Which Debts Should You Pay Off First?

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Debts can start weighing down on you after a period of time, causing immense anxiety and stress as well as affecting your financial status. If you have to pay off a certain amount of debt, it is a good idea to make a balanced plan to approach the pay off. If you debt repayment is haphazard and erratic, it will simply cause more mental and financial strain on you.

There is not set method according to which you should be repaying your debts, since it would largely depend on the source and kind of income as well as factors such as spending capacity. However, it is important to plan your payoff since the sooner you repay your debts, the better your finances will be. Here are some factors that you can take into consideration while repaying your debts, but first, it is important to see whether you should pay your smallest debts first or your high-interest debts first.

High-interest debts.

A lot of people consider that paying off the high-interest debts first is a better choice, since the more you delay, the more interest you have to pay, so essentially if you pay them off faster, you will save more money. The interest saved can be used to pay off the other debts.

This explanation is fairly logical; however, it may feel like you are not progressing anywhere with your debt repayment since high-interest debts are usually much larger and take very long to be paid off.

Smaller low-interest debts.

Some people think that paying off these debts faster can help you reduce the total debt you are under in a much faster way. You will be thinking that you are making considerable progress into going debt-free, once your smaller debts are paid off, and you can focus on the larger ones.

The only problem with this method is, if you also have a high-interest debt with this, then you would have to pay a larger interest amount on that for much longer.

The factors to take into account while deciding which method to follow can be:

  1. Your spending habits.

This directly correlates with the amount of money you will be able to save, and since you will be paying your debt out of your savings, it is very important to consider spending habits. If you have a lot of debt to pay off, it is advised to keep your credit card spending to a minimum, since you do not want to overspend and pay for your outstanding credit later on as well.

  • Tax breaks.

Tax breaks are available on low-interest loans, such as student debts, which provide a certain tax break on the amount on interest paid. These should definitely be taken into consideration when you are paying off your student loans and credit card debts, in particular.

  • The urgency of your debt.

This should always be taken into consideration when paying off debts. If you have a good number of years on your debt, you can rest assured that your monthly instalments will cover you. However, if you have payday loans, you should absolutely try to cover those first before moving on to the others.

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How Often Should You Review Your Home Loan?

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A home loan is a long term engagement, and cannot be taken lightly by any means. Most home loans last for a period of fifteen to twenty years, and a lot can happen during this time. Your home loan should be reviewed quite regularly since the future is always uncertain and you should know how the status of your loan is progressing. You loan and your needs should be well-aligned with each other, irrespective of how your financial situation changes during the time.

A number of things can affect your financial situation- the status of your job, changing government policies, changes in rates of interest, the economic situation of your country and so on. This is why you should always be updated regarding the outstanding amount on your home loan, so that you can take a decision regarding what your home loan would require- a balance transfer, top-up or foreclosure. Therefore, ideally, it is advised to review your home loan every four to five years.

  • Balance transfer:

This is a common method followed by many people with outstanding home loans. Over the years, it may be possible that you find financiers who provide better interest rates and more attractive options than your initial financier. In this situation, you can always transfer the loan from one agency to another, provided you have a history of timely payments and a good credit score. You simply need to submit some documents and a no-objection certificate along with your payment history to the new agency to enjoy the new benefits.

  • Foreclosure:

As the name suggests, this implies an earlier closure of your outstanding amount or paying a significant part to lower the EMI. This can be a good option of your financial condition improves in a stable way, and then you would no longer need to worry about the status of your home loan. You would need to submit the required documents along with an application for part payment or foreclosure, and of course, the loan sanctions paper. Once you close a home loan, always remember to take the original property papers from the financier.

  • Top-up:

As the name suggests, this essentially denotes an additional amount that can be availed in case the previous loan does not cover all your requirements. To avail the top-up loan facility, you would need to submit the required documents along with proof of income and employment and all the previous chain documents. Since this is a personal loan, the interest charged is usually higher than your earlier home loan.

When you review your home loan status periodically, you are up-to-date on how you should proceed with paying the outstanding amount depending on your present financial situation. You can then choose from among the options mentioned above and make your decision.

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Things to Do Now to Buy Home in Future

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Buying a new home is a major financial step in one’s life. There are a lot of formalities included in the home buying process that one has to complete to own a home. This is the reason why it is suggested to start preparing yourself long before stepping in the home buying process. Start searching online about all the legal formalities included in the process and take the advice of people who have recently bought a new home.

Want to know what things you need to do now to become a homeowner in the coming year? Then read the tips explained below.

