We are heading into the Christmas season with an economy that has seen better days. Below are some money management tips to help you through this holiday season, the current economic situation, and the future ahead.
1) After the holidays are over everyone usually dreads receiving credit card bills in the mail. With most credit card interest rates in the 20% to 24% range it is very difficult to pay these cards off. Due to the higher interest rate, if the credit card bill is not being paid in full on a monthly basis, the interest charged will cost a lot of money. One option available to you is to consolidate your debts into one loan at a much lower interest rate. This can be done in two ways: 1) Approach your bank and ask them to consolidate at a lower interest rate. The interest rate to consolidate is normally in the range of 7% to 8%. 2) If you have sufficient equity in your home you can use the equity to pay off your debt at a lower rate of interest by refinancing your home. Please check out our current lowest rates. The second way is the greatest savings provided you have the equity in your home. Please contact us today if you would like to refinance your home to consolidate your debt.
2) If you are fortunate enough to have very little to no credit card debt and have the luxury of a little extra money at the end of the month, where do you invest this surplus? During good economic times the stock markets were not as volatile and GIC and savings account rates were much higher. This encouraged you to invest your surplus savings. Today’s environment consists of uncertain economic times, extremely volatile stock markets, and historically low GIC and savings account rates. Thus putting these extra savings towards the mortgage may be the more prudent investment. Your current mortgage rate is probably somewhere in the range of 4% to 6%. Applying your money towards your mortgage would be the equivalent of receiving 4% to 6% guaranteed return on your investment. Please examine the following example to illustrate your savings.
Example: $300,000 mortgage amortized over 35 years with a 5 year fixed term of 5.80%
Scenario 1: Make your current monthly payments
Payment $1,656.75
Interest paid for entire term $83,886.83
Principle Balance at end of term $284,481.33
Remaining Amortization 30 years
Scenario 2: Make your current monthly payments along with an extra $100 per month
Payment $1,656.75
Extra Payment $100
Interest paid for entire term $82,957.31
Principle Balance at end of term $277,552.31
Remaining Amortization 28 Years 2 Months
As illustrated by the above example, an extra $100 a month payment over the 5 year period equates an interest savings of $929.52. The Interest savings may not seem significant, however your principle balance has dropped to $277,552.31 and your amortization has dropped to 28 years 2 months. The rule of thumb is that the faster you pay off your debt the more you will save on interest. Based on the example, this adds up to a projected savings of $30,606.89 over the next 28 years 2 months assuming your interest rate stays the same for the life of the mortgage. Now that is big savings.
The next example shows the same mortgage but switching from monthly payments to accelerated bi-weekly payments.
Example: $300,000 mortgage amortized over 35 years with a 5 year fixed term of 5.80%
Scenario 1: Make your current monthly payments
Payment $1,656.75
Interest paid for entire term $83,886.83
Principle Balance at end of term $284,481.33
Remaining Amortization 30 years
Scenario 2: Switch to Accelerated Bi-Weekly Payments
Payment $828.37
Interest paid for entire term $82,444.10
Principle Balance at end of term $274,756.00
Remaining Amortization 23 Years
As illustrated by this example, switching to an accelerated bi-weekly payment equates an interest savings over the next 5 years of $1,442.73. Again the interest savings may not seem significant, however your principle balance has dropped to $274,756.00 and your amortization has dropped to 23 years. As mentioned above the faster the debt is paid off the more you will save on interest. So, based on this example your savings add up to a projected $94,664.83 over the next 23 years assuming your interest rate stays the same for the life of the mortgage. Now that is even bigger savings.
Based on the above examples applying extra payments towards your mortgage will result in big savings. So if your credit card debt is under control and you have the ability to make some extra mortgage payments, please call your mortgage lender today to take advantage of the savings.
Please click here if you would like to make any comments about the current or past newsletters as we appreciate any feedback. Also watch for our new and improved website in Spring of 2009.
