turned down. This is a common mistake, what they don’t know is that this significantly impacts their credit score negatively. When you have too many inquiries you are basically shooting yourself in the foot. You are guaranteeing yourself a higher interest rate and increased cost for lending. The next lender can see that you applied at "so and so's" and they turned you down. The best way to approach this situation is to find out why you where turned down the first time. Finding out can be a little difficult if you don’t know how to go about it. Most of the institutional lenders will be very vague in explaining why you where turned down, they have policies in place to limit the information they can give out to their clients. There is a way around this, check your own credit score through Equifax periodically to make sure everything is up to date and correct.

You can get your credit report from one of the two credit Bureaus in Canada
Equifax
TransUnion

They charge a small fee of $14.50 CDN but well worth it to save you frustration down the road. Make sure that your credit report shows what accounts have been closed, what has been paid out and your report is current. After all these things are taken into consideration when you are applying for credit. If you need help understanding your credit report, believe me it is confusing to most at first, contact your local credit counselor and I am sure they would be happy to walk you through it.

This link might be helpful, it is a non- profit credit counseling service


What can I do to improve my credit score?
Pay all your bills on time. Paying late, or having your account sent to a collection agency has a negative impact on your credit score.
Try to keep your balances under your credit limit. Keeping your account balances below 75% of your available credit may also help your score.
Avoid applying for credit unless you have a genuine need for a new account. Too many inquiries in a short period of time can sometimes be interpreted as a sign that you are opening numerous credit accounts due to financial difficulties, or overextending yourself by taking on more debt than you can actually repay. A flurry of inquiries will prompt most lenders to ask you why. However, most scoring formulas will not penalize you if, for example, you are shopping for the best mortgage rate or the best car loan.
The long and short of it is that if you keep your payments up to date for 6 months - 1 year you have a better chance for getting approved for credit, lower interest rates and all around better deal.

Bankruptcy, collections = bad credit
Having bad credit is not the end of the world
If you happen to have any previous collections or even a past bankruptcy the best way to get back up is to re-establish your credit.

There are a couple of options here Home Trust

Good luck and have a great day,

Rachelle Czartorysnkyj Your Mortgage and Finance Specialist www.MortgageSourceCanada.Com

Tuesday, November 15, 2005

Renting VS Owning - EXPLORE YOUR OPTIONS

Many people dont even consider buying a home because they believe they cant afford it. In fact most people continue to rent and pay for someone elses mortgage. Homeownership is more affordable than people think in fact in most situations it is more affordable. Some factors to consider would be that rent increases over time but a fixed term mortgage does not, mortgage payments remain more stable over time.

So lets think about it, by owning instead of renting your wealth will increase as you gain more home equity. It makes more sense to stop renting and start buying. Now dont get me wrong, buying a house is a big committment. The house must be kept in good condition, renovations, repairs and insurance expenses all add up. But if we think of it as an investment into increasing our net worth we see the value of owning over renting. Another reason people are stuck renting is that the banks have turned them down.

How can I qualify for a mortgage when my bank has turned me down?
The answer is very simple, banks are very strict in their underwriting and require you to have A credit in order to qualify for a mortgage. Which means that you have credit that is perfect with no room for mistakes. Is that realistic? So most of the time if your credit is even a little less than perfect you will hear that you cant qualify for a mortgage.

Lets take a look at some alternative options to getting a mortgage...
Mortgage Brokers have the ability to shop the market for you, they submit your application to various institutions instead of just one. This makes the qualifying process faster, easier and you get a better rate. A mortgage professional will look at your application and decide where you would fit best, keeping the rate low while meeting your objectives. Unlike banks your applications dont get turned down automatically because you have had a few late payments. A Broker manually considers your application and places it accordingly. But it doesn't stop there... a broker will always present you with your options and they can go back and try with another lending institution if your application doesn't fit their criteria. There are so many more options when you explore this avenue, most brokers have access to private lenders which makes your options even more diverse.

What about fees? Mortgage Brokers generally dont charge any upfront fees unless your specific situation requires a committment fee.

Why do most people go to there own bank?
Because most people are not aware that there are other options available to them. Getting turned down by a bank is frustrating and time consuming, you would wonder why they didn't go to a Mortgage Broker in the first place. I will let you decide, do the research and make sure you feel confortable with your Mortgage agent after all an agent only gets paid when they have closed the deal for you. The BANK pays them. A bank lender is paid on salary or hourly so you can see how there would be little incentive to go above and beyond if your situation does not qualify for a conventional mortgage.

My recommendation would be to explore your options and do a little research, you will be glad you did. A difference in rate could mean a savings of $5000/year or more. That could mean extra money for redecorating or a even a long deserved vacation...

Rachelle Czartorynskyj www.mortgagesourcecanada.com

Quote of the day!

"The only person who succeeds is the person who is progressively realizing a worthy ideal. That's the person who says, 'I'm going to become this' - and then begins to work toward that goal."

Tuesday, November 01, 2005

Home Equity Loan or Home Equity Line of Credit?

