A common question that I hear from borrowers is: What’s the difference between a mortgage refinance vs renewal?

In this post, I want to go over the difference between the two as well as some of the reasons why a refinance can be a much better idea than simply doing a renewal. 

What’s the Difference Between Mortgage Refinance vs Renewal?

Simply put, a renewal is when your mortgage comes to term. For example, if you secure a 5-year term for your mortgage on April 1, 2017, your mortgage would be up for renewal on April 1, 2022.

Usually, a few months before you’ll get a phone call from your lender letting you know that your mortgage has come to term and you have a few options at that point.

A refinance, on the other hand, involves renegotiating your current loan agreement. When a refinance is complete, it’s a new loan that replaces you old loan with new terms in place.

Refinancing is typically used to access the equity in your home although there are many, many reasons for choosing to refinance.

You could be newly single, and needing to change the terms of your loan…

You could be a real estate investor, looking to access your equity to use as a downpayment on another property…

You could be in a tight bind financially, and wanting to take out some equity to pay off a loan..

And a million and one other reasons to refinance (which I’ll get into in the post)

However when faced with a mortgage refinance vs. renewal, your options are either to

• Option #1: Continue on with the same lender, and same terms you had previously

• Option #2: Look and shop around for better rates and options

I would highly suggest going with Option #2, although a lot of borrowers end up sticking with Option #1. The main difference is that Option #1 typically require less work than Option #2 (hence, why most people choose it…

What you’re missing out on…

The problem with continuing on the same terms is that you may be leaving thousands of dollars on the table! Just by asking a few questions, you could potentially put yourself in a better financial position.

You may encounter some pushback from lenders when you want to change the terms of your mortgage. Why wouldn’t they give you pushback? If you’re bound to get a lower interest rate, that means less money for them!

The other pushback you’ll see from lenders is when you want to switch to a variable rate mortgage from a fixed-rate mortgage. The reason, again, is that most big lenders in Canada (for example, the big banks) actually make more money putting you in a fixed-rate mortgage.

So, for a lot of these complicated reasons you won’t see lenders urging you to refinance.

They’re pretty happy for you to continue on with a renewal, because obviously that means you keep you mortgage with them and they making money!

Hiring a broker to negotiate on your behalf is the most powerful option for borrowers.

The reason is I advocate borrowers to higher a broker is because brokers will let you know what you qualify for in the market.

They’ll be able to tell you, in pretty brief time, whether you’re better off staying or switching lenders.

And if you’re staying, they’ll tell you if you’re getting a good deal or not!

Typically, brokers get paid by the lender, so in most cases you won’t have to pay them a penny. In fact, they’ll be happy to help you tell the difference between sticking around for a straight-forward mortgage refinance vs renewal.

That being said, one of the most powerful questions a broker can ask a borrower is: Has your life situation changed at all?

If you have more borrower power, for example, you may very likely qualify for a lower interest rate.

If you’re like most Canadians, your home value continues to rise, and you may be able to do useful and productive things with the equity you’ve built up.

A good example might be to renovate your basement. A basement renovation might cost $50,000, but could effectively raise the value of your home by the same amount and provide you with over $1,000 a month of cash flow.

A broker will be able to tell you which lender is most likely to get you the lowest rate, and structure a mortgage that’ll best serve your needs over the next 5 years.

A bank, on the other hand, will just offer a set of fixed products that they give to all borrowers.

More options = more customization!

There’s a reason why real estate investors almost exclusively work with brokers. They know that brokers are going to give them the most effective ways to access their equity when they need it.

Apart from investing in real estate, here are some of most common reasons why you may choose to refinance:

1. To Get Cash: A cash-out refinance is the most convenient way to access your home equity. Use the money to pay for higher education, make home improvements, invest in an income property, or pay off debt. Today’s low rates make a cash-out refinance a smarter choice than taking out a personal loan. 

2. Your Borrower Profile Has Improved: Your financial health has a significant impact on your loan terms. If your credit score has gone up and you’ve removed negative items from your credit history, you probably qualify for a better rate. Refinance your home equity with a lower rate for extreme savings!

3. To Reduce Your Loan Term: Changing your 30-year mortgage to a 15-year loan saves you money thanks to the lower-interest-rate that you pay over the shortened loan term. While this is a more aggressive way to pay off your mortgage, your savings could mean thousands of the life of the loan. 

4. To Change into an Interest-Only Loan: Refinancing into an interest-only loan offers some of the lowest monthly payments. If you need to free up your monthly cash-flow, a temporary interest-only mortgage might be just what you need. 