Please contact us for any of your mortgage needs. Betty at 403-532-3927, e-mail bsaskiw_prolink@telus.net, Kevin at 403-589-3021, kevsas@telus.net or at our website: www.yourmortgagecontact.com
Wishing you, your family and friends all the best over the holiday season and have a wonderful New Years.
Wednesday, December 3, 2008
Wednesday, November 5, 2008
Tips To Improve Your Credit Score
In today’s economic times of tightening lending markets, your credit history is increasingly more important when applying for a mortgage or loan. When a bank does your credit check, they do not provide a detailed analysis of your credit bureau and in most cases cannot even provide you with a copy. At Prolink Mortgages we will take the time and go through the credit bureau with you to ensure you understand the report as well as provide you with a copy of the report upon request. Also recent changes in the mortgage industry make it almost impossible to get mortgage financing with credit scores under 600 unless you are willing to pay a very high rate of interest. In some cases you even need a score above 650 to be considered for various mortgage programs such as rental or investment properties. By following these 8 simple rules, you will be ensured of the good credit score, mortgage and interest rate that you deserve.
1. Pay your bills on time. Your payment history is a major factor (35% of your score) in determining your credit score. If you pay your bills late, or had an account referred to collections, your credit score will take a major hit.
2. Sign up for online banking and make sure your regular recurring bills are paid automatically. This way you will not forget a payment that will wind up reducing your credit score.
3. Increase your credit limit. Another large factor is the amount of your debt in relation to your credit limit. If you have a card with a $10,000 credit limit and your balance is $9,000, this will not help to improve your score. To make the debt/credit limit ratio look better, you can try to call your credit card company and request an increase in your credit limit. Don't use the extra credit though! That defeats the whole purpose and puts you further in debt! A general rule of thumb is to try and keep the credit card balance below 50% of the credit card limit.
4. Don't apply for many cards at once. This will not improve your credit score because this is a characteristic of high credit risk groups.
5. Don't ever close an open credit card account. If you pay off a credit card down to a zero balance, leave it open. Remember that a positive factor for your credit score is how much available credit you have at your disposal when compared to your credit balance, in addition to the length of your credit history.
6. Apply for loans within a two-week period. Every time you request a loan and the lender pulls your credit report, it can hurt your score. It is part of the formula that reasons "this person is trying to apply for credit and loans and possibly be trying to live way beyond their means!" If you keep the loan process within a two-week period, all of the credit report lookups are bundled together as one single request!
7. Check for errors on your credit report. Examine your credit report for errors and contact the credit reporting agencies to fix any errors on your credit report.
8. For the credit card debt that you have outstanding, try and pay more than the minimum payments required. By paying more than the minimum payments, your credit score will increase because it shows that you are making an effort to pay down the credit card debt.
If you take action and follow these tips, you will be able to give your credit score an immediate boost and gradually increase the score even more as time passes. The major keys are to pay your bills on time and reduce your debt amounts when compared to your credit limit. This has a twofold benefit of improving your credit score and reducing your debt.
Don’t panic if you do a credit check and your credit score comes in lower than you expected. We will work with you and help to get your score increased. If you take our advice and suggestions, usually in as little as 60 days we can help you to increase your credit score to make your home ownership dreams a reality. Even if it takes longer than 60 days for your score to improve, we will continue to work with you over the long term to help in any way we can to get your credit on track.
Please contact us for your mortgage needs or for help with getting your credit on track to reach your future home ownership dreams. Betty at 403-532-3927, e-mail bsaskiw_prolink@telus.net, Kevin at 403-589-3021, kevsas@telus.net or at our website: www.yourmortgagecontact.com
1. Pay your bills on time. Your payment history is a major factor (35% of your score) in determining your credit score. If you pay your bills late, or had an account referred to collections, your credit score will take a major hit.
2. Sign up for online banking and make sure your regular recurring bills are paid automatically. This way you will not forget a payment that will wind up reducing your credit score.
