Thursday, March 30, 2006
That deterioration is coming at the end of ten years of generally 'excellent' affordability conditions, the report by the bank's economics department noted.
And, while affordability will likely continue to slide in the first half of this year, rising incomes and steady interest rates and house prices should stop the declines in 2007, economists said.
RBC Financial Group's (TSX: RY) latest housing affordability index, measures the proportion of pre-tax household income needed to service the costs of owning a home.
Such surveys are a popular promotional tool for Canada's banks and mutual fund companies. Many use public opinion polls to gauge demand for financial products and services, promote specific brand names and learn more about the public's financial management habits.
All the banks are focused on the housing market since mortgage lending is one of their key sources of profit and the average mortgage borrowed by homebuyers has been growing in recent years as house prices have soared.
Last year ended on a 'mildly sour note' after three quarters of improvement, the bank said, with housing affordability deteriorating across the country.
The worst-hit cities were Vancouver and Calgary, where house prices escalated rapidly as the economies in those energy- and mineral-rich western provinces grew faster than than the Canadian average.
While the markets in British Columbia and Alberta "continue to power forward," Royal Bank expects the pace of demand for new and existing homes in the rest of the country to slow moderately over the next two years because of the decline in affordability.
It will be "a controlled slowdown, with both new supply and demand expected to cool down simultaneously," the report said.
Much of the drop in affordability stems from slower growth in household income, said Derek Holt, the Royal Bank's assistant chief economist.
"This was unable to offset increases in mortgage rates, house prices and utilities costs," he said.
Benjamin Tal, senior economist at CIBC World Markets, expects affordability to get worse before getting better.
"Income growth in Canada is starting to accelerate, wages are rising," Tal said. "But the increase in house prices has been faster. Add to it higher interest rates, and the overall size of mortgages is rising, so affordability is going down."
The impact of rising interest rates has been more pronounced, Tal said, because about 22 per cent of mortgages are now variable-rate — moving with the bank's prime lending rate — rather than being fixed at long-term rates.
"With interest rates rising by maybe another (quarter to half point), we probably will see affordability continue to deteriorate, at least for the next few months," he said.
Beyond that, he expects it to stabilize because interest rates will stop rising, house prices will level off, and Tal predicts that incomes will be stronger than expected.
"So, I think affordability will not be much worse a year from now. It might even be better."
The housing market's soft landing will be supported by growth in home renovation spending, the Royal Bank report said.
Canada's renovation spending has grown by more than 50 per cent since 2000, to over $26 billion in 2005.
"While the recent takeoff in renovation spending is taken by some to be a sign of a bubble, our view is that homes built in the 1980s boom will continue to enter their prime renovation years, such that growth in renovation spending will partly offset weaker new home construction," the report said.
Ontario, in the meantime, is seeing new home construction decline as construction workers flock to Alberta.
Last year, housing starts in Ontario pulled back 7.4 per cent while residential building permits dropped for the first time in a decade.
"Migration and housing starts tend to move closely together in Ontario," Holt said. "Labour-hungry western provinces, most notably Alberta and British Columbia, continue to pull workers from other provinces, putting downward pressure on new home construction in Ontario, which still remains at elevated levels."
Wednesday's report suggests that condominiums were the most affordable Canadian housing type during the fourth quarter, with an index of 25.7 per cent. A standard townhouse is next at 30.1 per cent, followed by a detached bungalow at 37 per cent.
A two-storey home remains the least affordable type with an index reading of 43 per cent.
Wednesday, March 29, 2006
mortgage choices and perceptions in a changing market
TORONTO, March 28 /CNW/ - A majority of Canadians believe their current
mortgage interest rates are manageable, despite recent hikes, according to a
report released today by the Canadian Institute for Mortgage Brokers and
Lenders (CIMBL). The information, gathered by Pollara in a phone survey in
February and analyzed in conjunction with Canadian housing analyst and CIMBL
economist Will Dunning, indicates that 42 per cent of Canadian residential
mortgage holders polled have not seen their overall standard of living
significantly affected by the recent mortgage rate increases.
'As the spring home buying season begins, interest rates remain at a
historic low and mortgage holders continue to be satisfied with their rates,'
said Ron Swift, President of the Canadian Institute for Mortgage Brokers and
Lenders. 'Our latest survey reveals that Canadians find their current mortgage
rates manageable, despite increases over the past eight months. In addition,
although mortgage holders anticipate further rises, the study suggests that a
majority will be able to tolerate an increase of up to 1 percent. That's great
news for the marketplace.'