5. To Buy Someone Out: Ready to fly solo? If you have a co-borrower and you now need to remove them, refinancing can do that. This is often the case when it comes to divorce or when a co-borrower was required to qualify. Refinance your home equity to buy out your partner is also an option!

6. For Investment Protection: Some homeowners like to take out some of their equity even just to set aside for a rainy day. Home prices adjust all the time. So if you see your home value has gone up, you might want to access that equity while it’s on the upswing. 

7. To Lower Your LTV: On the other hand, you may have recently inherited some cash and are looking to reduce your mortgage balance. Instead of just applying that lump sum into your current loan, consider refinancing into a shorter-term loan as well as use the lump sum. This way, your rate will be lowered, your loan will be paid off faster plus your monthly payment may not even increase!

8. Consolidate Debt: Have a second mortgage? Refinancing can consolidate your loans into a single one. A second mortgage comes with higher interest rates, so consolidation makes sense if you want to both save money and the headache of dealing with several mortgages.

9. Take Advantage of A Special Loan Program: Some specialty loan products are available only for a limited time. If you want in on that deal, refinancing your current loan is how to do it. 

Knowing all those reasons it’s also useful to consider… 

Other Key Factors In Mortgage Refinance vs Renewal

The other key factors to understand in a mortgage refinance vs. renewal is the timing of everything.

If you’re 6 months away from renewal, it might be a bit too early to start generating quotes from brokers…

The reason is simple: a quote now, and a quote six months from now could be wildly different depending on the Bank of Canada interest rates.

Your best bet, when it comes to timing, is to start shopping around 3 months before renewal time. If you get an approval, brokers can usually hold that approval rate for over 90 days even if interest rates go up.

What is the Process For A Renewal Like?

When you first get your mortgage, you’re probably not thinking about the renewal process. After all, you’ve probably jumped through a lot of hoops to get your application approved, and the last thing you want to do is think about another lengthy process.

But before you know it, your term – whether it’s 1 year, five years or longer – will be up, and the process will begin.

The most important thing is to know what to expect. A mortgage renewal is when your current term comes to an end and you sign on for a new term, so they’ll be reaching out to you ahead of time.

When your mortgage term is nearing an end, keep an eye on your mailbox or your email inbox. Most lenders – at least federally regulated lenders – are required to provide you with a renewal statement at least three weeks before the end of your term.

This may come in the mail or via email, and it will include information about your mortgage that’s included in your normal statements, such as your current balance, payment amount, payment frequency, etc., as well as a renewal form that you can sign and send back.

When you sign for a new term, you’re essentially signing a new mortgage contract – what’s been paid during the previous term is gone. So if you have $650,000 remaining on a mortgage that was originally $875,000, your new mortgage will be for $650,000.

What is the Process For A Refinance Like?

A refinance is very similar to the first time you qualified for a mortgage!

The broker will go ahead and collect a detailed history including income, debts, and assets.

From there, the broker will make an educated estimate as to what kind of rates you qualify for how much equity you can comfortably access.

Once you’re ready to move forward, you’ll have to submit documentation to support the application before they submit to a lender. Commonly, this includes all of your employment documentation, tax slips, pay stubs, mortgage statements and property tax statements.

If you have tenants, you’ll need to provide copies of the rental agreements to include the income in your application.

In most cases, an appraisal of the property will also need to be done so the lender can independently confirm the value of the property that they’re lending against. Some lenders will cover this cost, however in most cases the borrower will pay for this.

If you’re borrowing a small sum of money, for example $50,000 or less, this appraisal step can sometimes be skipped depending on the lender.

After this step, the lender will go through a complete application, and give a final decision in terms of lending amount and the rates.

Once you accept the offer, you’ll be provided with a signing package very similar to the one you signed for your first mortgage.

Then, you’re all set!

Expect the funds in your bank account shortly and your new mortgage payment to come out soon.

Any more questions we can help with to help you understand a mortgage refinance vs. renewal? Contact us! We’re the mortgage specialists, and we’re ready to answer all of your refinancing questions.

Top 6 Mistakes When Home Shopping

The only thing worse than not getting the home you wanted is not getting it because of an avoidable mistake. When bidding on a home, be aware of best practices! While working with a real estate agent certainly helps — and we recommend it — buying decisions are ultimately in your hands, so you want to be as prepared as possible. Do you know someone else that is considering buying a home, too? Send this article to them! They’ll be thankful for the helpful advice and happy that you thought of them.