Start by saving – If you are serious about buying a new home sometime in future, then it is crucial to start saving now. Indulge in good savings plan early. Set budget for your daily expenses and don’t expend money on unwanted things. If you follow your savings plans strictly and build up a good deposit, then you will not have to borrow more from the mortgage lender. Lesser you will borrow, lesser will be the mortgage repayment.

Get rid of debt if any – This is one of the most important steps towards preparing yourself for purchasing dream home in future. Work on paying down your debt as it will help in improving your credit score and you may get a mortgage at a low-interest rate. Moreover, by paying down the debts, you will get rid of extra expenditures and will not feel stressed while buying a home.

Calculate how much you can afford – It is vital to understand how much you can spend on a new home. Also, by calculating your budget, you will determine how much more you need to save to buy the house of dreams in future. It is highly recommended not to exceed your budget while buying a home. Otherwise, you will have to face unwanted stress as surpassing the set budget you may not be able to meet your day to day expenses. Remember, you need to plan things in such a way that home buying does not bring worries in your life; instead, it should fill your life with excitement.

Improve your credit score – Start improving your credit score now if you want to buy a home the next year. Pay all your bills and outstanding payments to have a good credit score. Doing so is important because your credit score is the first thing that mortgage lenders check before approving any mortgage application.

Contact a mortgage broker – If you have a good credit score, the get yourself pre-approved for a loan before you see any home. Getting yourself pre-approved you will have a fair idea about what kind and size of a property can you afford.

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Buy House in Canada – Tips by a Pro

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Are you ready to buy a house in Canada? If yes, then this post is exclusively for you.

Who doesn’t want to gift their family a place that they call their own? Everyone does! For this reason, they go the extra mile and save as much as they can to buy a house of dreams one day. But, are you aware of what is involved in the home buying process? Where home buying fills you with excitement, the task can be overwhelming too. As a lot of steps and formalities are included in the process, you can get stressed a lot many times. But, you can reduce the stress level if you spend some time in understanding how to own a house in Canada.

So, let us discuss some tips to buy a house in Canada.

Save, save and save – The first and the most logical step towards buying a house is to save as much money as you can. It is because more the money you will have for the down payment, chances of getting a residential mortgage at a lower interest rate will increase. So, if you are planning to buy a house in the near future, then start saving and stop expending money unnecessarily.

Set your budget – Budget is a very crucial factor that one should not overlook while buying a new house. A realistic budget is something that plays a significant role in deciding what will be the size of your home and what all luxuries will be included in it. Make sure to analyze your income and daily expenses while making the budget.

Check mortgage options available – As there are several mortgage options available, you have to determine which mortgage type is suitable for you. In order to learn about the mortgage, surf on the internet and take the help of mortgage experts. Also, try to get pre-approved for a mortgage before starting your search for a house.

Make a list of features you need in your home – When it comes to buying a new house, you must know your requirements. Make a list of things and features that you need in your home. Also, talk to your family members while making a list as a task done in collaboration can yield better results. Look at your present place, see what important things it lacks and plan accordingly.

Hire realtor – Realtor is the most crucial person in your home buying process. As he has access to various homes available in the city, he can help you in buying the house of your dreams. Make sure to perform background checks and read online reviews before selecting any realtor for yourself. If you wish to purchase a home in an area of your choice, select the realtor who has knowledge about that particular area.

Make an offer – This is the most important step in the home buying process. Also, if you want to negotiate, then go ahead, don’t hesitate in doing so.  

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Four Smart Tips to Get Approved for Personal Loans

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When applying for a personal loan, facing rejection is the last thing you would want. But, because these loans are unsecured and have higher risk factors involved, the lenders are not very open to offer them as a part of their mortgage programs. So, getting approval for such loans is kind of difficult.

Personal loans are usually availed for reasons such as remodeling the house, planning an international trip, managing the debt consolidation, funding the medical expenses, making arrangements for the wedding and similar others.

These loans are not backed by any collateral asset. And, thus, the lender cannot auction anything you own in case of any default. However, he is going to charge you the rate of interest that is higher in comparison to other loans for the safety sake.

Now, because personal loans are extremely useful in almost every aspect, they are worth considering when making a purchase or investment. If you wish to boost the chances of getting approved for this loan, keep in mind the following tips –

  1. Calculate your Credit Score

A good FICO score is an indication of your ability to repay the loan. It is a method of quantifying and evaluating your creditworthiness based on your payment history, amounts owed, length of credit history, new credit and credit mix. The higher this score, the more are your chances of getting approved for a personal loan. So, if you have a lower score, it is recommended to wait and improve it by paying off your pending bills and debts.

