Like many aspects of your life, obtaining financing on a new or existing home can be a lot less stressful and a whole lot more straight-forward if you’re prepared. But if you’re not prepared, there are many common mistakes you can make. Most of these mistakes are easily avoidable with some preparation and informed advice – feel free to call or email with any questions/concerns! 

Below are the Top 5 Mortgage Mistakes people make when trying to secure financing for their home:

1. Failing to choose the best product for their situation
2. Automatically renewing their current mortgage with their existing lender
3. Signing documents without reading them
4. Taking it to the limit – running up credit
5. Not planning for your mortgage application

1. Failing to choose the best product for your situation
There are many different types of loans out there. There are fixed- and variable-rate products, hybrid and no-frills mortgages, lines of credit, term options, amortization choices, and more.

And although choice is great, it can be quite overwhelming without expert advice. While one person would benefit from a variable-rate product, their neighbour may be better suited to a fixed-rate product. The key is to always explain your current situation and future goals in detail so we can select a product that best meets both your current and longer-term needs.

2. Automatically renewing with your existing lender
Although you may feel an allegiance with the current financial institution that holds your loan, they may not be able to offer you the best choices. When refinancing or renewing, it’s important to always shop the market for your best available option, much like you did when securing your first mortgage. This ensures you end up with the best mortgage rate and terms customized to your unique situation. In many cases your bank will offer you the posted rate in hopes that you’ll simply sign and return the commitment without shopping around. Make sure you do your due diligence when refinancing and renewing. After all, this is your home, your mortgage and your money!

3. Signing documents without reading them
Never sign documents without reading them. If you’re unsure about something, always ask for clarification. Remember that you’re the one entering into the agreement, so you need to understand and agree with that commitment.

4. Taking your credit to the limit
Make sure that your credit balances are in your favour when it comes to your mortgage application. Lenders are looking for an appropriate debt-to-income ratio. In other words, you need to have more income than you have debt. Avoid running up a balance on your credit cards and pay down existing debts as much as possible.

5. Failing to plan ahead
If you know that you’ll need to obtain, renew or refinance a mortgage, it’s essential to plan for it by ensuring your credit is in order. If it’s not, start preparing. Don’t make any purchases on your credit cards that you can’t pay off and if you carry a balance on your credit cards, start paying them down. Refrain from making any large purchases before securing your mortgage. If you’re planning to buy a car, wait until after you have secured financing, as your debt-to-income ratio will rise and you don’t want this to occur while trying to secure a mortgage.

Understanding how the mortgage process works and how lenders qualify your loan will help you avoid the above mistakes. As always, if you have any questions or concerns, clarification is just a phone call or email away!

Improving your credit score

If your credit score is not as high as you think it should be, make sure that the information in your credit report is correct. If it is correct, read your report carefully to find out which factors are most likely having a negative influence on your score, and then work to improve them.

Here are some tips, from the Financial Consumer Agency of Canada (FCAC), on how to improve your credit score:

• Always pay your bills on time. Although the payment of your utility bills, such as phone, cable and electricity, is not recorded in your credit report, some cell phone companies may report late payments to the credit-reporting agencies, which could affect your score.
• Try to pay your bills in full by the due date. If you aren’t able to do this, pay at least the required minimum amount shown on your monthly credit card statement.
• Try to pay your debts as quickly as possible.
• Don’t go over the credit limit on your credit card. Try to keep your balance well below the limit. The higher your balance, the more impact it has on your credit score.
• Reduce the number of credit applications you make. If too many potential lenders ask about your credit in a short period of time, this may have a negative effect on your score. However, your score does not change when you ask for information about your own credit report.
• Make sure you have a credit history. You may have a low score because you do not have a record of owing money and paying it back. You can build a credit history by using a credit card.

Are you thinking about hiring a company to repair your credit?

Beware of companies that promise to help you re-establish your credit for a fee. Their ability to change the information that appears in your credit file is no different than anyone else’s. Only your creditors are able to alter this information; therefore you do not need to pay a third party to obtain, discuss, review or make changes to your credit report. You have the right to access your information and make changes to your file if there is an inaccuracy or if you want to include a comment.

If you are thinking of hiring someone to repair your credit, remember this:

• A credit bureau will not remove accurate negative information from your credit report before the legal time period has expired; therefore, do not believe anyone who claims they can get negative information removed from your credit report faster than is legally required.
• There are no “loopholes” or laws that credit repair companies can use to get correct information off your credit report.
• No credit repair company can do anything you can’t do for yourself. It is impossible for a third party to make changes in your file if the facts have been correctly reported. There are individuals and companies that claim they can fix a bad credit file. This is not the case. If a file includes accurate, yet negative information about your credit history, this information cannot be changed. Information will only be changed when your file contains an inaccuracy.
• The only way to rectify a poor credit rating is to adopt sound credit practices for a period of time.

Fixed Rate or Variable Rate

 The decision to choose a fixed or variable rate is not always an easy one. It should depend on your tolerance for risk as well as your ability to withstand increases in mortgage payments. You can sometimes expect a financial reward for going with the variable rate, although the precise magnitude will ebb and flow depending on the economic environment.

Fixed rate mortgages often appeal to clients who want stability in their payments, manage a tight monthly budget, or are generally more conservative. For example, young couples with large mortgages relative to their income might be better off opting for the peace of mind that a fixed-rate brings.