Not Being Ready to Make an Offer

Looking at properties without a pre-approval letter is like leading a toddler to a candy store knowing you forgot your wallet at home. You won’t like the result. A pre-approval letter is as good as money in the back when home shopping. It communicates to the seller that not only do you love the property but that you’re serious about purchasing it.

True, sellers may want to collect a few offers first, but many are just as eager to sell their property as you are to buy it. Giving a fair and attractive offer fast may be just the thing that will get you into your dream home.

Getting pre-approved is much easier and faster than it was a few years ago too! You can get started right now using our online contact form. It’s secure, convenient, and the quickest way to know how much you qualify for.

Hesitating Too Long Before Making An Offer

Of course, you’re allowed to hesitate. It’s a big financial decision, and emotions can run high. But don’t let uncertainty slow you down too much.

When it comes to real estate purchases, time can stifle and even kill the deal. You see, the longer you wait, the more competitors you’ll find. And a bidding war means you’ll ending pay more or even get outbid, missing out on the property altogether.

This is also where being prepared with your approval letter comes in. If you’re hesitating because you still need to apply for the loan, there’s a high possibility that you’ll miss out on that property.

Going All-In On Your First Bid

The next mistake is to put all your chips on the table — meaning offering your max pre-approved amount on the first round. What you want to do instead is look for homes that are below your maximum approved. That way, you have some wiggle room for bidding a bit higher on the second round (while others will be unable to because they didn’t read this article and bid max on their first round).

These tricks also help when going against all-cash offers, too. All-cash have a reputation of being tough to outbid because they’re attractive to sellers. But if they’ve gone all-in on their first bid, your higher loan-backed bid can take them out of the competition.

Going In Too Low

On the same note, you don’t lowball either. Sometimes home shoppers make an offer to negotiate, and it backfires. Remember that your goal is to buy the home, not get into a negotiation.

Instead, your first offer should be one that is fair for the house and the market while remaining under your max bid amount. Your real estate agent can help you with this one but do your homework as well. Research similar homes in the area to see how much they sold for and how long they were on the market. Compare the features as well as the square footage as it also affects what a fair offer would be.

Passing on The Inspection Contingency

Perhaps they didn’t want to ruffle the seller’s feathers, or maybe they thought that new constructions wouldn’t have flaws. Whatever the reason may be, we’ve seen too many homebuyers make the mistake of declining the home inspection contingency.

A home inspection contingency gives you peace of mind. It uncovers potential flaws that may require major cash to fix. If the damage is severe enough, it could offer a way to legally back out of the deal.

Whether it’s a new home or a jewel from the 1950s, always get a home inspection.

Letting Too Many People Have a Say

This mistake is tied to the second one we mentioned about hesitating. Letting people who are not financially invested in the purchase could slow you down or make you second guess your first thoughts.

Yes, having advice from your mother or a friend is valuable, but their helpfulness may be too protective. If your “advisor” is the type to focus on flaws or tell you “shop around” when they think you’ve fallen in love too fast, it might be better to shop without them.

Funding your dream home is what we do, and we’re the best at it! Contact us today to work with a mortgage professional that cares about your home buying goals as much as you do.

Always understand your costs of borrowing, versus your savings in interest

If you are saving a certain amount of money refinancing each year, calculate how long you need in the new mortgage to profitably refinance! 

• If you carry debt, you can use the same formula to figure out how much a reduced interest rate will save you in fees
• Refinance rates will change as your credit situation changes
• Refinance rates will change with the economy
• It never hurts to see what’s available!

When is it the best time to buy according to the market? When is it the best time to buy according to your current financial situation? When is it the best time to buy considering life goals and opportunities?

As you can see, the “best time” is a very personal thing. Let’s go in-depth and look at each of these situations. Remember to contact us for a personalized recommendation and get matched with a mortgage loan program that fits your right time.

The Real Estate Market and the Best Time to Get a Home Loan

When is it the right time to buy according to the market? When is it the right time to buy according to your current financial situation? When is it the right time to buy considering life goals and opportunities? 