Home equity loans and home equity lines of credit continue to grow in popularity. According to the Consumer Bankers Association, during 2003 combined home equity line and loan portfolios grew 29%, following a torrid 31% growth rate in 2002. With so many people deciding to cash in on their home's equity value, it seems sensible to review the factors that should be weighed in choosing between out a home equity loan (HEL) or a home equity line of credit (HELOC). In this article we outline three principal factors to weigh to make the decision as objective and rational as possible. But first, definitions:


A home equity loan (HEL) is very similar to a regular residential mortgage except that it typically has a shorter term and is in a second (or junior) position behind the first mortgage on the property - if there is a first mortgage. With a HEL, you receive a lump sum of money at closing and agree to repay it according to a fixed amortization schedule (usually 5, 10 or 15 years). Much like a regular mortgage, the typical HEL has a fixed interest rate that is set at closing for the life of the loan.


In contrast, a home equity line of credit (HELOC) in many ways is similar to a credit card. At closing you are assigned a specified credit limit that you can borrow up to - not a check. HELOC funds are borrowed "on demand" and you pay back only what you use plus interest. Depending on how much you use the HELOC, you will have a minimum monthly payment requirement (often "interest only"); beyond the minimum, it is up to you how much to pay and when to pay. One more important difference: the interest rate on a HELOC is adjustable meaning that it can - and almost certainly will - change over time.


So, once you've decided that tapping your home's equity is a smart move, how do you decide which route to go? If you take time to honestly assess your situation using the following three criteria, you will be able to make a sound and reasoned decision.


1. Certainty or Flexibility: Which do you value the most?! For many borrowers, this is the most important factor to consider. Your home is collateral for either type of home equity borrowing and, in a worst case scenario, it could be seized and sold to satisfy an outstanding unpaid loan balance. People do remember the double-digit interest rates of the early 1980's and, for many, the mere prospect of interest costs on a variable-rate home equity line of credit rising rapidly beyond their means is reason enough for them to opt for the certainty of a fixed rate HEL.


>From the borrower's perspective, "certainty" is the main virtue of a fixed-rate home equity loan. You borrow a specific amount of money for a specific period of time at a specific rate of interest. You repay the loan in precise monthly installments for a precise number of months. For many, knowing exactly what their future obligations will be is the only way they can borrow against the equity in their home and still sleep at night.


A home equity line of credit, in contrast, is short on certainty but long on the virtue of flexibility. With a HELOC you borrow funds on an irregular schedule that meets your needs at adjustable interest rates that can change quickly. Loan repayment is also flexible: you typically are required to make only relatively small "interest-only" monthly payments on a HELOC. However, you have flexibility to make any size payment above the interest-only minimum or payoff the loan at your will.


2. Do you need money for a one-time, lump-sum payment or will your cash needs be intermittent over several months or years? Home equity loans are best suited for one-time payment needs (a good example is consolidating debt by paying off several high-rate credit cards at one time). This is because at the time you close on a HEL, you will be provided with a lump-sum check in the amount you've borrowed (less closing costs). While it may be empowering to have that much money handed over to you, be humbled by the fact that you will immediately begin incurring interest costs on the entire balance.


When you close on a HELOC, on the other hand, you will be given a checkbook (or debit card) that you use only as needed. So, for instance, if you're embarking on a multiyear home improvement project for which you'll be writing checks at varying times, a HELOC might be best. Similarly, a credit line is probably best for paying sporadic college expenses. Interest on a HELOC is only charged from the time that your HELOC checks clear the bank and only on amounts actually disbursed…not the value of the entire credit line.


3. Do you possess sufficient financial self-discipline for a HELOC? Financially-disciplined borrowers can have the best of both worlds…almost. By taking out a HELOC but paying it back according to a self-imposed fixed amortization schedule they can enjoy both the flexibility of borrowing cash only as needed and the certainty of a fixed repayment schedule. HELOCs are typically more efficient in terms of lower closing costs and a lower initial interest rate. Also, a HELOC may be somewhat easier for borrowers to qualify for since the low, flexible monthly payments mean debt to income ratios that loan officers look at are more favorable for the borrower.


The one big factor not within the HELOC borrower's control is the interest rate (see #1 above). Interest rates will almost certainly change over the life of a HELOC. This means that a self-imposed "fixed" amortization schedule may need to be periodically refigured. Numerous internet sites provide free, powerful mortgage calculators that can assist you in preparing updated amortization schedules whenever needed. Some lenders are also meeting borrowers' demand for greater certainty by providing HELOC products that can be converted (for a fee) into a fixed rate loan when the borrower elects.


As mentioned earlier, HELOCs are much like credit cards and the similarity extends to spending temptation. If you are a person who has trouble keeping credit card debt under control and you haven't taken steps to change habits, then a HELOC probably isn't a smart choice.


You might be wondering which home equity product most people actually choose. According to the Consumer Bankers Association 2002 Home Equity Study, home equity lines of credit account for 28% of consumer credit accounts followed by personal loans (23%) and regular home equity loans (16%). In terms of dollar value, home equity credit accounts (HELs and HELOCs together) represent a full 75% of consumer credit portfolios with HELOCs having a 45% share of the market and HELs a 30% share. Of course, the popularity of HELOCs may subside if interest rates continue to rise.


Whichever home equity product you decide on be certain to shop for the best deal possible. The market is extremely competitive and there are many non-traditional options, including on-line lenders and credit unions, which should be considered in addition to your local bank.

By Tim Paul