Spruce Grove Mortgage Broker: Krista Rumberg
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My Best Advice For Improving Your Credit

Someone recently asked me about the best credit advice I could give.

I thought after being a mortgage broker for 14 years I certainly have some best practices about finances and credit I could write about. One of the biggest things I have learned is money, finance, and credit are concepts that a lot of people know nothing about. Here are some things you may find useful.

One of the biggest questions is, how do I improve my credit score or how do I keep it high?

Most Canadians have a credit score between 650 – 680. Anything over 700 is considered excellent and anything under 620 is considered poor credit.

The two biggest factors that drive that score are:

  • Credit utilization or how much of your available credit are you using. I have found that your credit score stays higher if you are only using 50% of your available credit. Therefore, if you pay off a credit card, keep the card open (exercise self discipline and don’t use it) with a zero balance to maintain a high score
  • The other significant factor is payment history. This means do you pay on time? You need to pay at least your minimum payment ON TIME or better yet pay it in full, ON TIME.

Keep your credit limits high and balances low.

Cell phones and mortgages now report to the credit bureau. If you are looking for a great way to start your teenager in establishing credit, put their cell phone in their own name.  Your mortgage also reports to the credit bureau. There is ZERO tolerance in lending for late mortgage payments. Credit bureaus hold history for about 7 years. That’s longer than the average marriage!  If you need to default on something don’t pick your mortgage.

Keep your credit limits high and balances low.

If you are someone who struggles with temptation, I recommend freezing you card into the middle of an ice cream bucket filled with water. This way the card is accessible in an emergency but its going to take a considerable amount of effort to access. Delete the memory of your card number on your computer.

It’s very important to establish credit in your own name.

I have an Aunt who lost her husband after being married for over 50 years. In addition to not knowing how to fill the car with gas she also had zero credit on her own. Everything was in her husband’s name. There she was 70+ years old trying to establish credit on her own and learn how to bank. Her questions were simple. How does the money go from my bank account to the gas station? Does someone run the money over? I know this is an extreme case but do yourself a huge favour and get a credit card on your own name and take an active role in understanding and doing your banking. When I say get a credit card in your name, I do not mean a supplementary card that your husband/wife is the primary applicant.

You need to be the primary card holder even if your limit starts at $500… get started.

Can we talk about consumer proposals and bankruptcies? Sometimes bad things happen to good people and sometimes people are just financially irresponsible and make poor choices. I think the biggest struggle is the moral one. A consumer proposal combines all your debts and your creditors are paid a small percentage of the overall debt. The individual who files the proposal along with a trustee reviews income and liabilities and a payment schedule is set. You make your payments over a period of several years. You get to maintain your registered investments like RRSP’s and often your home, if your debt excluding the mortgage is less than $250,000. When your payments are all paid back you become discharged and the consumer proposal reports to your credit bureau for 3 years after discharge. When you claim bankruptcy, your creditors don’t get paid anything and you don’t make payments. You don’t get to maintain your home or any assets and it will stay on your credit bureau for 6 years after discharge. From a mortgage stand point a consumer proposal is viewed very similarly to a bankruptcy and very frowned on by potential mortgage lenders. You need two years of PERFECT re-established credit to qualify for a mortgage after both consumer proposal and bankruptcy. Here are a couple websites that may provide some help, Romans Debt Solutions Inc. and The Credit Counselling Society.

I have some pretty strong opinions on what I deem to be poor choices on managing your finances.

Don’t make these poor choices:

  • Don’t buy an RV or a boat with 20-year or more amortization – you won’t keep it for 20 years and you will have negative equity and quite frankly if you need to amortize a purchase like this over 20 years you can’t afford it. Don’t buy it.
  • Don’t buy a vehicle with a balloon payment at the end. Don’t ever put yourself in a situation that when you sell the vehicle you will owe more than it’s worth. I strongly feel the government needs to step in a ban this garbage.
  • If you have credit card debt make sure you are paying it back significantly more than the minimum payment. Remember that credit card interest starts at the moment of purchase (when you have a balance owing) and compounds DAILY. So that means you are paying interest on interest on interest, etc. and the balance grows every day. Now that thing you bought because it was on sale but you couldn’t afford isn’t a very good deal.

Here are a few things that I deem to be good financial choices:

  • Use a broker when ever possible – general insurance broker, life insurance broker, mortgage broker, stock broker. A broker has a license to broker the product they are selling so they are likely specialized and have a variety or products for you to choose from that best fits your needs.
  • Pay your property taxes on your own. Don’t include them in your mortgage payment. Three times I have received frantic calls from clients – their tax account slipped thru the cracks and didn’t get paid by the lender.  If you don’t pay your property taxes for three years the municipality has the right to commence foreclosure proceedings. And they do! The TIPPS program is free from most municipalities and they will deduct it monthly from your bank account or you can pay in full on June 30 every year. In addition, when your mortgage comes up for renewal it’s way easier to change lenders if your tax account isn’t attached to your mortgage.
  • Use the clauses in your mortgage contract in your favour. Your mortgage likely has a portability clause (unless you have a no-frills mortgage). This means that if you want to change homes, you can port or move your existing mortgage from one home to the next. There are some rules surrounding this but this is an awesome clause that avoids paying the mortgage penalty in the event of a move. Use your prepayment privileges. Depending on your lender you can increase your mortgage payment from 10% to doubling up your payment. In addition, you can lump sum your mortgage up to 20% of the loan amount. These additional funds go directly to your principle and can save you thousands of dollars in interest and take years off your mortgage.