For the mortgages currently held by Canadians, the average mortgage
interest rate is 4.9 per cent. Consumers are in tune with what the Bank of
Canada and economist are forecasting - 66 per cent of consumers say they
expect mortgage rate increases in the near future.
CIMBL's research shows that current mortgage holders have a surprisingly
high tolerance for potential interest rate increases. The study suggests thatif rates remain at current levels, 62 per cent of Canadians would faceincreased interest rates at their next renewal. Yet, only 21 per cent ofmortgage holders would see a significant impact on their standard of livingfor a monthly mortgage rate increase of $100; 53 per cent would see an impactwith an increase of $200. Sequentially, a further increase of one-half of a percent wouldnegatively impact 20 per cent of Canadian mortgage holder's overall standardof living. An increase of one-half of a percent from current rates wouldresult in an average monthly increase of $50 in interest ($72 up from $22).Total interest costs for Canadian mortgage holders would jump by more than$2.7 billion ($3.9 billion up from $1.2 billion). An increase of one percentage point from current rates would negativelyimpact the overall standard of living of 29 per cent of mortgage holderspolled. Such an increase in rates would cause an average monthly interestpayment increase of $123, bringing the total interest costs for Canadianmortgage holders to $6.7 billion, up $5.5 billion from current costs. In anticipation of a rise in interest rates, consumers are more likely torenew their mortgages early to lock into current rates. For the 15 per cent ofconsumers scheduled to renew their mortgages in the next twelve months,relatively small increases are expected - an average of $6 per month. Forthose renewing during the next one to six years, average costs will rise andpeak in about four years. "As always, there is uncertainty about future changes in interest rates,"Swift added. "CIMBL's report demonstrates that although mortgage rates are onthe rise, Canadians continue to borrow - whether they are taking out a newmortgage, renewing or refinancing an existing one. There is still a strongreal estate demand in Canada." The survey, "Consumer Mortgage Choices in a Changing Market", contains awealth of additional industry data including the age distribution of mortgageholders in Canada, popularity and rates of different mortgage types andmortgage terms, and the amount of remaining principal on existing mortgages.For a full copy of the survey, please visit: www.cimbl.ca."
Tuesday, March 28, 2006
A mortgage banker is a direct lender; it lends you its own money, although it often sells the loan to the secondary market. Mortgage bankers (also known as “direct lenders”) sometimes retain servicing rights as well.
A mortgage broker is a middleman; he does the loan shopping and analysis for the borrower and puts the lender and borrower together. Many of the lenders through which the broker finds loans do not deal directly with the public (hence the expression, “wholesale lender”).
Using a mortgage banker can save the fees of a middleman and can make the loan process easier. A mortgage banker can give you direct loan approval, whereas a broker gives you information second-hand. However, many mortgage banks are limited in what they can offer, which is essentially their own product. In addition, if you present your loan application in a poor light, you’ve already made a bad impression. I am not suggesting you lie or mislead a lender, but understand that presenting a loan to a lender is like presenting your taxes to the IRS; there are many ways to do it, all of which are valid and legal. Using a mortgage broker allows you to present a loan application to a different lender in a different light (and you are a “fresh” face).
A mortgage broker charges a fee for his service, but has access to a wide variety of loan programs. He also may have knowledge of how to present your loan application to different lenders for approval. Some mortgage bankers also broker loans. As an investor it is wise to have both a mortgage broker and a mortgage banker on your team.
Monday, March 27, 2006
Mike Lacey - More from this author
Managing personal finances is among the biggest challenges facing Canadian households. Personal debt continues to climb as people seem either unable, or unwilling, to effectively manage their money.
This time of year is when the giving of the Christmas season comes home to roost, says Steve Wesley, manager of the credit counselling program at the Community Counselling and Resource Centre.
He explains many of those unable to meet the credit card bills that pile up after the holiday season are facing collection agencies. Many people don't know where to turn as they're swallowed up by debt.
Mr. Wesley and others with his organization provide free credit counselling services to those in need, helping to set up personal budgets and provide tips on ways to get rid of debt.