3. Increase your credit limit. Another large factor is the amount of your debt in relation to your credit limit. If you have a card with a $10,000 credit limit and your balance is $9,000, this will not help to improve your score. To make the debt/credit limit ratio look better, you can try to call your credit card company and request an increase in your credit limit. Don't use the extra credit though! That defeats the whole purpose and puts you further in debt! A general rule of thumb is to try and keep the credit card balance below 50% of the credit card limit.
4. Don't apply for many cards at once. This will not improve your credit score because this is a characteristic of high credit risk groups.
5. Don't ever close an open credit card account. If you pay off a credit card down to a zero balance, leave it open. Remember that a positive factor for your credit score is how much available credit you have at your disposal when compared to your credit balance, in addition to the length of your credit history.
6. Apply for loans within a two-week period. Every time you request a loan and the lender pulls your credit report, it can hurt your score. It is part of the formula that reasons "this person is trying to apply for credit and loans and possibly be trying to live way beyond their means!" If you keep the loan process within a two-week period, all of the credit report lookups are bundled together as one single request!
7. Check for errors on your credit report. Examine your credit report for errors and contact the credit reporting agencies to fix any errors on your credit report.
8. For the credit card debt that you have outstanding, try and pay more than the minimum payments required. By paying more than the minimum payments, your credit score will increase because it shows that you are making an effort to pay down the credit card debt.
If you take action and follow these tips, you will be able to give your credit score an immediate boost and gradually increase the score even more as time passes. The major keys are to pay your bills on time and reduce your debt amounts when compared to your credit limit. This has a twofold benefit of improving your credit score and reducing your debt.
Don’t panic if you do a credit check and your credit score comes in lower than you expected. We will work with you and help to get your score increased. If you take our advice and suggestions, usually in as little as 60 days we can help you to increase your credit score to make your home ownership dreams a reality. Even if it takes longer than 60 days for your score to improve, we will continue to work with you over the long term to help in any way we can to get your credit on track.
Please contact us for your mortgage needs or for help with getting your credit on track to reach your future home ownership dreams. Betty at 403-532-3927, e-mail bsaskiw_prolink@telus.net, Kevin at 403-589-3021, kevsas@telus.net or at our website: www.yourmortgagecontact.com
Friday, October 3, 2008
DON’T PANIC You Can Still Purchase A Home With No Down Payment
As you all probably know, as of October 15th 2008 lending institutions will no longer be offering zero downpayment mortgage programs. No worries, you will still have the ability to purchase a home with no downpayment. Here are two available options: 1) Borrow the 5% downpayment on your own through a bank or someone else or 2) A cash back mortgage where the lender loans you the 5% downpayment and the downpayment is included in your mortgage payment. Both of these options still allow you to get a mortgage where 100% of the purchase price is from borrowed funds. Please check our current rates for the up to date mortgage and cash back mortgage rates.
Let’s go through an example with each option assuming a purchase price of $400,000 and amortizing the mortgage over 35 years.
Option 1) Borrowing the money through your own means. In this scenario assuming you could borrow the 5% downpayment ($20,000) through a bank at Prime + 3.00% (7.75%) with minimum payments of interest only, the monthly payment would be approximately $129.17. The total mortgage portion including mortgage insurance premium would be $392,540.00 assuming a 5 year fixed interest rate of 5.45%. Monthly payments would be $2,079.57. In summary the total loans outstanding would be $412,540.00 with combined monthly payments of $2,208.74. You may find it difficult to get an unsecured loan from a bank. Or having to deal with two separate loans and payments can be very confusing so in this case option 2 is available for you.
Option 2) Cash Back Mortgage programs offered through the lenders where along with the mortgage, the downpayment is lent to you with one easy application process. The full $400,000.00 is lent to you at a slightly higher 5 year fixed rate currently at 7.20%. In this scenario total mortgage including the mortgage insurance premium is $412,540.00 and total monthly payments are $2,662.87.