 

Because I have a mortgage brokering license,

I will expand on why you want to use a mortgage broker over your bank.

What’s the difference?

Brokers have a license which allows them to access mortgage funds from all sorts of lenders. This is great for you, as it creates a competitive rate environment. A mortgage broker gets paid a percentage of your loan amount from the lender and gives you the best discounted rate for your situation. Your banks mortgage specialist is a bank employee and they only offer their banks mortgage. They can be knowledgeable on that banks individual mortgage products but they get paid more if they give you a higher rate. Keep in mind a mortgage shouldn’t always be about rate. You have to look at the terms of the mortgage. The big 5 banks mortgage penalties strongly favor the bank where the monoline lenders have consumer friendly mortgage penalties. RBC, BMO, CIBC, TD, Scotia, and ATB all have mortgage specialists. One of my biggest pet peeves is when a bank mortgage specialist refers to themselves as a broker. They are not – they don’t have a brokering license and they only offer their employers mortgage.  Keep in mind your mortgage broker can often offer you one of the big 5 bank’s mortgages too – some exceptions apply.

Your banks mortgage specialist is a bank employee and they only offer their banks mortgage.

Stay away from a collateral mortgage clause attached to your mortgage. Better yet ask if your mortgage has one? Don’t be surprised if your personal banker at your branch doesn’t have a clue what it is… but keep asking until you get the answer. There are some minor perks of a collateral charge but the risk far outweighs the gain. A collateral charge on your mortgage allows your lender to extend secured credit to you easier and with less risk to them. On the downside a collateral charge makes it more expensive and difficult to move your mortgage to a new lender on renewal and the biggest risk of all… in the event of default on any trade line extended as a result of your collateral mortgage, your bank can FORESLOSE on your home because of the defaulted trade. In some cases with a line of credit there is no option except to collateral charge but I highly recommend asking for a STANDARD mortgage charge. The power of a collateral charge mortgage may be best described by what happened to one borrower.

The parents had a collateral charge clause on their mortgage (nobody ever told them what this was nor did they know it was in the fine print of their mortgage paperwork). They held all their banking with “their bank”- credit cards, line of credit and in this case a car loan they co-signed for their son. The son was in an auto accident and the car was written off and not covered by insurance and for whatever reason the son stopped making the car payments. The bank started foreclosure proceedings on the parents’ home to recover the loss on the car loan.

You never know what can happen in your life, loss of job, sickness, etc that can impact your finances. I think the last thing you need to do is put your family home at risk.

There are many things that I covered here…and many I did not. This post could literally be 10 pages long.

Hopefully the tools above help you in your journey.

4 Things You Can Do To Pay Your Mortgage Faster

Although getting a mortgage is exciting as it allows you to become a homeowner, a mortgage is, in fact, a lot of debt. So if you have a mortgage, your goal should be to get rid of it as quickly as possible.

Here are four things you can do to help pay off your mortgage for good!

 

1. Accelerate your payments.

Making the change from monthly payments to accelerated bi-weekly payments is one of the easiest ways you can make a difference to the bottom line of your mortgage. Most people don’t even notice the difference.

A traditional mortgage splits the amount owing to 12 equal monthly payments. Accelerated biweekly is simply taking a regular monthly payment and dividing it in two, but instead of making 24 payments, you make 26. The extra two payments really accelerate the pay down of your mortgage.

2. Increase your regular mortgage payments.

Chances are you have the ability to increase your regular mortgage payment by 10-25%. This is a great option if you have some extra cash flow to spend in your budget. This money will go directly towards paying down the principal amount owing on your mortgage and isn’t a prepayment of interest.

3. Make a lump sum payment.

Depending on your lender and your mortgage product, you should be able to put down anywhere from 10-25% of the original mortgage balance. Some lenders are particular about when you can make these payments, however, if you haven’t taken advantage of a lump sum payment yet this year, you should be eligible.

4. Review your options regularly.

As your mortgage payments are withdrawn from your account on a set schedule, it’s easy to put your mortgage payments on auto-pilot, especially if you have opted for a longer term. This is why an annual review is a good idea, there may be opportunities to refinance and lower your interest rate.

The point of reviewing your mortgage annually is that you are conscious about making decisions regarding your mortgage and that you ensure you’ve always got the best mortgage for you!

