27 Sep

A TAKE CHARGE WOMAN’S GUIDE TO SURVIVING FINANCIAL RUIN AND OTHER ODDS AND SODS DURING A DIVORCE

General

Posted by: Brad Lockey

(I am not a woman, but the same points paralell to men in the case of divorce)


If you find yourself in the unfortunate position of getting divorced, have no fear, because help is here!

Divorce, while often times feels like a death, it is also the beginning of your new life.  And while it can be scary it can also be exhilarating and life changing.

As women, we often make the mistake of being too trusting or giving the proverbial “benefit of the doubt”.  But in a divorce that cannot happen.  In my career as a mortgage broker I have seen too many women have their credit ruined because they trusted that the ex spouse would pay the bills as agreed to.  BIG BOWL OF WRONG!!

If you have not done it before, then divorce is the time to take charge of your finances.  It’s vitally important to keep your credit intact and in good standing because, bad credit haunts you and follows you for 7 years.

Here are a few tips to keep you on track and ensure your credit does not take a beating like your poor little heart has.

  1. Ensure that if you have joint debt (credit cards, lines of credit etc.) that you know who is paying what. DO NOT trust your ex to pay the bills, because as soon as some other woman (or man) comes along and he wants to wine and dine her, those debts take a back seat.  Often the debts don’t get paid or are paid late, and because you are jointly responsible, your credit takes a hard hit as well.  So if you have agreed as to who is paying what debt, ensure that you have yourself removed from that joint debt as soon as you can.
     
  2. If you have a mortgage and you are both equally responsible for the payments until you either reach a settlement or sell the house, make sure that you continue to make the payments from an account you can monitor.  That is have your ex pay his share of the mortgage to you and then you pay the full amount from an account that is in your name.  Recovering from a mortgage that shows late payments, NSF payments and missed payments, is a long hard process. Do not fall for the “I’m paying my share, don’t worry”.
     
  3. Treat the divorce like a business.  Get everything that you can in writing.  The sooner that you hammer out an agreement the easier and quicker and most cost effective it will be. Even if you do not negotiate a separation agreement right away, ensure that you agree, who is responsible for what. It is crucial to keep your credit in good standing.  Divorce is already hard enough and emotionally draining without having to deal with creditor phone calls, and juggling missed payments.  And try getting your own credit card with a bad credit rating, you’d likely have more success getting a sitting with the Pope than a credit card!
     

Look, I am not trying to scare you, I am just reminding you to embrace your independence and take care of your financial well being.  Take charge of your finances.  It is such an empowering feeling to be in control of your bills and your money!

If there are children involved, remember this, they are children!  Do not make them a pawn in your divorce.  Do not pit your children against one parent.  It causes anxiety and confusion as they feel that they have to choose a parent and that they can’t love them both.  Your children only have one childhood.  Do not take that away from them.  Lastly do not talk badly about the ex in front of the children.  Talk about what a “loser” or “cheat” he is over wine with your friends when the children are not around.  It is an unfair and stressful position to put the children in.  Remember they did not choose you as parents and they are a casualty of the divorce, so make sure you children know, that they are loved, that they do not have to choose between the parents, and that lastly, none of it is their fault.

Finally know this.  It does get better and in time, you will likely acknowledge that getting divorced was one of the best decisions that you made.  When you feel yourself faltering and feeling nostalgic and missing your ex, simply remind yourself what brought you to the position of getting divorced in the first place. Give your head a shake and snap out of it!!!

Trust me; I know what I am talking about.  I have lived through divorce, bankruptcy as a result of divorce, cheating, bad credit etc.  You name it and I experienced it.  My climb back out of financial ruin was a situation that I would not wish on my worst enemy….OK maybe one or two!!!  The climb out was hard.  It made me who I am today (a pretty awesome ladyboss).

I hope that sharing this information will save you some grief in your own struggle.  There is life after divorce, there is love after divorce, there is money after divorce and there is mortgage help in just such a situation from Dominion Lending Centres.

(Shared by 

MARIA KYLE

Dominion Lending Centres – Accredited Mortgage Professional
Maria is part of DLC Vintage Financial based in Duncan, BC.)

27 Sep

10 QUESTIONS FOR FIRST TIME BUYERS

General

Posted by: Brad Lockey

Top 10 Things to Consider Before Your Mortgage Matures

As a first time home buyer, the process of purchasing a home can seem very daunting.  From a financing standpoint, here are 10 common questions I hear from first time home buyers.

1. What’s your best rate?

This is by far the most common question.  Rate is a small part of your mortgage contract but its often the most talked about.  People become “rate sensitive” when they hear their neighbour or co-worker got 2.49% and they want the same rate.

