Month: December 2015

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21 Dec

DLC Corporate Blog – 25 ways to pay off debt !

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Borrowed content from the DCL Network – great ideas to pay off debt! Thansk Len Anderson

HOW TO PAY OFF DEBT FASTER – 25 SECRET TIPS YOUR BANKER DOESN’T WANT YOU TO KNOW

How To Pay Off Debt Faster - 25 Secret Tips Your Banker Doesn't Want You To Know1. Make a double mortgage payment whenever you can. Doing this once a year can shave over 4 years off the mortgage! Sometimes you can skip a payment later on too…if you really, really need to. Try not to. If your payment is $2,000 a month, four years of no payments is $96,000!!

2. Increase frequency of payment. For Example going from monthly to bi-weekly accelerated can shave over three years off your mortgage! $2,000, three years of no payments is $72,000!!

3. Increase your payment. For example a one-time 10% increase can shave 4 years off the mortgage. That’s $96,000! Imagine if you bumped the payment 10% every year from the get go!!! You would be mortgage free in 13 years! Start to finish! Can’t do it? How about 5% every year….you would be mortgage free in 18 years! How about increasing the payment by the amount of your annual raise?

4. Lump sum payments…same idea…mortgage is gone way faster! Even just one payment a year equivalent to 1 monthly payment will give you similar results as #2 above! How about using your annual work bonus?

5. Renegotiate whenever rates drop to save interest and pay mortgage faster! Generally a good idea however *Caution* get independent professional advice (a cost benefit analysis) to make sure it makes sense for you at that time. I can help. A 1% reduction on a $300,000 mortgage will save $250 a month…times 5 years…that’s $15,000!!

6. Keep your credit rating high for best rate. Always pay on time. Never let payments slip past their due date. Always keep balances low in relation to credit limits on credit cards, lines of credit, etc. 50% or less is best even if you pay the balances in full every month. What generally reports to the credit bureau is the statement balance each month. So if your credit limit is $3000 and you are running $3000 a month through the card each month (to collect all those points you never spend or can’t use in blackout periods) and paying in full, it will look like you are maxing out your credit limit and your credit score will drop accordingly.

7. Increase your mortgage! Yeah I know sounds backwards! Do it to roll in your credit cards, line of credit, car loan etc for a better rate and a set payment plan. Oh you say you don’t want to extend the repayment period of that stuff by rolling it into your mortgage or you have a low or promo rate credit card (those never end well) I agree! Then keep the total payment amount the same but pay it in one neat monthly payment to the increased mortgage.

8. Make an RRSP contribution and use the refund to pay down your mortgage.

9. Go variable rate with your mortgage but keep payments as if fixed rate. Variable rates usually win out over fixed rates. By paying a higher payment you will pay off the mortgage faster. It’s also a buffer in case the rate rises above the fixed rate for short periods of time. *Caution* variable rates are not for everyone. Get independent professional advice to find out what is best for you. I can help!

10. Take your mortgage with you when you change properties to avoid penalty or higher rate on a new mortgage. This is called “porting”. Make sure that your mortgage has this feature. It is not widely known and could save you a ton of dough.

11. Set up auto savings every paycheque, even $10, when it reaches the amount of one mortgage payment, apply it to the mortgage. This concept goes nicely with #4 above.

12. Unhook from the money drip…stop paying with your fancy points credit or debit card. Way too easy to overspend! Go old school, go off the grid…PAY CASH, it works!

13. Don’t ever buy on layaway, you know, six months don’t pay schemes. You think…No problem I’ll just pay it in six months, it will be okay. Yeah right!

14. Downsize your house. Two good friends and clients of mine, having followed many of the tips here, are in great shape except they have a six bedroom house! Two people, six bed house – go figure! They are nearly debt free so no biggy, but can you say the same? Circumstances change, make the adjustments along the way!

15. Don’t want to move? Convert the basement/rooms to rental and use the income to pay down debt.

16. Convert your mortgage to tax deductible. If you are self-employed, own rental property or have investments, this is likely possible. I won’t go into details here, just ask me how.

17. Have a payment priority.

18. Pay off the highest interest rate first.

19. If you have tax deductible loans, pay them off last, slowest. Pay the non-tax deductible loans first and fastest.

20. Pay off ugly debt first. Stuff like credit card purchases.

21. Payoff bad debt next. Stuff like car loans, boat loans. Things that depreciate in value.

22. Pay off good debt (or shall I say “not so bad debt”) last. Stuff like mortgages, investment loans. Things that hopefully appreciate in value.

23. Buying a car? Finance it if you have to, don’t lease! *Exception* If you are self-employed it might make sense.

24. You have $20,000 in a secret bank account for a rainy day fund and $20,000 owing on a line of credit. Seriously? The bank account is paying you next to nothing (which is taxable income to boot) and the line of credit rate is way higher (and not tax deductible). You know what to do. You can keep the line of credit open and on standby for rainy day funds. Make it the secret line of credit that you have but never use.