  • Avoid Filling Multiple Loan Applications

This is one of the major mistakes loan buyers make when looking for a personal loan. They send loan application forms to multiple lenders or financial institutions thinking to receive a response from at least one of them. However, such a move makes you seem desperate and gives a bad impression of your financial status. Moreover, you end up affecting your credit scores if you don’t get approval from them.

  • Search for a Reliable Lender or Broker

You have to do ample homework to search for a good lender or mortgage broker. In case you are struggling with poor credit scores, you have to look for someone who specializes in high-risk borrowing. Stay away from payday and title loans because they can keep you in permanent debt, with their unrealistic fees. In fact, avoid every offer that seems too good to be true and instead derive an in-depth comparison to get the best deal and low-interest rates.

  • Keep an Eye on your Debt-to-Income Ratio

At any given point of your life, spending more than forty percent of your income towards monthly loan repayments can be highly detrimental for your overall finances. Hence, if you earn $2500 a month, you shouldn’t be paying out more than $625 for your EMIs. By no means, your monthly debt should take a toll on your monthly gross income. Try to keep the debt-to-income ratio as low as possible and don’t borrow unless very necessary.

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Things You Need to Ask Your Mortgage Broker

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Are you planning to buy a mortgage, but don’t have enough knowledge about it? Are you first-time mortgage buyer? Do you want to renew your mortgage? Do you want to hire a mortgage advisor but don’t know how to spot the best professional? If your answer to any of these questions is yes, then this article is for you.

Hiring a mortgage advisor can be an overwhelming task, especially if it is your first time. When you are in the market, there is much more to consider than the interest rate. But, if you successfully hire the right mortgage broker, you can rely on him for all the mortgage-related tasks. He will leave you stress-free by doing all the formalities and paper-work on your behalf.

However, all the brokers are not the same. Some take their profession seriously and help their clients in cracking the best deal. While others work for the sake of commission. To make sure that you work with a reliable mortgage pro only, don’t forget to ask him the following questions.

Question #1. Can you provide references?

Firstly, ideal is to take recommendations from friends, relatives or neighbors. But, if you have selected mortgage specialist through a listing available on the internet, then ask for references. A true broker who is true to his profession will happily provide you with the reference list, whereas, an unethical and unprofessional person will only make excuses. Don’t work with the later ones.

Talking to the previous clients, you can learn about their experience with the broker during the entire process. Ask if they were treated fairly or not. Also, ask will they work with the broker in the future if required.

 Question #2. From how many years you are working as a mortgage broker? 

Now, this is among the most important questions as it will help you in learning about the experience of the loan advisor. More the number of years into the brokerage more will be the experience. Hence, the best advice you will get.

If you think that going for the amateur broker will cost you less, then it is your biggest myth that you should debunk right now. Only an experienced broker has good links in the market and can help you in getting the loan at the lowest rate possible.

Question #3. What type of loan will work best for me?

Several types of mortgage options are available in the mortgage industry. But you need to find the one that works best for you. A trustworthy and reputed mortgage broker will patiently explain all the loan types to you and will also suggest the best loan option. He will analyze your needs and financial situation thoroughly before reaching any final decision.

Moreover, this question will help you in knowing how much knowledge do mortgage broker has about the loan and its types. So, don’t miss asking this crucial question if you want to know your mortgage broker in a better way.

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What Every Canadian Must Know About Top Mortgage Rules This 2018

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Changes in mortgage rules in Canada have been made effective since January 2018. These will affect every Canadian who plans on buying a new home for this year and the years to come up until new rules will be implemented in the future. While there are many changes that have been implemented, a few of the major ones that you should take note of when going for a mortgage are the following:

Loan to value ratio must be improved by lenders

This rule applies to mortgage lenders other than credit unions and private mortgage lenders. Alongside having a more improved loan to value ratio, these lenders must also be aware of the critical risks they will be exposed to when lending. It is important for them to learn how to respond to these risks in an appropriate manner. As soon-to-be Canadian homeowners, you must take note that these lenders have been ordered to have internal risk management protocols to help them deal with these risks and those of highly priced markets that exist in the Canadian market.

Restrictions are given to transactions that appear to avoid limits on the loan to value ratio

Mortgage lenders except those of credit unions and private lenders are not allowed by law to make arrangements with other lenders for transactions that appear to have been designed in order to avoid the limitations of the loan to value ratio. For instance, you make an application through a lender and that lender can only avail up to 70% of the 80% LTV. That lender will look for a third-party lender that can give the remaining 10% LTV. This is what is prohibited by the new mortgage rules for 2018.