He says there are some simple, common sense steps people can make to ensure they don't end up in financial trouble.
'The first thing anyone should do is sit down and draw up a monthly expense sheet,' he says.
'This is a snapshot of where the money is going.'
That way, a person can see if more money is coming in than is going out. If it is the reverse, the next step is to look at what expenses can be trimmed back or taken out of the equation all together.
'What are the necessities of life? Rent, mortgage, food, clothing, things you have to have to survive,' he says.
Items not necessary can be put aside, at least until the finances are in better shape.
'It's 99 per cent common sense but, for some reason, a lot of people will shy away from sitting down at the kitchen table [and putting together a budget],' he says.
That's a good plan for those who are not burdened by too much debt. But those facing an avalanche of bills can turn to Mr. Wesley and his staff. To book a free and confidential appointment with one of the organization's counsellors, call 742-1351 between 9 a.m. and 4:30 p.m. Monday to Friday.
Meanwhile, Credit Counselling Canada also provides the following tips on getting debt under control:
·Sell unsecured assets. Have a garage sale, sell used clothes or get rid a second vehicle if it's owned outright.
·Consolidate your debts. A consolidation loan can bring all of your debts into one payment with lower interest.
·Refinance over a longer period of time. Extend the length of time you have to pay on a personal loan, a car loan, a lease or a mortgage. This may reduce the monthly payment required.
·Borrow from friends or relatives.·Attempt to make a lump sum payment. If you're expecting a large sum of money, such as a tax refund or from selling an asset, talk to your creditor about them accepting a lump sum.
·Set up a repayment program with creditors if possible.
'The real threat is global imbalance'Sunil Jain March 24, 2006
Standard & Poor's Chief Economist David Wyss predicts that 2007 will be a reasonably good year as well (4 per cent global growth as compared to 4.5 this year), but sees increasing global imbalances as the problem area.
Excerpts from a conversation with Business Standard:
Despite the risks associated with the twin US deficits, you're projecting pretty robust growth in not just this year, but also in 2007.
We're looking at 4.5 per cent this year and 4 per cent in 2007. The Eurozone is looking better and the good thing about Japan's growth (this is the third year it's over two per cent) is that it is now driven by domestic demand and not exports as in the past. Asia and Latin America continue to do well and account for half the world's growth.
The twin deficit is not just a US problem. France, Germany and the UK have sizeable fiscal deficits as well, roughly the same size in relation to GDP. The US trade deficit has to be seen in the context of a sizeable trade surplus in Japan and Asia.
So the issue is of poor spending in the rest of the world?
It's a real problem. The Eurozone accounted for 15 per cent of the world's GDP in 2004, but just 6 per cent of the world's growth. Japan accounted for 7 per cent of GDP but just 4 per cent of growth -- so, the two areas account for around a fourth of GDP but just a tenth of growth. This is the problem, and since they account for most of US exports, the problem gets heightened.
With poor productivity growth in the EU and Japan (it's around 1 per cent in both areas as compared to 2.5 in the US) and no population growth, few people want to invest here either. So, the overhang keeps getting worse.
People focus on China's mercantilist policy and the currency peg that is clearly artificial and aimed at keeping trade going (I think the remninbi's about 20 per cent out of whack), but Japan's got a larger trade surplus -- I think the yen should be around 95 or so to the dollar, instead of the 116 or so that it is today.
The S&P 500 are also sitting on piles of cash -- the problem is not so much a glut of savings as it is a dearth of investment.
With the dollar getting stronger, the problem's getting worse. So when does the dollar start weakening?
The Fed will probably have two more hikes by May and stop around 5 per cent, while the European Central Bank will move to 3 per cent by the end of June after two more hikes. Only when the Fed stops its tightening, will people wake up to the exchange risk, so the inflows to the US should slow down (this will then increase bond yields) and the dollar will soften. The problem is that while markets usually fix things by currency depreciation/appreciation, I see the Bank of Japan going back to playing an active role instead of letting the market function.
So you're seeing a soft landing? What about the Chinese moving to euros, and what of the property bubble bursting in the US?
I'm seeing a soft landing, yes. I don't see the Chinese moving to the euro in a big enough way since this will hit them a lot more than it will hit the US. The property bubble will burst, but I don't see it bursting in the sense of property prices falling -- I see it bursting as in prices not rising. Of course, there will be pockets where you'll see actual declines.