As you can see in the two examples above your payments are slightly lower in option 1. This is because you are only paying interest on the downpayment loan and nothing to the principle portion where in option 2, more money will be going towards your principle. Also finding financing yourself for the downpayment can be very difficult to obtain and each situation is unique so please feel free to contact us to see which option is best for your individual situation.
For both options you must have a strong credit score (650 or above). In addition you must have 1.5% closing costs from your own resources that cannot be borrowed. Closing costs are fees associated with lawyer’s fees, moving costs, property tax adjustments, etc. In the example above using the $400,000 purchase price, the closing costs would be $6,000.
One would think that with the higher interest rate and borrowed downpayment you would qualify for much less than the old zero down mortgage program, but this is not the case. For example, if you were to qualify for a $300,000 mortgage using the zero down mortgage program, the cash back or borrowed downpayment programs would qualify you for approximately $290,000. That’s only $10,000 less. The reason for this is the lower insurance premium as well as the ability to qualify at 35% GDS and 42% TDS, which is higher than the 40% TDS required for the zero down payment program.
The cash back mortgages are also accessible to a greater number of applicants as the credit score required is lower than for the zero down program. For example, you need a 680 or greater credit score with the old zero down program. The cash back or borrowed downpayment programs allow you to purchase with a minimum credit score of 650. This means more opportunity for you to purchase your dream home faster.
So if you don’t have the downpayment saved up no problem we can help you get into that dream home faster than you think. If you have any questions or would like to apply today please contact Betty at 403-532-3927, e-mail bsaskiw_prolink@telus.net, Kevin at 403-589-3021, kevsas@telus.net or at our website: www.yourmortgagecontact.com
Let’s go through an example with each option assuming a purchase price of $400,000 and amortizing the mortgage over 35 years.
Option 1) Borrowing the money through your own means. In this scenario assuming you could borrow the 5% downpayment ($20,000) through a bank at Prime + 3.00% (7.75%) with minimum payments of interest only, the monthly payment would be approximately $129.17. The total mortgage portion including mortgage insurance premium would be $392,540.00 assuming a 5 year fixed interest rate of 5.45%. Monthly payments would be $2,079.57. In summary the total loans outstanding would be $412,540.00 with combined monthly payments of $2,208.74. You may find it difficult to get an unsecured loan from a bank. Or having to deal with two separate loans and payments can be very confusing so in this case option 2 is available for you.
Option 2) Cash Back Mortgage programs offered through the lenders where along with the mortgage, the downpayment is lent to you with one easy application process. The full $400,000.00 is lent to you at a slightly higher 5 year fixed rate currently at 7.20%. In this scenario total mortgage including the mortgage insurance premium is $412,540.00 and total monthly payments are $2,662.87.
As you can see in the two examples above your payments are slightly lower in option 1. This is because you are only paying interest on the downpayment loan and nothing to the principle portion where in option 2, more money will be going towards your principle. Also finding financing yourself for the downpayment can be very difficult to obtain and each situation is unique so please feel free to contact us to see which option is best for your individual situation.
For both options you must have a strong credit score (650 or above). In addition you must have 1.5% closing costs from your own resources that cannot be borrowed. Closing costs are fees associated with lawyer’s fees, moving costs, property tax adjustments, etc. In the example above using the $400,000 purchase price, the closing costs would be $6,000.
One would think that with the higher interest rate and borrowed downpayment you would qualify for much less than the old zero down mortgage program, but this is not the case. For example, if you were to qualify for a $300,000 mortgage using the zero down mortgage program, the cash back or borrowed downpayment programs would qualify you for approximately $290,000. That’s only $10,000 less. The reason for this is the lower insurance premium as well as the ability to qualify at 35% GDS and 42% TDS, which is higher than the 40% TDS required for the zero down payment program.
The cash back mortgages are also accessible to a greater number of applicants as the credit score required is lower than for the zero down program. For example, you need a 680 or greater credit score with the old zero down program. The cash back or borrowed downpayment programs allow you to purchase with a minimum credit score of 650. This means more opportunity for you to purchase your dream home faster.