Uninsured mortgages will use a new minimum rate

If your mortgage is uninsured then you will need to qualify for a mortgage that has a new minimum rate. There is a benchmark rate given by the Bank of Canada for five years. The rate to qualify may also be based on the contractual mortgage rate of the lender with an additional rate of 2%. In the past, consumers are qualified with the rates offered by that of the lender. Don’t worry because you will still pay according to your lender’s rate. It is just that the qualification process which will feature a higher rate of calculation.

Rules affect those applying for renewal or refinancing

Canadian homeowners looking to refinance or renew their existing mortgages will have to take note that they are affected by these new sets of rules too. While the laws become stricter for them, it has to be noted that the new rules will apply only to those whose mortgages have been granted by financial institutions that are regulated by the federal system. You have to undergo the stress test as when you applied for your mortgage the first time. This is to assure your lenders that you are still capable of paying the mortgage. These rules are not as strict when it comes to your private lenders.

In case you are looking for second mortgage in Montreal, it will be good to know how your privileges are affected by these new rules. Ask questions and get educated about these laws!

Categories: Mortgage loans

What Should First Time Home Buyers In The Greater Toronto Area Know?

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Being a first-time buyer in the greater Toronto area is not a simple task. 2018 has set in with its fair share of troubles. The increase of mortgage qualification rates by the government has left many potential buyers waffling.

The unexpected change has thrown homebuyers into a state of uncertainty and confusion. The changes do very little to address the government concerns on home prices due to the massive supply shortage facing major markets. If the shortages go on unaddressed, the concerns will persist as well.

How The Home Buyer Landscape Has Changed

Mortgage type

The 20% down payment is now seemingly unattainable. Even the uninsured mortgage borrowers have to go great lengths in proving that they are able to pay off the monthly mortgage within the limited 5-year benchmark rates as published by the Bank of Canada, or an additional 2% on their contract mortgage rate. To survive, your income must be sufficient to cover up the extra costs.

The changes are a huge blow to young and inexperienced buyers with financial limitations. While the changes are very unfavorable to first-timers, the rates draw a danger line to keep off any unable buyers. Secondly, the unreasonable rates are not commensurate to the rising demands. The housing shortages cannot sustain the ever-growing population.

What Is The Average Home Buyer’s Budget?

The average rate is $350,000 for the average first time home buyer. If you are used to downtown Toronto’s process, this may seem way too small, but it aligns with what many buyers can afford. In the Great Toronto Area, the median resident’s income varies between $38,018 for a single person to 132,596 for a couple.

According to most financial experts, to ease your mortgage, ensure your mortgage costs do not go beyond 30% of your monthly income. With taxes, maintenance, and utilities, you need minimum household earnings of $61,500 after taxing or just $5,120 per month. To avoid mandatory default insurance, you need a 20% down payment equal to around $70,000.

However, with the surged rates, we are forced to assume a supposed rate of 5.5% translating to an upshot in monthly payments to $1,709.

Best Areas For First-Time Home Buyers

Identifying the best areas to purchase your home is not impossible. Once you understand your ideal kind of lifestyle that appropriately fits into your budget, you will easily weed out any unfavorable deals and determine what suits you best. For an all-time urbanite, Hamilton is the best choice. For a relaxed lifestyle, Tecumseth will do just fine. Finally, Oshawa is the best catch if you intend to raise your young family.

Bad Credit Mortgage Can Bring You Through Trying Times

One great advantage of obtaining a bad credit mortgage in Montreal despite poor credit is that even though the interest rate might be more than the loan,  you will be building collateral once you close the offer and get into the home. If the housing industry appreciates, the value of the home you own will increase and the amount of money you still pay back will certainly reduce. This will make it possible to market your house for more if you want to use money as a down payment on your next house. A bad credit home loan will also enable you to get into a home with a little down payment. There will be a trade-off in a higher rate of interest, but if you do not have enough money, poor credit home loans will be an option for you.

Categories: Home loans

How To Qualify For A Mortgage This 2018

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Are your efforts spent on finding a good mortgage offer bearing no fruits? As the clock ticks, times are equally changing. If you keep a close eye on current events, you have probably heard of the new mortgage rule expected to toughen things up this year. However, amid the mind-boggling happenings and as a borrower, you can still find the best current mortgage rates for yourself.

Think It Is Hard?