Few people agree with this scenario. Aren't people taking double mortgages in the US, and so won't consumer spending take a huge fall once interest rates rise and prick the bubble?
Most US mortgage rates are fixed-interest and not floating, so even if rates rise, the immediate pressure will be restricted. The point of being over-leveraged is also over-stated. On an average, the mortgage value to the value of a house is around 45 per cent, which is safe. The US is actually not as high-debt as compared to the EU or Japan.
To what levels do oil prices need to climb to, before we see an impact on global growth?
Well, in real terms, we're seeing the highest oil prices in the past two decades. But the reason why it's not biting so far is that the share of energy in US GDP is around 7 per cent today as compared to 14 per cent in 1980 -- so we're a lot less energy-intensive. Plus there's more head room due to the enormous deflation brought about because of China and India in areas such as textiles (costs have gone down 4-5 per cent per annum here), and food's been pretty flat as well.
I don't think there's this cliff for prices to breach, but I think it could even go to $100 before we see a real problem. But the real issue here is how things unfold. If oil prices continue to rise due to demand, that's self-correcting since if prices start hitting demand, they'll self-correct.
A supply-side shock, however, is a different matter altogether. Over the next three to five years, however, there's a lot more capacity coming up (Canadian tarsand, coal liquefaction and Qatar's even putting up a plant to convert natural gas to diesel) and so prices should come down.
Can both India and China sustain their growth?
I think the weakness of the banking system in China can be tackled by recapitalisation, but the economy's now becoming too big to be led by exports and investment levels are already up to around 50 per cent.
India's growth is lead by tech and that can't go on because there's just so many engineers and software people you can produce -- don't forget, it takes 22 years to turn out a college graduate! India will keep to a 7-8 per cent growth and China will slow a bit, though it will still be more than 9 per cent.
Friday, March 24, 2006
Owner discovers new family living in house
Police say estranged wife made own deal
Mar. 22, 2006. 10:15 AM
A Toronto man got a shock when he tried to return his children to his estranged wife at their matrimonial home in Ajax after a weekend visit and found another family living there, police say.
Durham Region police allege that the man's wife sold the home on Delaney Dr. without his knowledge and bought a larger home in Ajax with the $200,000 proceeds from the sale � a situation known as title fraud.
'I've never heard of a case quite like it,' said Det. Jack Haze.
Since their separation, the man usually returned the children to his wife at a specified location.
However, on one day in January 2005, the man missed the appointment with his wife and decided to take the children back to what he thought was their home in Ajax.
'He got the shock of his life when another woman answered the door and said it was her house,' Haze said in an interview.
The Toronto man contacted police, who found that the home had been sold in the spring of 2004 without his permission.
Police allege his estranged wife forged her husband's name on an agreement of purchase and sale, and then had her brother-in-law impersonate her husband at the lawyer's office.
False Canadian citizenship papers, which are 'a dime a dozen' on the street, Haze said, were used as identification for the transaction.
There has recently been a great deal of publicity about title fraud, which involves stealing a person's identity and then selling their home out from under them. In some c"
The survey, by RBC Royal Bank, also found that 32 per cent of respondents 55 and over hold a mortgage, and suggested that Canadians are increasingly comfortable with housing debt following the rise in house prices over the last few years.
‘‘There’s definitely a trend among aging baby boomers that they are very comfortable in holding debt later in their lives, and so I think that a reverse-mortgage, or at least leveraging the equity in their homes, is something they’re comfortable with,’’ Catherine Adams, RBC’s vice president of home equity financing, said in an interview.
Another recent study by the bank found that 48 per cent of Canadians do not believe it’s necessary to retire debt free.
Wednesday’s 13th annual Homeownership Survey also found that 60 per cent of Canadian homeowners currently hold a mortgage, up from 56 per cent in 2005 and from 50 per cent in 2000.
The average amount owing is $95,840.And nearly 40 per cent of mortgage holders have borrowed against the equity in their homes.
By: Tara Perkins
Monday, March 20, 2006
Tuesday, February 21, 2006
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.
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.
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.
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.
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.
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
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.
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.
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
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!
- Keep all credit in good standing
- Dont go applying everywhere for credit
- Dont over extend yourself
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.
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
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
Thursday, December 29, 2005
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!
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!