Getting a Mortgage After Bankruptcy

Mortgage Tips Trina Kieswetter 21 Oct

If you have had to declare bankruptcy, you may be wondering what is next.

Bankruptcy is not a financial death sentence. In fact, there are a few things you can do after declaring bankruptcy to help reset your financial status and get a mortgage in the future.

While there is no wait requirement to apply for a mortgage after bankruptcy, it is important to allow your credit time to heal in order to ensure approval.

The first step to rebuilding your credit is getting a secured credit card. If you are able to show that you are responsible with this credit card by paying your balance in full each month and not overspending, it will help to improve your credit score.

Once you’ve re-established your credit, you can apply for a mortgage. What type of mortgage you can apply for, and whether or not you qualify, will depend on a few factors, such as: how long ago you declared bankruptcy, the size of your down payment, your total debt-to-service ratio (how much debt you are taking on compared to your total income) and your loan-to-value ratio (loan value versus the property value).

Depending on this, you will have three options for your future mortgage loan:

Traditional or Prime-Insured Mortgage

This is a traditional mortgage, which will typically offer the best interest rates. To apply for this type of mortgage after bankruptcy the following requirements apply:

  • Your bankruptcy was 2 years, 1 day previous
  • You have one-year of re-established credit on two credit items (credit card, car lease, loan).
  • You have a minimum down payment of 5% for the first $500,000 and 10% for any additional amount over that
    • You have mortgage insurance – required for all down payments under 20%
  • You have a total debt-to-service ratio of 44% maximum
  • Your loan-to-value ratio is 95% minimum

Subprime Mortgage

This type of mortgage falls between a traditional and private mortgage, meaning you qualify for more than private but not enough for a traditional loan. To apply for this type of mortgage:

  • Your bankruptcy was 3 – 12 months prior
  • You have a total debt-to-service ratio of 50% maximum
  • Your loan-to-value ratio is 85% minimum

Private Mortgage

If you don’t qualify for a traditional or subprime mortgage, you have the option of looking into a private mortgage. Typically, your interest rate will be higher on a private mortgage but there is no waiting period after bankruptcy and the requirements are as follows:

  • You have a down payment of 15% of the purchase price
  • You have obtained a full appraisal
  • You have paid a lender commitment fee – typically 1% of the mortgage value
  • Your loan-to-value ratio is 80% minimum

If you have previously declared bankruptcy and are now looking to start over and apply for a mortgage, don’t hesitate to reach out to me for expert advice and to review your options today!

 

 

Published by DLC Marketing Team

Retirement Worries Weighing you Down?

General Trina Kieswetter 13 Oct

It’s natural to have uneasiness over the state of your retirement preparedness due to the inherent uncertainties involved:

  • How long will I live?
  • Will my health or my spouse’s health fail? and when?
  • How much will my current assets and investments grow in value?
  • How will inflation impact the next 5, 10 or 20 years?

There is no shortage of variables to consider when trying to figure out how you are going to fund your retirement dreams. There is also no magic number — often quoted numbers like $1,000,000 or formulas like six times your annual salary at age 50 have no basis in fact, especially not your facts. They have no way to know if your retirement plans include restoring a pricey vintage car or spending most nights glued to a hockey game on the TV.

A financial advisor can help crunch the numbers and offer investment alternatives, but you need to make the big decisions on the type of retirement lifestyle you envision and how much you can realistically afford to sock away along the way to fund that dream.

If you really need some kind of number for reference, 2019 Federal Government data showed the average annual spend for a household over 65 (including taxes) was $64,461. As you get closer to retirement and some of the bigger bills fade away (mortgage, kid’s education) you will have a clearer picture of your needs.

Retirement age and life expectancy are two more uncertainties to deal with. The average Canadian calls it a day just shy of 83 years, but it is on the rise. If you are 20 now, it is expected that you will have about a 50/50 chance to hit 90! The average age for retirement is 63, so simple math (83 minus 63) tells us you will most likely need at least 20 years of retirement income.

Hopefully you have been saving and investing with your RRSP and/or TFSA and have also developed some other passive income streams to supplement your government pension income. If your employer has a pension plan and you maxed out that and your CPP for 35 years, you may be able to live entirely off of your pension income and not worry about saving anything for retirement!