Questions on your mortgage, or want to compare your mortgage to what is currently available? Please email me.
Mortgage Broker Spruce GroveMortgage Broker Spruce Grove

Check These 5 Things Before Your Mortgage Renewal

When your mortgage term comes to an end, the next step is to look at your mortgage renewal options. Here are five things you should consider when renewing your mortgage to make sure you pay the least amount of money over your next term, because who doesn’t like saving money?!

Do not simply sign renewal papers with your current lender!

When your renewal papers come in the mail, please understand that your current lender hasn’t offered you the best terms available. Don’t just sign and mail them back, to get the best deal… you need to look at all your options first!

mortgage renewal signing

Interest Rate

Most Canadians think that the lowest interest rate means the best mortgage product. Although sometimes that is true, there are other factors such as fine print. In regards to interest rates, your current bank doesn’t always have the best one. They have the best one that they can offer, but it might not be the best on the market. This is where having a broker in your corner to look at rates and compare with your needs in the next 4 points can help.

Fine Print

A mortgage is more than just an interest rate. You can save yourself a lot of money if you pay attention to the fine print, not only the rate.

Breaking Your Mortgage

This would be one of those fine print details to investigate. If you decide to break your mortgage early, you will inevitably end up paying a penalty. A variable rate will typically cost three months interest to break, whereas breaking a fixed rate mortgage can be significantly more costly as you could incur an interest rate differential penalty.

Fixed VS Variable

Whether you go fixed or variable is a big decision. You must decide whether the rate will be allowed to fluctuate along with the bank’s prime lending rate or whether you want to lock in the rate for the whole term.

Also, consider the term length for each fixed and variable, you have lots of options! 6 months to 10 years!

Mortgage Refinance

When your mortgage is up for renewal, you are in a unique position to refinance your mortgage without incurring a penalty, so make sure you consider this option as well.

So if your mortgage is up for renewal within the next six months, looking at all your options is the best way to make sure you get the best mortgage for you.

 

Questions on your mortgage, or want to compare your mortgage to what is currently available? Please email me.

Spruce Grove Mortgage

Krista Lindstrom

Mortgage Broker

krista@mortgagesimple.ca

780-946-6222

 

What’s The Difference Between The Bank And Your Broker?

What’s The Difference?

The difference between a banker and a broker comes down to the products each can offer, and where their allegiances lie.

A banker is paid by the bank, to make the bank money at your expense, while a mortgage broker is paid by the lender to get you the best mortgage available, which is to your benefit.

Mortgage Brokers

A mortgage broker has access to multiple lenders and shops around to get you the best mortgage product available for your needs.

Working with a mortgage broker provides you with options right across the board. Instead of having to go in and fight the bank for a deal, your mortgage broker does all the leg work and outlines your options at several lenders. Since the lender pays the mortgage broker upon closing, there is no cost to you for your brokers services.

Bankers

A banker works for a single financial institution, and can only offer mortgage products from that institution.

As banks can only offer you their rates and products, they are very limited in how they can help you. They never offer you the best deal to start with, however, will eventually negotiate on terms and rates, but you will be responsible for doing the negotiations on your own.

Renewal Time?

If you have a mortgage up for renewal, or you would like to refinance, it is always in your best interest to contact your mortgage broker instead of dealing with the lender who currently holds your mortgage. Just because they were the best option previously, that doesn’t mean they will be the best option in the future.

If you or someone you know is considering a new mortgage, let’s connect to get you the best mortgage options available!

Questions on your mortgage, or want to compare your mortgage to what is currently available? Please email me.

Connect with me on social media as well.

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Mortgage Broker Spruce Grove

What Documents Do You Need To Apply For A Mortgage?

Home buying is exciting, but also can be a lot of work. There are a lot of factors in play when thinking about purchasing a home, from location, how many bedrooms, finding a realtor, mortgage broker and lawyer.

Within all of this there is some documents and information needed as well. In order to apply for a mortgage we need to be able to figure out your income and your down payment.It can sometimes seem like a lot so here are a couple of tips for organizing:

  • Set up a place where you can have all the documents go. This could be an accordion file folder labelled with each item or simply a inbox on your desk where it gets placed and ready to go.
  • For any letters you need, ask employers/family for them now, as sometimes they need a bit more than a days notice to pull together a letter.
  • Print off our Mortgage documents checklist and keep it with your paperwork, checking off items as you have them.

With this check list you can now begin to pull together all of your documents and start the four steps to getting a new mortgage below.

Step 1: Apply

You can start the application process with me online even, by visiting this link. Or you can give me a call (780) 946-6222 or sending me an email Krista@mortgagesimple.ca

Step 2: Processing

I will then be in touch to review your application and discuss your specific needs before getting you approved for your mortgage financing.

Step 3: Acceptance

When your loan is approved, I will send you your approval and a list of required documents. The checklist above is a great start ahead of time. The approval must be signed and returned along with any other required documents.

Step 4: Funding

Once your loan is complete you will need to meet with your lawyer to finalize and register your loan.

From there, find and move into your new home and enjoy the fruit of your hard work!

Spruce Grove MortgageAxiom Mortgage Edmonton

 

 

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