Some lenders will dangle these low rates to entice you but don’t be fooled.  The lowest rates almost always come with conditions such as high pre-payment penalties or quick 30 day closings.

Is saving $15/month on your mortgage payment worth paying a penalty up to 9 times higher when you sell or need to refinance in 3 years?  No broker or website can secure a rate without a full application and credit bureau.

2. What’s the maximum mortgage amount for which I can qualify?

My suggestion is set a budget your comfortable with and let your Dominion Lending Centres mortgage professional tell you how much mortgage your budget allows.

The two ratios used to determine how much mortgage you qualify for are the Gross Debt Service Ratio (GDS) & the Total Debt Service Ratio (TDS).  Your GDS is composed of your new housing cost such as your mortgage payment (principal & interest), property taxes, heating costs and any strata fees.  Your TDS includes your GDS as well as any other monthly liabilities such as car loans, credit card debts, lines of credit etc.

Depending on your credit score, the maximum GDS/TDS ratio is 39/44.  This means your GDS shouldn’t be more than 39% of your gross income.  Your TDS shouldn’t be more than 44% of your gross income.  If your gross income is $100,000/yr you could allocate $39,000/yr to GDS & $44,000/yr to TDS.

3. How much money do I need for a down payment?

For owner-occupied homes, the minimum down payment required is 5% of the purchase price for homes under $500,000. For homes over $500,000 10% down payment is required on the amount over $500,000 up to $1M.  Anything over $1M requires 20% down as a minimum.  If you want to avoid CMHC mortgage insurance then 20% down payment or greater is needed.

Any rental properties require a minimum of 20% down.

4. What happens if I don’t have the full down payment amount?

As a first time home buyer you are eligible to use your RRSP as a form of down payment to a maximum of $25,000. Your RRSPs can be used without being taxed if you pay back within 15 years.

Another popular option is a gifted down payment.  A gift can come from an immediate family member to form part or all of your down payment.

Some lenders will also allow a flex down program.  This means you borrow the money from a line of credit and this loan is factored into your debt service ratios.

5. What will a lender look at when approving me for a mortgage?

Generally speaking, the lender will want to look at your source of income, employment history, debt levels and repayment history and the actual property itself.

Lenders want stability.  By vetting and checking the above, the lenders feel confident you are able to make your mortgage payments and in the unlikely event you default, they know the property is marketable.

6. What’s better, fixed or variable rate?

Not everyone qualifies for a variable rate because the qualification rate is currently 4.74% vs the 5 year fixed of 2.54%.  That’s a big difference!

Assuming you qualify for a variable, it boils down to risk tolerance and your plan for the property.  Fixed rates give you stability over the term of your mortgage where a variable rate is tied to the prime rate, currently 2.70%.  This means your mortgage payment could decrease or increase depending on what the Bank of Canada decides.

Variable rates can save you thousands if you sell or refinance during your term.  The standard penalty on a variable rate is 3 months interest.  The penalty on a fixed rate is calculated using the interest rate differential and depending on your lender can sometimes be in the tens of thousands of dollars.

Your Dominion Lending Centres mortgage professional can discuss all the differences and benefits for you.

7. What credit score do I need to qualify?

Anything over 680 is considered AAA with most lenders.  A score above 680 gives you access to all the discounted rates.  If your score is below 680 there are options but often at higher interest rates.

8. What happens if my credit score isn’t great?

Take action immediately to increase your credit score.  If possible pay off all your debts on credit cards and lines of credit as this will increase your score substantially.  Its a good idea to always pay your balance in full each month as this creates a pattern of positive repayment.

Don’t take on anymore new debt such as car loans or new credit cards.  Make sure everything is up to date meaning no overdue collections or old Telus or Rogers bills outstanding.

9. How much are closing costs?

Closing costs vary but lenders typically want to see that you have 1.5% of the purchase price on hand for closing costs.  If you bought a condo for $500,000 you’d need $7,500 for closing costs.  This is only a guideline and costs vary.

Closing costs will cover things like, inspections, lawyer fees, property transfer tax, appraisals, and title insurance.

10. How much will my mortgage payments be?

Obviously this depends on your mortgage size, rate, amortization, repayment schedule, any CMHC insurance and if your lender is collecting your property taxes for you or not.  My suggestion is stick to your budget!

If you have any other questions, please feel free to contact Dominion Lending Centres – we are always happy to answer all your questions.

21 Sep

A COOL CAR, OR A HOME OF YOUR OWN?

General

Posted by: Brad Lockey

A Cool Car, Or A Home Of Your Own?


Thinking of purchasing or leasing a new car?

Some quick math for you.