The key point is to confirm how much you are going to receive. The average CPP cheque is $625/month or just over half of the $1204 maximum. Makes sure you investigate any private or employer pension benefits you have as well as your CPP and OAS benefits to determine how much you will receive. A reverse mortgage may also be an option to generate cashflow.

It’s never too late to get started with retirement savings and investing, but you have to realize that catching up will be harder than it sounds, even as your income rises. If you have unused TFSA or RRSP contribution limits (you can easily check by looking at your latest income tax assessment), by all means, start playing catch-up as soon as you are able.

Another problem with starting late is that you miss out on the magic of compound returns. Maxing out your TFSA every year from age 25 to 65 with an index fund at 5% would yield $725,000. Starting at age 40 would leave you with only $287,000. You could try and compensate for a late start by taking on riskier investments with higher returns, but that doesn’t always end up well!

If you are planning to rely on a side hustle, spouse and/or inheritance to get you through retirement, just be aware that those options can be easily derailed. If your spouse dies, your survivor’s pension could be considerably lower. Side hustles are great, but your health may fail or maybe you can’t find a job – only 10 to 20% of retirees report doing some sort of work. As for inheritance, your parents may live to be a 100, they may make some bad investments, or they may even get remarried.

Anxiety is a natural by-product of retirement planning, and the cure is having the knowledge and facts you need to make your own judgement on how much is enough.

 

Published by DLC Marketing Team

Why is NOW a great time for a Reverse Mortgage?

Mortgage Tips Trina Kieswetter 12 Oct

According to a recent study by Angus Reid, Seven-in-Ten Canadians say money is a source of stress1.You may feel the pressure of the current economic circumstances, such as rising inflation, which makes it more challenging to maintain your standard of living. More Canadians are becoming stressed about their financial situation, from increasing expenses such as out-of-pocket health care and home retrofitting costs to higher grocery and electricity bills.

At times like this, you might be looking for advice and guidance on how you can navigate the uncertain economic climate to maintain your standard of living. The good news is that if you are a Canadian 55+, the CHIP Reverse Mortgage by HomeEquity Bank is a solution for today.

Here are 5 benefits of the CHIP Reverse Mortgage:

  1. A Reverse Mortgage allows you to leverage your most valuable asset- your home. You could access up to 55% of the equity in your home, tax-free, with no required monthly mortgage payments, and no negative impact on your cash flow.
  2. A survey found that 92% of Canadians 45+ are keen on aging in place, but finances are a barrier*. With a Reverse Mortgage, you can stay in the home and community you love. You can release more equity in the future, if you choose not to take the full amount or if the value of your home rises. Additionally, you will still be able to benefit from future home price appreciation.
  3. With a Reverse Mortgage, there is no restriction on how you spend the money you receive.  You can use a Reverse Mortgage to relieve financial pressure, increase your cashflow, buy the vacation property you always dreamed of, cover health care expenses, finally renovate or make home improvements, and more!
  4. Because you are tapping into your home equity, the funds are not added to your taxable income, nor do they affect government benefits such as Old Age Security (OAS) and Canada Pension Plan (CPP). Also, unlocking part of your home’s equity allows a larger portion of your registered investments to continue growing on a tax-free basis- potentially providing more assets to leave your heirs.
  5. A critical safeguard in today’s economic climate is HomeEquity Bank’s No Negative Equity Guarantee, meaning you will never owe more than your home is worth when you decide to move or sell. This feature ensures that if your home depreciates below the mortgage amount owing, HomeEquity Bank will cover the difference**. You can stay in the home you love while you wait for the housing market to recover. As an added protection, HomeEquity Bank’s process includes independent legal advice for your lawyer to review the mortgage contract to ensure you understand all the features of the contract.

Contact me to find out how the CHIP Reverse Mortgage by HomeEquity Bank can be a viable option to help you live your best retirement!

1source: Falling Behind: 53% of Canadians say they can’t keep up with the cost of living – Angus Reid Institute

*Survey Methodology: Survey conducted by Ipsos, on behalf of HomeEquity Bank from April 13-16, 2022, polled 1001 Canadians 45+ to assess public opinion on the role and contributions of Personal Support Workers and financial barriers to access.