So if you don’t have the downpayment saved up no problem we can help you get into that dream home faster than you think. If you have any questions or would like to apply today please contact Betty at 403-532-3927, e-mail bsaskiw_prolink@telus.net, Kevin at 403-589-3021, kevsas@telus.net or at our website: www.yourmortgagecontact.com
Tuesday, September 2, 2008
September Newsletter - Dream About A Vaction Property Or Second Home
Have you ever thought of heading out to your ski condo on your favourite mountain, cottage by the lake, house where there is some of the best golfing in the world, or just somewhere you can escape to other than your home in the city? Do you have a child that is going to school away from home? How would you like to own that property and visit any time you want? Then what you are looking for is a vacation property or second home.
Now is a great time to think about a vacation or second home as you may still purchase a property with zero downpayment. Even after October 15th 2008 when a minimum 5% downpayment is required it is still considered a great time to buy for a couple of reasons. With the recent price decreases seen in the housing market and the large inventory of properties to choose from, this provides an opportunity for you to take your time and look for that dream property you are searching for.
The second home purchase program was introduced for the purpose of an individual wishing to purchase a second home in order to cut down on their commuting time or to obtain a vacation property. Also considered under the second home purchase program is the case where a mortgagor’s relative is living in the second property on a rent-free basis. As well, this program is ideal for a person wishing to provide a house for a child away at university.
Qualifying for a vacation or second home mortgage is very similar to the process of qualifying for your primary residence with the exception of a few criteria. These exceptions are as follows:
· The property must be intended for occupancy at some point during the year by the borrower; or a relative of the borrower on a rent free basis.
· The property can be located anywhere in Canada and must be suitable and available for all season access. Thus a back country cabin only accessible by foot would not be eligible for this program. Some exceptions apply.
· Properties that are constructed for seasonal use or have seasonal access only are not eligible. This means that if you have a cabin on the lake which you can only access by boat in the summertime, this cabin would be ineligible for this program. Some exceptions apply.
· The property must have a permanent foundation below the frost line; be zoned residential, rural or seasonal; include a kitchen, 3-piece bathroom, bedroom, and common area; have year-round road access; be winterized with a permanent heat source; and have a water source and septic system or sanitary sewer.
· Properties located on an island must have a year round bridge or ferry access.
· Time share interests, life leases and properties in rental pools are not eligible.
· Properties that are not winterized or have seasonal access will be considered for purchases with a minimum downpayment of 10%. In this case, the maximum loan amount will normally be $350,000.00.
· US residents may also purchase a second home or vacation property in Canada with a minimum downpayment of 35%. The applicants must be able to provide the downpayment from their own resources along with a solid credit history based on their US credit bureau.
· The applicant can only have 2 owner occupied properties under the second home program since the second home program allows you to purchase the second home with 0% downpayment. Any additional properties you wish to purchase must qualify as an investment or rental property where a minimum downpayment of 10% is required.
If you are unsure if the properties you are looking at are eligible for this program or not please feel free to contact us anytime to confirm.
In the event you may not have the ability to use the property at all times, cannot qualify for the property purchase on your own, or just feel that the payment is too high for you to afford, here are a couple of options available to you to make this dream a reality:
1. To help with the purchase of the property you may want to get a group together (maximum of 4 applicants) to make qualifying and affordability of the property easier. Also having more people involved in the property gets greater usage out of the investment
2. Another opportunity available to you is the chance of making a little income on the property. As above it states that the property must be intended for occupancy at some point during the year by the borrower; or a relative of the borrower on a rent free basis. This means that during the times that you will not be using the property you can rent it out. For example you may not be able to get out to the cottage every weekend of the year but for some weekends you may wish to rent it out. Unfortunately this income cannot be used to help qualify for the mortgage.
Remember a second home purchase can also be considered a very solid long term investment. With exception to the previous four years, the long term history of the housing market has shown that property values have increased on average 5% to 8% per year.
