How much is your credit score costing you?

It's always important to keep an eye on your credit score, whether you're in the market for a new mortgage or not. Not only does regular monitoring alert you to potential identity theft, but it will also allow you to deal with any potential credit errors before the eleventh hour.

 

According to this infographic by Canadian lender Xceed, the most common credit reporting error is a Tradelines (or Consumer Reports) error. This is a negative item on your report that, while it may be yours, features some sort of mistake - like the incorrect number of days a payment is late, incorrect balance or missing account information. If the information is wrong, you can dispute it - and if the credit bureau is unable to verify the information within 30 days, the entry has to be removed from your credit file.

Other ways mistakes can find their way onto your credit report is if you have a hard-to-spell last name or a name that changed after you were married. This can lead to confusion among creditors -- and increases the possibility that someone else's missed payments will find their way onto your report. Occasionally, collections agencies also fail to report when a collection has been paid in full - and the mark on your credit report continues to bring your score down.

If you spot an error on your credit report, it's important to dispute it in writing to either (or both) of Canada's two credit bureaus - TransUnion and Equifax. A low credit score can cost you thousands when it comes to your mortgage, primarily because the best rates are reserved for those with a good score. Once you fix any outstanding errors - or pay off outstanding debts - you'll be amazed at how quickly your score can improve.

Must-have tools every homeowner should own

Since deciding to sell my house I've had to do a few repairs.  You know that list of "things that need doing but don't really bug me enough to invest the time"?  Rummaging through the basement I found enough tools to do most of the work but I did have to make a few trips to the hardware store. 

I have decided to share my "must have" list with you.  Hardware stores can be overwhelming if you don't know what you're looking for. Whether you've bought your first home or have decided that 2013 is the year you become "handy", below is a list of "starter" tools every homeowner should have on hand:

1. Toolbox
2. Hammer
3. Pry bar
4. Vise grips
5. Needle-nose pliers
6. Screwdrivers (mixed set
7. Wire cutter/stripper
8. Tape measure (16-foot)
9. Reversible drill with bit set
10. 9-inch torpedo level


If you don't feel like buying each of these tools individually, there are some great starter tool kits available that have everything you need - from screwdrivers to pliers to measuring tapes - in one handy box. With the basics on hand, you can buy additional tools - like hand saws or sanders - as the need arises, which might be a little easier on your wallet.

How to live with less.

 

 

 

If you've already started your spring cleaning, chances are you're all too familiar with our society's obsession with "stuff"?. For those of you looking for some inspiration to purge those unneeded things, you might want to check out this New York Times article , "Living with less -- a lot less" by Graham Hill.

 

Hill made a killing during the Dot Com era, and immediately spent his fortune on material items - houses, gadgets, cars, you name it. The article explains how managing these items became a job in itself, and how it eventually started to suck the life out of him.

After achieving his "ah-ha"? moment, he purged everything and now lives in a 420 square foot condo in Manhattan. Without a lot of extra stuff taking up space, he's been able to organize it in a way that allows him to entertain dinner parties for 12, accommodate overnight guests (in their own room) and watch TV in his own "media room"?.

Here's a video of what his new lifestyle looks like:

http://gizmodo.com/5967622/the-tiny-transforming-apartment-that-packs-six-rooms-into-350-square-feet

Hill is hoping his next business venture will get more people living a minimalist lifestyle. Life Edited offers similar living solutions to those that exist in his condo.

http://www.lifeedited.com/

Whether you're living in a 420 square foot condo or not, it's always good to partake in some regular decluttering to avoid letting things get out of control. If this is what you're planning on doing this spring, good luck and happy purging!

How to tell if your home is overvalued

It seemed natural that with the introduction of record-low interest rates, threats of housing bubbles wouldn't be far behind. For years, the Federal government, Bank of Canada - and now, the International Monetary Fund - have warned about potential housing overvaluation across the country.

The thing is, saying that houses across Canada are, on average, 10% overvalued doesn't make much sense. Canada is a vast country - and housing markets vary drastically from one area to the next.
So how can you tell if your house is overvalued? Well, that's a difficult - if not impossible - question to answer (unless you're an economist - but even then...). That being said, I've always liked this concept that was printed in the New York Times way back in 2005. It employs a mathematical equation similar to that used in the stock market, to determine if stocks are overvalued. The equation looks at a house's "rent ratio": You take the price of a house in a typical area and divide it by the cost to rent it for an entire year. The result is the rent ratio - and the lower the ratio, the better. Typically anything under 20 is considered "bubble safe".
The article acknowledges this is an imperfect measure - mainly because it's not always easy to find out what your house would get on the rental market. That being said, it has proven to be somewhat useful - and is definitely worth a shot if you're worried about buying a home that's potentially overvalued!