**As long as you keep your property in good maintenance, pay your property taxes and property insurance and your property is not in default. The guarantee excludes administrative expenses and interest that has accumulated after the due date.

 

Published by HomeEquity Bank.

How to Start Saving Money

Lifestyle Trina Kieswetter 9 Oct

We often hear the mantra, “pay yourself first” when it comes to personal finance. This concept of automatically routing some of your salary every payday (before you can spend it!) into a retirement investment account isn’t hard to understand, but it’s hard to implement if you need every nickel just to survive until your next paycheque.

Discipline and dedication to the cause will help, but they are only part of the savings solution. The fact is that to succeed at saving in today’s world, most of us will need to earn more and spend less. Making more money will help you mow down any and all expenses that pop up along the way and leave you with more money in your jeans. However, any size paycheque goes a lot farther when supplemented with restraint and monitoring to control expenses at their source… before they vacuum up your potential savings.

Making more money is often preferred to budgeting as cutting back can be painful, but there are definitely some drawbacks. More income means more taxes and it many also lower benefits like your GST rebate or CCB benefits. If your tax rate is around 20%, an extra hour at $15 hour will have the same effect as cutting about $12 from the household budget.

Working more will also rob you of precious free time so there are significant social costs as well. If you have to incur additional expenses such as a babysitter or dining out more because you have less time or energy to cook, those costs need to be factored in as well.

Perhaps the biggest problem with working more is the very strong tendency to spend more! This is where discipline and determination come into play — make sure you earmark that extra money for saving and try to keep your expenses at the current level. Making more money won’t solve your problems if you continue to spend too much, make poor spending decisions, fail to invest, and have no goals to help motivate you and measure your financial progress.

You should also look at your debt cost to see if you should be saving in the first place! If you carry a credit card balance for example, you should definitely be throwing everything you have at it instead of saving. Even with the recent rise in interest rates, you would be lucky to get 4% on cash savings — most credit cards have rates four or five times that figure. You could also invest any extra money, but you have to add in the risk factor, and you would be hard-pressed to get returns that exceed the interest rate on most credit cards.

Turning to defensive savings strategies, there are countless articles churned out every day on how to spend less, and they may yield some good tips that are practical for your situation. Look for easy things like taking advantage of grocery store bargains, collecting points or discounts on a credit card (but paying the balance in full every month!), or clipping coupons.

There is no end to the money-saving ideas and hacks, but the first step is to know your costs. You can’t kill what you can’t see, and household expenses are no exception. You need to track all your expenses for at least a month and analyze where your money is going.

You may find some low-hanging fruits like a lightly used membership you could cancel, or maybe you didn’t realize how much those nights out on the town are adding up to every month. On the other hand, you may find the low-hanging fruit is long gone and that making more money is your only way forward! Make sure to track your expenses first and give yourself a realistic starting number before you dive into a more austere budget.

Finding the cash to start saving and investing is becoming increasingly difficult these days and while more income will certainly help, you will also need to continuously manage your expenses and make smart buying decisions to really pile up the savings.

For powerful personal finance education and training with immediate results, check out the complimentary livestreams each week from Enriched Academy. View the schedule and sign up for upcoming sessions on their events page.

 

 

Published by DLC Marketing Team

Where Will Rising Interest Rates Hurt Most?

General Trina Kieswetter 7 Oct

Rising inflation combined with a strengthening post-pandemic economy gives both reason and opportunity for the Bank of Canada (BOC) to further raise interest through to the end of 2022 and beyond.

The 1% increase to the benchmark overnight rate in early July was a wake-up call that they were not bluffing and are prepared to act aggressively. Depending on how inflation trends, we could be looking at interest rates that are 1% or 2% higher within the next year.

Before jumping into the effects of higher interest rates, we should clarify one common point of misunderstanding about the prime rate and the BOC overnight rate. The prime rate is the basis for most variable rate loans, including mortgages and lines of credit. It is determined by the major banks and currently sits at 4.7%; 2.2% higher than the BOC overnight rate. Although these two rates are different, the key takeaway is that the prime rate moves in lockstep with any changes to the BOC rate, usually within a few days.

