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Credit card rules: How to wean yourself off credit card debt.

As seen in BC New Home Guide.

The Canadian government implemented credit card regulations that increases transparency and protects consumers. Here are some of the regulations:

  • Credit contracts and application forms must have a “summary box” that clearly explains interest rates, fees, and how long it would take to fully repay a balance if only minimum monthly payments are made.
  • Banks must give advance disclosure of interest rate increases, even if this information is already in the credit contract.
  • You must give your consent before your credit limit can be increased.
  • If you transfer your balance to a lower-interest card, your payments now have to be allocated in your favour.
  • There’s now a limit on certain debt collection practices used by financial institutions.
  • Banks can’t charge over-the-limit fees resulting from holds placed by merchants.
  • You have a minimum 21-day interest-free grace period on all new purchases if you pay your outstanding balance in full by the due date.

Eliminate-credit-card-debt1While critics don’t think these regulations go far enough to protect the consumer, at least the government is trying to make an effort to help consumers avoid predatory lending practices. And that’s a good thing.

However, an even better strategy is to start weaning yourself off of credit card debt. Unlike taking out a mortgage to buy a home or revenue property, buying stuff with your credit card at high interest rates doesn’t yield any returns – it simply gets you deeper in debt.

The following are some tips to help you use your credit card responsibly so you don’t pay unnecessary charges and get in trouble with credit card debt:

  • When you pay for something with a credit card, you are taking out a loan and you have to pay it back.
  • Pay the balance in full each month
  • If you can’t pay it in full, pay as much as you can
  • Don’t make only the minimum payment
  • If you always carry a balance, get a low rate card
  • Pay a few days before the due date
  • If you have a line of credit, transfer the balance to your line of credit with a lower rate. The goal is to pay down your debt and not go further into debt.

Put yourself on a budget, take a part-time job (or start a home business) and eventually get your credit cards paid off. You will be astonished how much extra money you will have to invest in assets that actually appreciate in value and put cash in your pocket!

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Difference between pre-qualified and pre-approved? – part 1

Determining how much house you can afford involves plenty of number crunching. Jorge and Alisa Aragon explain two stages on the road to mortgage approval – As seen in REW.ca 

Q: What is the difference between pre-qualification and pre-approval for a mortgage?

A: Pre-qualification is a relatively simple process where the mortgage broker or bank estimates both your borrowing power and the maximum amount of mortgage you can carry. This is done by providing information about your financial situation, such as your income, assets and debts. This easy and quick step doesn’t take into account your creditworthiness or involve a thorough analysis of your financial situation. It’s simply a place to start to estimate the price range of homes that you could qualify for. As mortgage experts, we do this during our initial meeting to give you a rough idea how much you will be able to qualify for. Pre-approval is a more in-depth analysis of your financial situation, as you will complete an application and provide consent for the lender to obtain your credit report. At this point, the lender has more detailed information on your income, assets and liabilities, and your information has been checked and verified. Your credit report has been pulled to learn about your credit score, history and credit worthiness. Based on this information, the lender will issue a pre-approval letter letting you know what you are likely to be approved for a mortgage and the amount you may be approved for. The pre-approvals can also guarantee current mortgage rates for up to 120 days. It is important to acknowledge that you are not guaranteed to get a mortgage if you are pre-qualified or pre-approved. Many things can happen during the process, and some lenders may give a pre-approval letter without actually verifying your information. Talk to a mortgage expert to get the pre-qualification/pre-approval process started and get you on the road to homeownership.


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Your cellphone account can impact whether you’ll be approved for a mortgage.

Equifax and TransUnion are the two main credit reporting agencies in Canada. They collect all the data on your loans, lines of credit and credit cards to create your credit report and calculate your credit score. This information is then used by lenders—including mortgage lenders—to determine whether you’re a good credit risk.

Recently, both credit reporting agencies started including cellphone accounts in their credit reports. This means if you make a cellphone payment after the due date, it appears on your credit report and reflects negatively on your borrowing profile. Even worse, if you allow your cellphone account to go delinquent and it’s sent to a collection agency, not only does this appear on your report, it can also reduce your credit score. Mortgage lenders use this information to make underwriting decisions. Therefore, having a negative record with your cellphone provider can actually impact your likelihood of being approved for a loan and increase the interest rate you’ll pay.

If you’ve recently walked away from a cellphone contract, it’s a good idea to get the company to put in writing that the contract has been fulfilled and is now closed. This can help prevent any damage to your credit rating. We are always pleased to help if you want more information on how to preserve or improve your credit rating.


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The questions most commonly asked when buying a house!

What’s the best rate I can get?

Your credit score plays a big part in the interest rate for which you will qualify, as the riskier you appear as a borrower, the higher your rate will be. Rate is definitely not the most important aspect of a mortgage, however, as many rock-bottom rates often come from no frills mortgage products. In other words, even if you qualify for the lowest rate, you often have to give up other things such as pre-payments and portability privileges when opting for the lowest-rate product.