A $400.00 payment will reduce your total mortgage qualification by $100,000.00

Ouch.

I will confess that I think about new cars for at least a moment or two daily, fast cars and I go back a few decades and as I hit ‘mid-life’ temptations abound. Apparently there are 265 new car models to choose from, so many cars so little time.

I do not feel that old, but I do recall when most manufactures had three models to choose from, no mini vans, and few SUV’s.  Never mind the wide variety of niches being filled with Hybrid-this and crossover-that.

Once upon a time BMW offered 3, 5 & 7 series.  Today they offer 1, 2, 3, 4, 5, 6, 7, 8, i, X, Z etc…

Honda as recently as the early 90’s was three models, whatever happened to the prelude anyways?

But what does this have to do with mortgage financing?

The simple math is this;

$13,000.00 of consumer debt (credit card, line of credit)

OR

A student loan payment of $400.00 per month

OR

A Monthly car payment of $400.00 (Lease or Finance)

Will eliminate $100,000.00 of mortgage money from what one would otherwise qualify for.

Nice car, nice digs…tough to finance both, tougher still to finance the car before the home.

The moral of the story is this;

1. Eliminate debt from your life (and take on no new debt).

2. If you are Incorporated, be sure to have the actual payments flowing directly from your Corporate bank accounts.  This will reduce the impact in most cases.

3. If you must personally Lease or Finance a new car, do so after settling into your new home and making certain that your budget can handle it.

Keep in mind that qualifying for a mortgage involves a rigorous review of your debt servicing abilities, and you are largely ‘protected from yourself’.  However qualifying for a vehicle requires little more than a pulse.

You are the master of your own demise when it comes to consumer debt.

There is little to no oversight.  Personally I have yet to see clients in foreclosure over a mortgage payment alone.  Often is the vehicle, boat, RV, credit cards, unsecured line of credit that all came after the mortgage which are the root of the problem.

Debt is the enemy, but at least mortgage debt is attached to an appreciating asset in which you live at 50 year record low interest rates.

1 Sep

STOP IT!!!

General

Posted by: Brad Lockey

Stop It!!!

Well folks I just do not get it. I do not understand why smart person after smart person continues to sign on the dotted line for the first offer they are given upon mortgage renewal. Case in point that has brought this to a head for me was just a couple weeks ago. The mortgage was with one of the beloved big 5 banks whom we Canadians seem to hold in great awe and respect. Here is what it looked like:

Mortgage amount $259,997 in a new 5 year fixed rate term with a 20-year amortization at 4.10% making the monthly payment $1584.51 and the balance after 5 years $213,266.26.

I know for a fact that the SAME bank and many others were offering 2.59% for the exact same term. This is how that would have shaken out:

Mortgage amount with a rate of 2.59% in a 20-year amortization would have had a monthly payment of $1,387.40 and the balance at the end would have been $206,956.55.

That means that the client could have saved $197.11/month or $11,826.60 over the 5 years. On top of that is the crazy fact that they would have also owed $6,309.71 LESS at term maturity. $18,136.31 is the amount that this one person could have saved. That is one person out of a very large number of people doing the exact same thing so I must loudly repeat – Stop it!!

Let us examine the facts for a moment shall we?

1. Banks are a business and they are mandated to generate a profit for their shareholders and investors. Though success seems to have become a dirty word, this is actually a good thing for our economy. Our banks are strong and continue to report profits. A secret of the banking world that you need to be aware of is that the person you are sitting down with may receive a commission or a bonus based on how many mortgages they sign at the higher rates. I repeat that I do not have any problem with profit. I myself am commissioned based. What does concern me is the fact that the average consumer does not know this may be occurring on their transaction which may lead a them to make a choice without questioning their options.

2. The average consumer will shop 3 stores and visit many websites to save on big ticket purchase such as a TV or a car. Once they get to the dealership they will negotiate and play the game to get the best price so why do we not when it comes to our largest asset? Why are we not ensuring that we are not overspending $18,136.31?

3. There are a large number of lenders and banks in our country to choose from. They are solid institutions offering great mortgages to consumers. Research them and make an informed decision before dismissing them as unreliable. They too are watched over by the powers that be who work diligently to protect your rights as consumers.

4. There are so many well qualified mortgage professionals from Dominion Lending Centres who live and work in your community. Find one you like and have them find your best option if the whole thing seems like too much work.

Did you know that to switch your mortgage to a new lender at renewal, you will not incur a penalty, or pay legal fees or appraisal fees? It will probably take about 4 hours all together, which in the examples I used, works out to $4,534.08/hour. That is pretty substantial hourly wage and certainly worth your time.

So stop it and save your money.