Now that we have that out of the way, just how will future interest rate hikes affect your debts?

Variable rate mortgages
The percentage of Canadians holding a variable rate mortgage surged in 2021 and now stands at about 50%. Any rise in the BOC rate is met by an equal rise in variable rate mortgages, so the impact is very clear and takes effect quickly. A 1% increase will add around $200 to the monthly payment on a $500K mortgage. Keep in mind that the interest rate has already rose 2.25% since the beginning of 2022!

Home equity line of credit (HELOC)
HELOCs usually have a variable interest rate that will rise in conjunction with any BOC rate hikes. A $100,000 balance carried on your HELOC will cost you about $20 more in interest each month for every 0.25% increase by the BOC.

Credit card debt
The interest rate on your credit card and how it can be adjusted are outlined in your cardholder agreement. There is usually little correlation between credit cards rates and the rates set by the central bank. However, credit card rates are already so astronomically high that it is unlikely you would even notice a 1% increase! Our advice is to attack any outstanding credit card balance ASAP.

Personal lines of credit
There are fixed and variable rate options out there. If you selected the lower variable rate when you signed your agreement, expect to pay more going forward on any outstanding balance.

Car loans
Most car loans in Canada are fixed, but the average fixed rate is rising quickly and now sits about 5.25%. While not common, variable rate cars loans are loans are available and your payment could be affected by interest rate hikes.

Student loans
There are provincial and federal student loan programs with different interest options so the effect of rate hikes will vary. The default choice for Government of Canada student loans is variable interest “at prime” with a fixed rate option at “prime + 2%”. The point is mute right now as interest charges are currently suspended, but variable rate student loan holders will see a significantly higher payment when interest charges resume in April of 2023.

Most of us will be paying more interest as we move through 2022 and into 2023. A mortgage or some other debt may be inevitable and not all debt is bad, but it’s important to understand your interest expense and adjust your repayment priorities accordingly. For powerful personal finance education and training with immediate results, check out the complimentary livestreams each week from Enriched Academy. View the schedule and sign up for upcoming sessions on their events page.

 

 

Published by DLC Marketing Team

Second Mortgages: What You Need to Know

Mortgage Tips Trina Kieswetter 5 Oct

One of the biggest benefits to purchasing your own home is the ability to build equity in your property. This equity can come in handy down the line for refinancing, renovations, or taking out additional loans – such as a second mortgage.

What is a second mortgage?

First things first, a second mortgage refers to an additional or secondary loan taken out on a property for which you already have a mortgage. This is not the same as purchasing a second home or property and taking out a separate mortgage for that. A second mortgage is a very different product from a traditional mortgage as you are using your existing home equity to qualify for the loan and put up in case of default. Similar to a traditional mortgage, a second mortgage will also come with its own interest rate, monthly payments, set terms, closing costs and more.

Second mortgages versus refinancing

As both refinancing your existing mortgage and taking out a second mortgage can take advantage of existing home equity, it is a good idea to look at the differences between them. Firstly, a refinance is typically only done when you’re at the end of your current mortgage term so as to avoid any penalties with refinancing the mortgage.

The purpose of refinancing is often to take advantage of a lower interest rate, change your mortgage terms or, in some cases, borrow against your home equity.

When you get a second mortgage, you are able to borrow a lump sum against the equity in your current home and can use that money for whatever purpose you see fit. You can even choose to borrow in installments through a credit line and refinance your second mortgage in the future.

What are the advantages of a second mortgage?

There are several advantages when it comes to taking out a second mortgage, including:

  • The ability to access a large loan sum (in some cases, up to 90% of your home equity) which is more than you can typically borrow on other traditional loans.
  • Better interest rate than a credit card as they are a ‘secured’ form of debt.
  • You can use the money however you see fit without any caveats.

What are the disadvantages of a second mortgage?

As always, when it comes to taking out an additional loan, there are a few things to consider:

  • Interest rates tend to be higher on a second mortgage than refinancing your mortgage.
  • Additional financial pressure from carrying a second loan and another set of monthly bills.

