Tuesday, January 25, 2011

How to Get Approved for a Line of Credit at a Bank in Brampton

Running a business like Brampton/Mississauga mortgage broker leads to a lot of interaction with home owners in the community. Often times we encounter customers looking to consolidate credit card and line of credit debt that they have accumulated at their bank.

This is because often times the first thing a consumer who needs credit will often do is go to their local bank. This often will not result in the best deal. When you go to your bank they are selling you the products and services offered by their bank. It doesn’t necessarily mean that the product or service they are selling you makes the most sense.

Here is one example. Scotiabank offers a mortgage product where they offer you a line of credit against your home at the time of purchase. Normally if you obtain a home equity line of credit the bank will register your line of credit in second position on your home. Well this particular mortgage product is registered as a single mortgage and usually the mortgage registered is much greater than the amount owed, usually encumbering all of the equity in your property.

Some banks will push you to take an unsecured line of credit which will usually bear a much greater interest rate then a home equity line of credit.

If you own a home in Brampton, the best thing to do is to talk to a local Brampton mortgage broker. They will be able to review the home equity line of credit product with multiple banks, help you compare the positives and negatives of each one and negotiate the best terms on your behalf.

If you have been thinking about obtaining a home equity line of credit, time could be running out. CMHC recently announced that it will be withdrawing high ratio insurance on home equity lines of credit so depending on how much equity you have in your property this change may affect your ability to qualify with the bank. This is another way a local Brampton mortgage broker can come in handy. They will have access to other funding sources that may be able to help. Other companies that offer home equity line of credit products include trust companies, credit unions and finance companies. For more information about how to get approved for a line of credit with a bank in Brampton please visit http://www.gtamortgagematters.com/

Tuesday, January 18, 2011

Jim Flaherty Announces New Mortgage Rules – Canadians, Call Your Mortgage Brokers!

The Globe and Mail reported this morning that Finance Minister Jim Flaherty announced new mortgage rules.

Most high ratio mortgages (mortgages that are more than 75% the value of the home) are high ration insured by the Canadian Mortgage and Housing Corporation (CMHC) and their lending guidelines (which are dictated by the Ministry of Finance) largely determine how much money you will be able to borrow against your home.

While these new rules are responsible and in the best interest of Canadians, they will impact homeowners because the Canadian Government is further tightening the amount of equity you will be able to take out of your home (with CMHC insurance).

Here are some of the highlights of the new federals rules that were announced. The new rules will:

1. Reduce the maximum amortization period to 30 years from 35 years for CMHC (government) insured mortgages where the loan to value exceeds 80 per cent.

2. Reduce the amount Canadians can borrow when refinancing their mortgages from 90% loan to value to 85% loan to value.

3. Begin the process of withdrawing CMHC insurance on lines of credit that are secured by home equity.

These rules are scheduled to take effect in March of 2011. So, what does this mean to you?

1. If you are currently living your lifestyle around having a mortgage payment that is based on an amortization of more than 30 years, it is time to start thinking about how you can eliminate other debt and payments. Your bank may want to reduce your mortgage amortization when your mortgage term is due and you are trying to renew your mortgage and this will directly impact your payment (making it higher). Also traditionally mortgage amortizations have been based on 25 years and it seems that CMHC may be headed back into that direction. So while now it is being reduced to 30 years, in the future it may be further reduced to 25 years.

2. If you have been thinking about refinancing your home to consolidate debt, you had better call your mortgage broker a.s.a.p. Now that this announcement was made, the banks will quickly start to adjust their rules to comply. This will happen likely before the rules do, so if you need to take more than 85% of the equity out of your home – the window of time is closing fast.

3. If you planned on obtaining a home equity line of credit for a home renovation or some other reason, this may be more difficult now. Without CMHC insurance, the banks will be less likely to issue high ratio lines of credit based on home equity. Some banks may also reduce the limit on your existing line of credit in the event that the insurance is withdrawn. Your mortgage broker can tell you what other financial products are available. A second mortgage is a viable option as you often do not CMHC insurance to get one.

This is a positive step on the part of the Canadian Government because while it further restricts the amount that you can borrow against your home, it prevents you from leveraging all of your home equity. A healthy mortgage amortization is 25 years or less and the idea of paying off your mortgage over more than 30 years is not a financially responsible one.

As the Canadian government continues to move in a more conservative direction with respect to lending principles we must follow suit with respect to our borrowing and spending habits. We can do this by taking a hard look at our household debt, find ways to pay it down and improve our overall financial goals. For more information please visit www.gtamortgagematters.com

Monday, January 10, 2011

What is the Minimum Credit Score Needed to Get Approved for a Mortgage in Brampton and Around the GTA?

