How to Improve your Mortgage Qualifying Success
1. Get your credit report. Getting a copy of your credit report will let you know how you will be viewed by lenders. You can order yours for free through the mail or for a small fee online at www.equifax.ca. If you spot a problem, contact Equifax to resolve the issue.
2. Polish your credit. You can boost your score by several points fairly quickly with continual good credit habits. Most importantly, pay your bills on time, every time. Don’t let your credit accounts exceed 50% of the credit available. Before you cancel any credit cards, get advice. And don’t apply for a store card just to save on your purchase that day. Make a habit of checking your credit score each year, and watch how those good credit habits push your credit score skywards!
3. Cash is king. Plan to go into homeownership with the maximum down payment possible. If you are in the “saving up” stage of preparing for homeownership, now is the time to meet. There are several down payment savings strategies available that we can put to work for you.
4. Get a boost from family. Parents and grandparents have enjoyed the personal and financial benefits of home ownership themselves, and see how hard it is today to make that important first step into the market. Check to see if they are willing to help by gifting or loaning some or all of the down payment, or by helping you with other debts.
Should you stress about the stress test?
What you should know about new mortgage rules.
On October 3rd, Finance Minister Bill Morneau announced that new mortgage rules will include more stringent “stress testing” for borrowers. The new rules are designed to lower debt levels, enforce some belt-tightening, and protect the housing market over the long term. Here’s how these new rules will affect Canadians.
THE HIGH-RATIO RULE
There has been a long-time rule that you must have “high-ratio mortgage insurance” if you have less than 20% downpayment. This insurance is there to protect the lender, and the premium is almost always added to your mortgage amount.
What’s changed? If you require an insured mortgage, you must qualify for your mortgage using the Bank of Canada qualifying rate (currently 4.64%) regardless of what your actual mortgage rate will be.
That means that – although I can find you a much better mortgage rate – you’d still need to show you can handle the mortgage using the qualifying rate. This financial “stress test” was already applicable for fixed and variable mortgages with terms of 1 to 4 years. Now, it also applies to fixed-rate mortgages of 5 years or longer.
Why the new rule? The government wants to be sure that borrowers can withstand any increases in mortgage rates when their mortgages come up for renewal.
Will my payments be higher? No. Your payments will still be based on your much lower actual mortgage contract rate. Keep in mind that mortgage rates are expected to stay at record lows into 2020. So this new rule isn’t costing you more. The potential change will be in how much mortgage you will qualify for: up to 20% less. You may need to plan on purchasing a less expensive home, or save up a larger downpayment, or ensure you eliminate all or most of your other debts.
Are any loans grandfathered? The new mortgage stress test does not apply when:
A mortgage loan insurance application was received before October 17, 2016;
The lender made a legally binding commitment to make the loan before October 17, 2016; or
The borrower entered into a legally binding agreement of purchase and sale for the property against which the loan was secured before October 17, 2016.
Which renovations go right to your bottom line?
Whether you are looking to buy a fixer-upper or renovate your existing home to improve the quality of life for you and your family, it’s worthwhile to understand which home renovations can help boost the value of your home and go straight to your bottom line. According to the Appraisal Institute of Canada (AIC), the top four renovations with the highest return on investment (ROI) include:
Updated kitchen - the kitchen is almost always the heart of the home, so it’s no surprise that kitchen renovations consistently provide the best return on your renovation investment. If payback is important to you, keep the project in line with the style and quality of the rest of the house and neighbourhood.
A sparkly bathroom - bathroom renovations are also very reliable when it comes to boosting the overall value of your home.
Fresh painting - whether it’s inside or outside, a fresh coat of paint can work wonders on the overall impression of your home. If you are looking to sell, choose neutrals that have wide-ranging market appeal.
Focus on decor - updating lighting and plumbing fixtures, counter tops, and replacing worn flooring or refinishing hardwood floors are also definite ROI winners.
Of course it’s also important to budget for those renovations that are necessary just to maintain your home’s worth. According to the AIC, it’s essential to replace the roof, update heating/cooling systems and replace windows/doors as they near the end of their life expectancy.
The AIC also lists finishing the basement, garage improvements, sun rooms and other additions, decks and fences, and landscaping as the top renovations that generally offer the highest enjoyment value.