Good news. We have listed a step-by-step guide to lead you through the process of acquiring a mortgage. First, you need to find out what has really changed in order to identify your loopholes. Some huge changes in the qualification processes have been affected in the last few years. It is therefore prudent to seek information on the changes. The main point here is to look at things differently.

As directed by the office of the Superintendent of Financial Institutions (OSFI), all federally-regulated mortgages in Canada are subject to a stress test. Before, only high ration mortgage-borrowers with a 20% or less down payment were subjected to the stress test.

As per the new rules, to qualify, homebuyers must attain higher interest rates than the one given by the mortgage provider. The current 5.14% Bank of Canada’s rate is lower than the new qualification targets with a gap of about 2% points.).

While, the mortgage rate may vary, the hypothetical rate would stagnate at 5.14%, translating to a 20% loss they would pay prior to the stress test. Also, rising interest rates is yet another factor that may dim your chances to qualify for a great offer. A few weeks ago, the Bank of Canada announced a rate increase of 1.25%. This decision not only triggered upticks in bank prime rates but to the variable mortgage rates as well. Despite the hard-pressing stress test, there is still a way out to get your dream home provided you plan broadly.

Qualifying For A Mortgage

If you can secure a good deal, you will as well save on your payments. Contrary to the widely held misnomer that you need up to 20% to qualify for a mortgage loan, the rates can swoop to as low as 5% through mortgage default insurance. To have a round-up idea of what may fit into your budget, have a look at the mortgage affordability Calculator. And since there are many things associated with costs, do not rush when making final decisions. Reach out to a trusted and credible mortgage professional for clear direction since there are many other factors that may impact your affordability.

Next, your mortgage lender should give you a pre-approval form. The forms indicate how much mortgage you can qualify for, which helps to estimate the monthly rates. The forms allow you to lock an interest rate up to 120 days. That way, in case the rates shoot within the pre-approved time-lines, you are still guaranteed the lower, pre-approved mortgage rate. Before initiating the process, put together all your documents to expedite the process and avoid inconveniences. Also, order a credit report to counter-check the information to avoid any inaccuracies.

Keeping pulses with your credit score prior to contacting a mortgage professional will keep you informed of the possible rates. Remember also that you will have to provide documents to prove your employment, identification, ability to pay the down payments, closing costs and information about your debts and assets. Your mortgage professional may also demand additional documents.

Categories: Mortgage loans

Reviewing Your Mortgage Renewal Options

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Sometimes, days fly so fast, especially when you are paying off your mortgage. There will come a point in your life when you may be given the opportunity to renew. Before engaging into mortgage renewal, however, you have to consider a set of factors that may affect your decision. Rates may be higher based on what is current in the market. There are times that it can be lower though if you are lucky enough. You have to review your mortgage renewal options first if you want to take advantage of the offer. Here are things to take note of in the process.

Be familiar with the renewal process

If you are busy, you might not really be aware it is time to renew unless you get the renewal statement which is given at least about 21 days before the existing mortgage term ends. The statement contains every piece of vital information you must know including the amount still to be paid for the principal loan, the term and the interest rate. You have the option to either pay the current mortgage in full or renew it for another term.

The offer itself is already tempting. Take note that it is important to find better options and rates in the market. You might also want to consider if you will switch from the current bank or lender at renewal time. When making a decision, it is important to know that you have control over the mortgage renewal process.

Do you really need the mortgage?

This is one question that should be brought to mind before signing the mortgage renewal letter. Actually, you should have reconsidered all these things months before the end of your current mortgage term. Make your own research and do some paperwork. The advantage of renewing an existing mortgage includes the fact that you do not have to go through the same process as when you applied for an initial mortgage.

Alongside this question, you have to ask some other questions regarding mortgage renewal. Can you possibly increase your mortgage payment amortisation so that you will be able to pay the entire amount sooner and at a lesser interest rate? Are the rates lower than the previous one? Can payment frequency be changed? Did your lender or broker deliver a good job with regards your mortgage? Do you want to consider debt consolidation?

Take this as a time to reassess your financial situation

You have to consider mortgage renewal time as a period to assess your current financial situation. It is not just about looking for a good interest rate that will make paying entirely easier for you. You should also rethink about the various mortgage options that you have and compare and contrast one from the other. You have to make sure that you are getting into a win-win situation should you consider to renew your mortgage.

Have you considered getting into debt consolidation mortgages in Montreal instead of renewing the mortgage that you have? If you do, then give us a call. We can help you come up with a better decision when applying for new mortgages.

Categories: Mortgage loans