As we have discussed in past articles, those who own a home in Brampton or in other suburbs that surround the GTA, have the most financial options when it comes to refinancing their homes.

Real-estate in the suburbs is in high demand and more and more families are choosing to move out of Toronto. Toronto is also a financial metropolis so with many different types of financial institutions come more financial options.

The more money you have down, or the more equity you have in your home, the more likely you will be at being successful obtaining mortgage financing, even with a low credit score.

Historically a 680 or higher beacon score/credit score was deemed acceptable to a bank and while CMHC will ensure a high ratio mortgage for an individual with a credit score as low as 620, the bank may not. So what does this mean to you?

This means that if you had a 650 credit score and wanted to ask the bank to finance a mortgage with a 5% down payment and even though you may qualify for CMHC high ratio insurance, your bank could end up declining your mortgage financing. That does not mean you don’t have other options.

Many Trust Companies, Mortgage Investment Corporations and Credit Unions will offer financing to a consumer who qualifies for CMHC insurance and has a 650 beacon score. Most of these institutions lend their money through local Brampton mortgage brokers so it makes sense to have a good relationship with one.

Another challenge with the recent turbulent economy is that some banks now require borrowers to have a credit score that exceeds 700!

It is also important to keep on top of your credit if you want to have the most mortgage options. For more information about the minimum credit score needed to get approved for a mortgage in Brampton and around the GTA visit www.gtamortgagematters.com.

Tuesday, January 4, 2011

Which makes more sense: Canada Revenue Agency Interest Rates, Penalties and Prosecution OR Low rate home equity loan in Brampton? Here are our arguments.

Our mortgage brokerage has serviced homeowners in Mississauga, Brampton and in the rest of the GTA for many years and have run into consumers who have all different types of financial difficulty.

One common financial problem we run into is individuals who have income tax debt with the Canada Revenue Agency. Generally those who have an income tax debt outstanding with the CRA fall into two categories:

1. They are not paying because they believe they don’t owe the money.

2. They think they do not have the resources to pay off the CRA.

In both cases, the best answer is to raise the money to pay off your tax debt. The primary reason we say this is because as long as you owe the CRA money they will continue to compound interest and penalties and will also pursue you for the money. This could include freezing your bank account, garnishing your wages or even placing a lien on your home.

Homeowners are in an especially precarious position because the very mention of a tax lien or tax problem could cause the bank to call in their mortgages.

So who will loan money to a homeowner with a tax problem? Homeowners in Brampton, Mississauga and other urban centres have more options than those in rural areas. Outside of major banks and financial institutions, there are many mortgage investment corporations and private lenders who approve a home equity loans to homeowners who have an income tax problem.

We reiterate that these companies and individuals are more likely to approve this type of financing when the property is located in an urban centre and is on city plumbing.

What's most important is that you do not wait. The longer you sit on your tax debt the greater the problem will become. It simply will not go away by itself. If you are a homeowner, contact a mortgage broker who is seasoned in dealing with individuals who have tax problems, this could save you big!

For more information visit www.gtamortgagematters.com.

Use Home Equity to Negotiate with the Canada Revenue Agency

Canadian homeowners have more negotiating power than they think when it comes to the Canada Revenue Agency. That is until the CRA has located your property and placed a lien on it.

Using your home to negotiate with the Canada Revenue Agency all comes down to timing. If you have some equity in your home and owe the CRA money or are about to owe the CRA money, here are the best steps to take.

Many homeowners in this situation will go to their bank first to obtain the financing to pay off a tax debt. This could be fatal because the mere mention of a tax debt could cause your bank to rate you as high risk and could result in a loss of credit privileges. That is the last place you should go for help when in the midst of a credit problem.

Speak with a trusted mortgage broker and disclose all the facts. They will know which lenders will be likely to deal with you and they will know, given your circumstance, how much equity you can take out of your home. This is a crucial first step, because if you don’t have enough equity to pay the debt in full, you will have to make arrangements on the balance.

If there will be a balance, your next step will be to divide the balance by 24. Can you afford to pay this sum each month? If the answer to this question is yes, you are in a position to make a deal.

If the answer to this question is no, you may need the assistance of a debt counsellor or trustee to help you negotiate a settlement with respect to your tax debt. This would be a last resort because if it involves insolvency, this will mangle your credit.

If the answer was yes, it’s time to make a deal with the CRA to avoid enforcement action. So in our example we raise a lump sum payment on the tax debt using home equity and planned to propose a monthly repayment plan on the balance.

Whether you contact the CRA directly or hire an Advocate to contact the CRA on your behalf – Get the entire agreement in writing. A verbal agreement with the CRA is meaningless and I repeat, you must get the agreement in writing.

For more information about using home equity to negotiate with the Canada Revenue Agency visit www.gtamortgagematters.com.