Before looking into any additional loans, such as a secondary mortgage (or even refinancing), be sure to speak to your DLC Mortgage Expert! Regardless of why you are considering a second mortgage, it is a good idea to get a review of your current financial situation and determine if this is the best solution before proceeding.

 

 

Published by DLC Marketing Team

The Real Deal about Transfers and Switches

Mortgage Tips Trina Kieswetter 5 Oct

Most people who are thinking about a transfer or switch want to take advantage of a lower interest rate or to get a new mortgage product with terms that better suits their needs.

Up for Renewal?

If your mortgage is approaching renewal and you are considering a transfer or switch – great news! You won’t be charged a penalty. BUT you are still required to qualify at the current qualifying rate and need to consider potential costs around legal charges, appraisal fees and penalty fees (if applicable). In some cases, the lender will offer you the option to include these fees in your mortgage or even cover the costs for you.

Currently have a Collateral Charge Mortgage?

If you have a collateral charge mortgage (which secures your loan against collateral such as the property), these loans cannot be switched; they can only be registered or discharged. This means you would need to discharge the mortgage from your current lender (and pay any fees associated) before registering it with a new lender (and pay any fees associated).

Still locked into your Mortgage?

If you’re considering a transfer or switch in the middle of your mortgage term, you will likely incur a penalty for breaking that mortgage. Typically, transfers and switches are done to take advantage of a lower interest rate (and lower monthly payments), but you want to be confident that the penalty doesn’t outweigh the potential savings before moving ahead.

Things to consider for a transfer or switch:

  1. You may be required to pay fees associated with the transfer or switch, including possible admin and legal fees.
  2. You will need to requalify under the qualifying rate to show that you can carry the mortgage with the new lender.
  3. You will be required to submit documents that may include, but are not limited to, the following (depending on the lender):
    • Application and credit bureau
    • Verification of income and employment
    • Renewal or annual statement indicating mortgage number
    • Pre-Authorized Payment form accompanied by VOID cheque
    • Signed commitment
    • Confirmation of fire insurance is required
    • If LTV is above 80%, confirmation of valid CMHC, Sagen or Canada Guaranty insurance is required
    • Appraisal
    • Payout authorization form
    • Property tax bill

If your mortgage is currently up for renewal, consider reaching out to your DLC Mortgage Expert. Not only can they advise you of any penalties or fees that may be associated with your desired transfer or switch, but they also have the knowledge and ability to shop the market for you to find the best options to meet your needs. This extensive network of lender options allows brokers to ensure that you are not only getting the sharpest rate, but that the mortgage product and terms are suitable for you now – and in the future.

 

 

Published by DLC Marketing Team

Selling Your Home in Winter

Real Estate Trina Kieswetter 5 Oct

While you might think selling your home in winter is harder, with the right considerations it doesn’t have to be! When selling your home during warmer months, the focus is typically on curb appeal and gardening, as well as having bright colors and patterns to draw out different rooms.

While curb appeal should not be forgotten in winter months, the focus should be centered on creating a warm, comfortable and welcoming space. You can do this through the following:

  1. Curb Appeal – If you live in an area that receives high amounts of snow, be diligent about keeping your sidewalk and driveways clear for visitors, and to keep your home looking clean for viewing. Always make sure to sweep any fallen leaves or debris.
  2. Keep it Cozy – Ensuring your home is sufficiently heated during showings will also go a long way to making it feel more comfortable; a steady 20 to 22 degrees Celsius during showings is ideal.
  3. Light and Inviting – With days being shorter and darker during winter, ensuring your home is light and inviting can make a big difference. In some cases, you may consider repainting the walls before listing your property.
  4. Declutter – When selling, it is important to declutter your home so that it looks its best and gives room for people to imagine their own belongings in your space.
  5. Define Property Boundaries – If you are showing your home in the middle of snow season, be sure to mark the four corners of your property so that potential buyers can see exactly what they are getting.

While there is some extra work with selling your home in the winter due to the weather conditions, it can pay off! Buyers tend to be highly motivated and often there is less competition for sales during this time giving more focus to your home.

 

 

 

 

Published by DLC Marketing Team