25. Give your Banker more money. No really. Keep enough in your chequing account to meet the minimum requirement to waive your service charges. My bank charges $10 a month for 25 transactions and nothing, zero, zilch, zip if I keep $2,500 in the account. Let’s see $10 x 12 is $120 a year to pay off debt. I’d have to earn 5% with the $2,500 in my savings account to come out ahead. No brainer here. Oh yeah, if you need more than 25 transactions a month…see #12 above.

26. #26? BONUS TIP and MOST IMPORTANT. Let’s face it, you’re not the Government and you’re not a Bank, you can’t run deficits forever and you won’t get a bailout….stop procrastinating already! See 1 through 24 above and take action now!

Sidenote: *Caution* beware of some too good to be true ultra-low rate mortgages. These “no frills” mortgages are often loaded with restrictions like pre-payment limitations, fully-closed terms, stripped-out features, or unusual penalties. You really need to compare product to product. If you’re not looking at what you’re giving up, you may regret it in the future. This alone could prevent you from taking advantage of tips #1, 2, 3, 4, 5, 7, 8, 9, 10, 14, 16 and 22!

17 Dec

DLC Corporate Blog – Co-signor or Guarantor???

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Graciously borrowed from Pauline Tonkin of the DLC Network

If a buyer can’t obtain a mortgage due to poor credit, employment history, lack of down payment or income — most lenders will consider lending if there is someone to act as co-signor or guarantor for a mortgage. The two options provide different requirements.

Co-signer or guarantor for a mortgage, which is best? People often use the terms guarantor and co-signer interchangeably, but they have very different responsibilities and rights. A co-signor is basically a co-owner – he/she is registered on the title and is equally responsible for payments (although it’s often a given that the co-signor will not make the payments). A guarantor, on the other hand, personally guarantees payments will be made if the original applicant defaults, but he has no claim to the property because he/she is not on title.

Lenders require a co-signor or guarantor for a mortgage for different reasons. A co-signor is used when you need to support income. If the original applicant’s qualifying ratio doesn’t meet the lender’s standards, a co-signor is required to bridge the income gap. A co-signor, because their name is also on the title, must sign all of the mortgage documents and can expect to remain on title until the applicant qualifies for the mortgage on his or her own. Or, in the case of two spouses, the co-signor might remain on title indefinitely. Keep in mind that removing someone from the title involves legal fees.

A guarantor is usually called upon if the applicant qualifies by income, but has a slight credit blemish or has yet to establish credit. It’s also an option for couples where one spouse is an entrepreneur and they don’t want to risk losing the house should the business go bankrupt — they simply keep that person’s name off the mortgage.

Guidance for guarantors
A guarantor has to be stronger financially than a co-signor because they promise to carry the entire debt should the homeowner default. As a result, guarantors are carefully scrutinized, undergo a credit check and must also disclose assets, liabilities and income.

Therefore, it’s important for guarantors to know all of the circumstances of the person they’re acting for and be confident the applicant will make the payments. Before signing, all guarantors should seek advice from a lawyer who is independent of the real estate transaction.

It’s also smart to secure creditor insurance in case things go wrong. The applicant and guarantor should discuss collateral or come up with a repayment plan up front should the guarantor be called on to cover the debt.

What happens when you co-sign or become guarantor on a mortgage?

When a guarantor wants out
Some lenders offer early release policies that free the guarantor from obligation (usually after 12 months) if the borrower is up-to-date with payments and has established good credit. Sometimes a guarantor can remain under obligation for several years.

Before agreeing to act on behalf of an applicant, guarantors need to evaluate the time commitment they’re willing to make. If, for example, they want to buy their own home in a few years or take on any major debt, such as a car or boat, they may not qualify because of their guarantor status.

Regardless of whether you wish to be a co-signor or guarantor, for a mortgage you should always consult your mortgage professional at Dominion Lending Centres and a lawyer before acting.

 

Michael James

Learn to Love your Mortgage

17 Dec

DLC Corporate Blog – Changes to Down Payment explained!

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Graciously provided by Mark Alltree of DLC Network

Finance Minister Bill Morneau announced changes to down payment requirements. Effective February 15, 2016, the minimum down payment for new insured mortgages will increase from five per cent to 10 per cent for the portion of the house price above $500,000. The five per cent minimum down payment for properties up to $500,000 remains unchanged.

Homes priced at more than $1 million by law require a minimum down payment of 20 per cent. This announcement therefore focuses on homes priced between $500,000 and $1 million.

In the Mortgage Professionals Canada (MPC) Fall Report, Chief Economist, Will Dunning discusses why raising the down payment could cause problems for the housing market, including this cautionary observation: “Rising prices have made it increasingly difficult for first-time home buyers to accumulate down payments. Increasing down payment requirements would, most likely, severely dampen housing demands from people who are financially well-qualified to make their monthly mortgage payments.”

MPC notes that the 10% requirement does represent a graduated approach while the Ministry of Finance commented that they believe this will only impact 1% of home purchasers.

In short, over 500k will involve more savings or gifted down payment purchase plus we need to have provisions for the Property Transfer Tax in BC.

I would love to have that conversation with you for your mortgage needs.

 

Michael James 

Learn to Love your Mortgage