What’s the maximum mortgage amount for which I can qualify?

To determine the amount for which you will qualify, there are two calculations you will need to complete. The first is your Gross Debt Service (GDS) ratio. GDS looks at your proposed new housing costs (mortgage payments, taxes, heating costs and strata/condo fees, if applicable). Generally speaking, this amount should be no more than 39% of your gross monthly income. For example, if your gross monthly income is $4,000, you should not be spending more than $1,560 in monthly housing expenses. Second, you will need to calculate your Total Debt Service (TDS) ratio. The TDS ratio measures your total debt obligations (including housing costs, loans, car payments and credit card bills). Generally speaking, your TDS ratio should be no more than 42% – 44% of your gross monthly income. The TDS will depend on your credit. Keep in mind that these numbers are prescribed maximums and that you should strive for lower ratios for a more affordable lifestyle. Before falling in love with a potential new home, you may want to get pre-qualified. This will help you stay within your price range and spend your time looking at homes you can reasonably afford.

How much money do I need for a down payment?

The minimum down payment required is 5% of the purchase price of the home. And in order to avoid paying mortgage default insurance, you need to have at least a 20% down payment.

What happens if I don’t have the full down payment amount?

There are programs available that enable you to use other forms of down payment, such as from your RRSPs, or a gift from a parent, child or siblings.

What will a lender look at when qualifying me for a mortgage?

Most lenders look at five factors when determining whether you qualify for a mortgage:

  1. Income
  2. Debts
  3. Employment History
  4. Credit history
  5. Value of the Property you wish to purchase.

Should I go with a fixed or variable rate mortgage?

The answer to this question depends on your personal risk tolerance. If, for instance, you are a first-time homebuyer and/or you have a set budget that you can comfortably spend on your mortgage, it’s smart to lock into a fixed mortgage with predictable payments over a specific period of time. If, however, your financial situation can handle the fluctuations of a variable rate mortgage, this may save you some money over the long run.

What credit score do I need to qualify?

Generally speaking, you are a prime candidate for a mortgage if your credit score is 650 and above. The higher you score the better, as you will have more options and advantages. These days almost anyone can obtain a mortgage, but the key for those with lower credit scores their options will be more limited and interest rates could be higher.  But don’t worry consult a Mortgage Expert to see how they can help you in obtaining a mortgage.

What happens if my credit score isn’t great?

There are several things you can do to boost your credit fairly quickly. Following are five steps you can use to help attain a speedy credit score boost:

  1. Pay down credit cards. The number one way to increase your credit score is to pay down your credit cards so they are below 70% of your limits.
  2. Limit the use of credit cards. Racking up a large amount and then paying it off in monthly installments can hurt your credit score. If there is a balance at the end of the month, this affects your score.
  3. Check credit limits. If your lender is slower at reporting monthly transactions, this can have a significant impact on how other lenders view your file.
  4. Keep old cards. Older credit is better credit. If you stop using older credit cards, the issuers may stop updating your accounts. Use these cards periodically and then pay them off.
  5. Don’t let mistakes build up. Always dispute any mistakes or situations that may harm your score. If, for instance, a cell phone bill is incorrect and the company will not amend it, you can dispute this by making the credit bureau aware of the situation.

How much will I have to pay for closing costs?

As a general rule of thumb, it’s recommended that you put aside at least 1.5% of the purchase price (in addition to the down payment) strictly to cover closing costs. You must have this amount but it doesn’t mean you are going to spend it.  The following are some of the closing costs:

  • Legal costs
  • Property tax adjustments
  • Strata/condo fee adjustments
  • Cost to register property in land title office, etc.

How much will my mortgage payments be?

Monthly mortgage payments vary based on several factors, including: the size of your mortgage; whether you’re paying mortgage default insurance; your mortgage amortization; your interest rate; and your frequency of making mortgage payments.

To get more details about these and other questions you might have, give us a call at 778.893.0525 and we will be able to analyze your personal situation and provide you with more information so you can make an informed decision on buying your home.


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Be aware of your credit report

A mistake on your credit report can cost you money. It can increase the interest you pay on loans, prevent you from getting a mortgage, buying a car or getting a job.

A new 8 year American Government study was released today and indicates as many as 40 million Americans have a mistake on their credit report. Twenty million have significant mistakes.

In Canada is not different, mistakes are made every single day. There a 2 Credit Bureaus in Canada, Equifax and TransUnion. We always recommend our clients to review their credit report on a regular basis (every six months to a year) and not just for mistakes, but for potential identity theft, which could be financial devastated for an individual.

Both Credit Bureaus have free service, when you ask to a report mail to you. If you want to download your report, you have to pay for it.

Don’t risk your credit health and review your credit report often.

For more information regarding this problem read Credit reporting error costing Canadians.