The Trouble with Schemes

You can well imagine that in my business we see  a lot of different arrangements for home ownership.  I must say that even after 25+ years in the business I'm still shocked at the creative ways people achieve home ownership. 

But a scheme is a scheme and while they make perfect sense to you they usually come unravelled and it's never pretty.  Take the case of the friend who bought a house for her friend to get her through an ugly divorce.  The deal was in three years when everything had settled down the person going through the divorce would take over, remortgage and pay her friend back.  The benefit to person going through the divorce was a roof over her head for her children, no apparent assets to declare in the divorce and the chance to build some equity for her future.  The benefit to the friend?  The house is in her name and she owns it.  Technically she can do what she wants with the house.

Fast forward 3 years.  It's time to take over the house and the divorce is still in the "ugly" stage.  Settlement has not been achieved and what has been decided has been screwed up by the courts interpretation of the agreement.  At the root of the fight is some joint credit that is now seriously in arrears.  But there is now equity in the house and taking it over will give our subject some net worth.  Not so fast.....

Here's how a lender sees it.  You didn't pay your bills.  End of story.  You had a contract to pay and seriously the lender doesn't give a crap about your personal arrangement.  You both signed a contract agreeing to pay the debt.  Any sudden asset in your name shows you acquired some net worth while neglecting what you already owe.  A creditor will see you has having built net worth using their money - the money you neglected to pay them. 

So what happens now?  If this scheme, okay "arrangement", is to conclude this client must pay back 100%  of the joint debt under question.  What a waste of three years!  If you're thinking of divorcing make sure you understand the rules around credit.  Don't let the courts decide because they will take years to state the obvious and all you can do is scheme your way into a mess. 

As for this case?  Well I guess the friend who owns the house will have to decide what she is going to do with it. 

Hidden Mortgage Fess are making a Come Back.

It's never a good thing when banks are predicting their profits to slide - which is expected to happen in 2013. As Rob Carrick mentions in this article in the Globe, it usually means they're going to find other ways to ding customers - like through excessive mortgage breakage fees.

You've likely heard a few horror stories of friends or relatives who tried to get out of their mortgage early. Maybe they had to relocate temporarily, and opted to sell their home in favour of renting another. Or maybe they wanted to move to a larger home, and realized a little too late that the rock-bottom rate they were paying on their existing mortgage was low because it didn't include portability features. 

These stories don't usually end well - and often involve hefty interest rate differential fees (that compensate the bank for the money it would have made had you kept your mortgage through the agreed upon term) as well as a host of other fees, such as reinvestment fees, discharge fees and transfer fees. 
 
Before you ever sign on the dotted line of a mortgage, it's wise to inquire about what will happen should you opt to pay off that mortgage in full, move to a larger or smaller house or refinance down the road. If you already have a mortgage and didn't have your mortgage breakage fees explained to you upon signing, it's wise to look into it now. Just in case your future home ownership plans will require extra funds.

If you have any questions or are thinking about breaking your mortgage, don't hesitate to give us a call. We can explain the pros and cons of such a move in person, and help you minimize the damage.

A Brief HIstory of Mortgages in Canada

When you make your mortgage payment every month (or every other week, if you're into paying your mortgage off faster), have you ever wondered what your mortgage may have looked like 100 years ago? No? Well, below is a brief history of how mortgages have come to evolve in Canada:

The War Measures Act

Canada's first mortgage lending program took effect in 1918, under the War Measures Act. At this time, the Federal government was the only lender - it appropriated $25 million to the provinces, intended to be re-lent for the construction of residential units and mortgage loans.
At this time, the maximum loan was to be between 80 and 90% of lending value, or $4,500 - whichever was smaller. Annual interest was charged at 5%, with 20-30 year contractual terms. The weirdest thing about these loans? They weren't amortized. For that 20-30 year contract, mortgage holders were only required to pay interest periodically, with the entire amount due at the end.
The Dominion Act

The War Measures Act was replaced by the Dominion Act in 1935. The major difference here was that the government gave up its position as the country's sole mortgage lender, and instead joined forces with institutional lenders - namely, insurance, trust and loan companies.
Under this act, the government provided 20% of the lending value, with the private lenders providing between 50 and 60%. The interest rate was still set at 5%, but these loans were set at 10-year terms, with the provision for a 10-year renewal.
These loans were amortized, and the payments looked much like the payments you make today - equal payments made up of a combination of principal and interest.
The National Housing Act

The National Housing Act was first introduced in 1938, and was amended in 1944 and again in 1954, when it became the Act that we recognize today.
This Act came with a number of changes, the most notable being the introduction of banks as private lenders. Because of the post-war housing boom, Canada needed more private lenders - and this Act was designed to add more funds into the mortgage pool.