A variable rate mortgage often allows the borrower to take advantage of lower rates — the interest rate is calculated on an ongoing basis at a lenders’ prime rate minus a set percentage. For example, if the prime mortgage rate is 5.5 percent, the holder of a prime minus 0.5 percent mortgage would pay a 5.00 percent variable interest rate.

As a consumer, the best option is to have a candid discussion with your mortgage professional to ensure you have a full understanding of the risks and rewards of each type of mortgage.

Source: The Globe and Mail

Many experts believed that the real estate market was cooling. But as the spring buying season begins, it’s clear that’s not true.

According to the Canadian Real Estate Association, the national average price for a home in March was $401,419, an increase of six per cent in year-over-year comparisons.

While the market defies predictions, one thing’s for sure: The continued rise of Canadian home prices is putting a damper on the hopes and dreams of first-time buyers.

Sarah Wiseberg, who rents a condo in Toronto’s pricey downtown core, knows this only too well.

“I’ve been searching for almost a year, and I think it’s extremely discouraging for a first-time homebuyer, particularly if they are looking for something other than a 500-square-foot condo,” Wiseberg said.

Agata Pietrzak, a real estate broker for Remax Condos Plus in Toronto, says there are many buyers entering the housing market, but not enough supply to meet that demand.

“In terms of single-family homes, there is a lack of inventory, and that usually results in a bidding war,” Pietrzak said. “It is almost unimaginable to buy a house at list price now.”

In some instances, Pietrzak says she has seen first-time homebuyers with small families resort to condos, because prices for houses were way beyond their budget.

In a recent report released by BMO Financial, the national average budget for first-time buyers has increased to $316,000, with Vancouver topping the list at $506,500. Toronto comes in at $408,300 and Calgary at $363,400.

Wiseberg, who says she is willing to spend between $500,000 and $600,000 for her first home, entered the housing market after abandoning the idea of spending hundreds of thousands on a condo. She couldn’t believe the competition in the housing market.

“Every house that I’ve gone to easily goes $100,000 over the asking price,” Wiseberg said. “I definitely do not want to enter a bidding war, because I don’t want to be cash-poor.”

The BMO Financial report found that 60 per cent of first-time buyers in Canada are delaying purchases, and 39 per cent of those cite high prices as the main reason.

But not all is doom and gloom. Several cities across the country have seen price drops, including Montreal, Winnipeg and Regina.

Broker and manager Daniel Wachniak from Royal LePage Dynamic in Winnipeg says the city’s housing market is fairly balanced, but specifies other factors are at play when it comes to pricing. He said the prolonged winter is one factor that explains the recent price decrease in Winnipeg.

“You have to look at our weather and the time of year,” Wachniak said. “The houses that probably sold [in late winter] were more open to negotiations than houses being listed right now.”

When it comes to bidding wars, Wachniak said he has seen them go as high as $80,000 over asking price.

“We had different spikes, ranging from $5,000 to $80,000, where a house in a certain area not usually seeing listings results in a bigger demand,” he said.

Given BMO’s recent decision to cut its five-year fixed mortgage rate to 2.99 per cent, Pietrzak said it’s a good time to buy, especially for first-timers.

“I’m working with several first-time buyers right now and they are becoming more confident in the market and with the rates available,” she said.

Kelvin Mangaroo, founder of Ratesupermarket.ca, which allows Canadians to compare mortgage rates, has a different take. He sees first-time buyers in cities such as Toronto getting priced out of the market.

“Many first-time homebuyers in Toronto are getting squeezed,” Mangaroo said. “A lot of the mortgage rules that have happened in the last couple years have made it harder to get a mortgage.”

In 2012, the federal government reduced the maximum amortization period for a mortgage to 30 years. It has also tightened other regulations, like putting a limit on the percentage of their gross household income a homebuyer can spend on home expenses in order to qualify for a mortgage.

These factors, along with a short supply of houses, especially in urban centres, is having a negative effect on buyers, says Mangaroo.

The disparity is evident in the numbers: The average budget for first-time buyers in Toronto stands at $408,300, but the average house price in Toronto is $546,597.

Buyers unhappy with the condo lifestyle are finding their options increasingly limited.

Preferring a house with space and character, Sarah Wiseberg has her eyes set on a home in one of Toronto’s older neighbourhoods. She found a couple of houses with potential, but they sold before she could even make an offer.

While prices may grow further out of reach, Wiseberg said she is reluctant to turn to her parents for financial assistance. She’s determined to do it on her own.

“I think whatever is meant to be will be,” she said. “If I find a place by June, amazing. If I don’t, then I’m fine with renting for another year.”

                                                                                                                            Source: CBC

It looks like BMO is restarting some rate wars out there…however it is important to remind you that this rate offer may NOT give you all the bells and whistles of a regular mortgage product that some other mortgage lenders offer! Unfortunately for those who buy into it, BMO’s Low-Rate Mortgage is a product that comes with some major restrictions:

1. You only get 10%/10% prepayment privileges. Where many other lenders give homeowners the option to increase their monthly payments by 20% or more each year, as well as make lump-sum payments on the original mortgage in that same percentage range, BMO’s Low-Rate Mortgage restricts homeowners to 10% for both categories. This makes it extremely difficult to pay down the mortgage sooner, without facing a prepayment charge to do so.