So what are you waiting for? Let’s make your dream a reality. If you, someone you know of or a group are interested in purchasing a vacation or second home please inquire with Betty at 403-532-3927, e-mail bsaskiw_prolink@telus.net, Kevin at 403-589-3021, kevsas@telus.net or at our website: http://www.yourmortgagecontact.com/ and apply today.
Now is a great time to think about a vacation or second home as you may still purchase a property with zero downpayment. Even after October 15th 2008 when a minimum 5% downpayment is required it is still considered a great time to buy for a couple of reasons. With the recent price decreases seen in the housing market and the large inventory of properties to choose from, this provides an opportunity for you to take your time and look for that dream property you are searching for.
The second home purchase program was introduced for the purpose of an individual wishing to purchase a second home in order to cut down on their commuting time or to obtain a vacation property. Also considered under the second home purchase program is the case where a mortgagor’s relative is living in the second property on a rent-free basis. As well, this program is ideal for a person wishing to provide a house for a child away at university.
Qualifying for a vacation or second home mortgage is very similar to the process of qualifying for your primary residence with the exception of a few criteria. These exceptions are as follows:
· The property must be intended for occupancy at some point during the year by the borrower; or a relative of the borrower on a rent free basis.
· The property can be located anywhere in Canada and must be suitable and available for all season access. Thus a back country cabin only accessible by foot would not be eligible for this program. Some exceptions apply.
· Properties that are constructed for seasonal use or have seasonal access only are not eligible. This means that if you have a cabin on the lake which you can only access by boat in the summertime, this cabin would be ineligible for this program. Some exceptions apply.
· The property must have a permanent foundation below the frost line; be zoned residential, rural or seasonal; include a kitchen, 3-piece bathroom, bedroom, and common area; have year-round road access; be winterized with a permanent heat source; and have a water source and septic system or sanitary sewer.
· Properties located on an island must have a year round bridge or ferry access.
· Time share interests, life leases and properties in rental pools are not eligible.
· Properties that are not winterized or have seasonal access will be considered for purchases with a minimum downpayment of 10%. In this case, the maximum loan amount will normally be $350,000.00.
· US residents may also purchase a second home or vacation property in Canada with a minimum downpayment of 35%. The applicants must be able to provide the downpayment from their own resources along with a solid credit history based on their US credit bureau.
· The applicant can only have 2 owner occupied properties under the second home program since the second home program allows you to purchase the second home with 0% downpayment. Any additional properties you wish to purchase must qualify as an investment or rental property where a minimum downpayment of 10% is required.
If you are unsure if the properties you are looking at are eligible for this program or not please feel free to contact us anytime to confirm.
In the event you may not have the ability to use the property at all times, cannot qualify for the property purchase on your own, or just feel that the payment is too high for you to afford, here are a couple of options available to you to make this dream a reality:
1. To help with the purchase of the property you may want to get a group together (maximum of 4 applicants) to make qualifying and affordability of the property easier. Also having more people involved in the property gets greater usage out of the investment
2. Another opportunity available to you is the chance of making a little income on the property. As above it states that the property must be intended for occupancy at some point during the year by the borrower; or a relative of the borrower on a rent free basis. This means that during the times that you will not be using the property you can rent it out. For example you may not be able to get out to the cottage every weekend of the year but for some weekends you may wish to rent it out. Unfortunately this income cannot be used to help qualify for the mortgage.
Remember a second home purchase can also be considered a very solid long term investment. With exception to the previous four years, the long term history of the housing market has shown that property values have increased on average 5% to 8% per year.
So what are you waiting for? Let’s make your dream a reality. If you, someone you know of or a group are interested in purchasing a vacation or second home please inquire with Betty at 403-532-3927, e-mail bsaskiw_prolink@telus.net, Kevin at 403-589-3021, kevsas@telus.net or at our website: http://www.yourmortgagecontact.com/ and apply today.
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