29 Dec

108 YEAR 7 MONTH AMORTIZATION: TOTALLY COOL SAYS THE FEDS!

General

Posted by: Brad Lockey

108 Year 7 month Amortization… Totally Cool Says the Feds!

In October 2015, I wrote 136 words on this topic, hoping that the image alone would get some traction. It was a pretty insane image to a numbers geek like me – linked here.

Perhaps these additional 381 words worth will garner more attention.

This month’s Visa images are tamer, as a business card the monthly total can be significant during busy months. Yes I pay the balance to zero each month, in fact I appear to actually over pay it some months (so deep is my fear of credit card interest).

No I will not be taking 108 years and 7 months to pay off the balance…

108 YEARS AND 7 MONTHS!

108 YEARS AND 7 MONTHS!

108 YEARS AND 7 MONTHS!

Here is a question for a government so intent on protecting us from ourselves:

Why clamp down even further against lending on a secured asset in which we live, a debt we must pay off in a maximum of 30 years, (25 if less than 20% down) with a record of repayment that is the envy of the free world, yet allow us to take 108 years and 7  months to pay off the:

  • Particle board furniture we fill the home with?
  • The vacation we could not afford to take?
  • A night of bottle service hitting up the clubs (yo!)?

How does this make sense?

99.63% of Canadians never miss a mortgage payment. There is no mortgage crisis to repair.

Can the same be said about this form of debt though?

To qualify for this 108 year 7 month amortization… Does one need:

  • A down payment?
  • Clean Credit history?
  • A job?

Nope. Not at all.

In fact in some cases one can qualify for this kind of debt without even being alive, or even being an actual  human being. Trust me, to apply for a mortgage through Dominion Lending Centres, is easy, but not THAT easy!

So I ask again: Where is the real debt problem in our country?

Why is our government not asking this question?

Why is our government intent on trying to fix a problem that does not exist?

Canada is not the USA, and policy should not be set based on Netflix analysis.

The recent changes made to mortgage lending will in fact do the most damage to lower middle class households, the ones already most susceptible to 108 year 7 month loans.

Enjoy your day, mine will be spent applying for credit cards on behalf of our dog and two cats.

 
13 Dec

TOP 5 REASONS PEOPLE DO NOT QUALIFY FOR A MORTGAGE

General

Posted by: Brad Lockey

I receive calls every month from people who want to know how to qualify for a mortgage because they were declined by their bank. In many cases I can help them and in some cases they have to wait – but we identify what they need to do to get in a better situation to qualify.

Here are the top 5 reasons why people don’t qualify for a mortgage with their bank and come to see an independent mortgage specialist.

#5 Lack of a Down Payment or Equity

With the end of cash-back mortgages offered by the banks, borrowers now have to come up with the down payment on their own. They can receive it as a gift from a family member – but no more cash-back from the lender used for down payments. Minimum down payment is 5% for the purchase of an owner-occupied home or 20% for a rental property. Minimum 20% equity in the home if it is a refinance. This will help you qualify for a mortgage.

#4 Insufficient Income

With the high price of homes in the Vancouver area, sometimes people simply don’t earn enough money to manage a mortgage payment, property taxes and strata fees along with existing consumer debt and still have a life. For some home buyers, the only other option is to access more money for a down payment (gifted) or try to purchase a home with suite income or look at alternative lenders who accept room and board and other sources of income to help you qualify for a mortgage. In some instances, home buyers will look for someone else to go on title to add income to the application.

#3 New Mortgage Rules

For those with less than 20% down payment, the new mortgage rules are adjusted to the debt servicing ratios and amortization for borrowers. The new rules for debt servicing apply to those with good credit scores and allow for a max of 39% (gross debt servicing – GDS) of gross monthly income to cover the mortgage payments, property taxes and 50% of the strata fee. In addition a max of 44% (total debt servicing – TDS) of gross monthly income is allowed to cover the same and other consumer debts such as loans, credit cards and lines of credit. The maximum amortization was also reduced from 30 years to 25 years – effectively tightening qualification for borrowers equivalent to a 1% interest rate hike.

#2 Credit Issues

Some people don’t realize if they are late on credit card payments, their mortgage or loan payments the lender will update the credit bureau agencies and the late payments will reflect on their credit report, lowering their credit score. Other items can also effect credit scores such as a collection (if you didn’t pay that parking ticket or fitness membership fee they can send to a collection agency) and those marks on your credit report make your score drop like a rock. Going over your credit card limit, and applying for credit often requiring your credit report to be pulled by the bank, auto dealership and credit card companies will lower your score. Finally, consumer proposal and bankruptcy will greatly impact your score, which can stay on your report for up to 7 years if real estate was involved as is the case with bankruptcy.

#1 Too Much Debt

There are a growing number of consumers doing – well – too much consuming. Credit card debt is on the rise and over use of lines of credit are putting some people in a debt overload situation. Some pre-home-buyers go out and purchase that amazing new truck, along with a large monthly payment, which pushes their total debt servicing (TDS) ratio over the limit. Nice new truck – no home with a garage. Some home owners have so much consumer debt that they are unable to refinance their home to consolidate the mortgage and the credit card debt because the amount exceeds the maximum loan to value allowable (currently 80% of the value of the home) and if housing prices stabilize or drop in some areas – this makes it more difficult for home owners to qualify for that new mortgage and lower payments. Paying off your debt will help you qualify for a mortgage.

Do you want more information for your next mortgage? Contact any of us here at Dominion Lending Centres – we’re here to help!