Buyer’s market. Seller’s market. Even seasoned real estate investors can have trouble nailing down the “right time.” But there are a few things to help you gauge whether the market is right for buying:

1. Price trend in your desired area: Comparing the historical home costs gives you valuable insight as to whether you can expect prices to rise quickly or stay steady. It’s useful to compare those trends with other areas in the county to see the bigger picture for asking price and home sales.
2. Home sale trends: If home sales seem to be moving slowly, it’s a good indicator that it’s a buyer’s market and likely the right time to buy. Sellers will be more willing to negotiate, and there will be less competition.
3. New construction slowing down: You’ll want to watch out for lagging construction as this can mean housing will be in short supply, driving prices and competition up.
4. Interest rates: Another number you want to look at is interest rates. Now this one is a little tough since rates are changing all the time, and there’s no absolute way to predict what it will be next week or even tomorrow. However, there are several key indicators that true mortgage professionals look at to gain insight. Working with a trustworthy professional is key as they can guide you when the right time to buy is considering mortgage rate trends.

Your Finances and the Best Time To Buy

The market and current mortgage rates play a critical role as to whether it’s the right time to buy a home, but so do your finances. You may have heard that you need to save 20% for the downpayment. If you don’t have 20%, you may think it’s not the right time to buy. However, certain loan programs let you purchase a home with as little at 3.5% –some even less than that!

Even a struggling credit score may not affect your “right time to buy.” Government-backed home loans allow banks to issue great loan packages to buyers with lower than average credit scores. If fear of getting denied a home loan due to low credit has been holding you back, now is the RIGHT time to discover the possibilities.

Life Goals and the Best Time to Get a Home Loan

With the above mentioned in mind, let’s now consider your life goals. Are you ready to set roots –at least for five years –in one community? Ready to invest with long-term payoff? Tired of renting and the inability to make customize your home? If these sound like you, then now is the right time to buy.

Even in less than favorable real estate markets, great rates and life circumstances may mean that it’s your right time to buy. Get a custom rate quote! Our mortgage office is dedicated to truth in lending and personalized service. Contact us today to learn about your mortgage options and discover if it truly is the right time for you to buy!

Types of Identity Theft Mortgage Problems And How It Affects Your Home Loan Application

There are many types of identity theft. While all are serious, only one can hamper getting a home loan. With financial identity theft, a criminal is using your identity to get approved for credit. While a $300 shopping spree probably won’t affect your ability to get approved for a mortgage, it could lower your credit score and change the mortgage rate you qualify for.

However, fraudulent charges of thousands or tens of thousands of dollars are sure to halt your loan approval and here’s why:
Part of getting approved for any loan is demonstrating that you can be trusted to pay it back. And, essentially, that’s what a credit score shows. The higher the score, the more financially responsible you appear to be, and the more lenders will trust that you can and will pay back the loan.

So when it comes to mortgage approval, you can imagine how much weight your credit score carries. And if your credit shows that you have a $12,000 debt that’s currently in collections, that’s a red flag that no lender wants to see.

Home loan denied. Well, for now, anyway.

Fortunately, that’s not the end of the story! While it’s not a fast process, there are steps you can take to help clear up the crime from your credit history and get you well on your way to home loan approval.

What You Can Do If You’re a Victim

First thing you want to do it report the crime to the police. You’ll also want to file an affidavit with the Canadian Anti-Fraud Center (CAFC). Sometimes, a copy of the police report and the affidavit is all that the underwriter needs to move your application towards approval. Unfortunately, even with proof of a crime and loan approval, your rate may remain on the higher end of the scale because rates are determined when you first applied for the home loan.

Now we come to a fork in the road. Accept the higher rate and move forward with the home purchase. Or wait until everything gets cleared from your credit history and start the process all over again.

Both options have their advantages and disadvantages.

If you decide to purchase now, you’ll have the certainty of buying in the current favorable conditions. Your rate may be high now but, then again, it could be high later too. The market is changing all the time, and we cannot predict what your future rate would be.

However, if you decide to take the extra steps to clear your history and wait to purchase, you’ll have the peace of mind that you are getting the best rate based on your actual credit score. Your rate may also be lower than it was the first time around, possibly saving you thousands of dollars over the life of the loan.

Plus, you also have to consider the housing market. The availability of homes for sale in your price bracket may not be the same in six months. Are you willing to wait and see?

Identity theft isn’t something that’s fixed overnight. After you’ve filed a police report and an affidavit with the CAFC, you still need to submit copies to the credit bureaus. This will trigger an investigation and should also stop them from showing the fraudulent info on your report. The time it takes for your report to be completely cleared varies quite a bit. It can take as little as weeks, but in some cases, it’s taken years.

We hope that you are never a victim of identity theft, in any form. However, know that there is light at the end of the tunnel when it comes to buying your dream home even if this does happen to you. Do you know what rate you qualify for? Contact us today to see how low your rate can be!

Having a mortgage co-borrower is a huge deal. And just like any other investment, you’ll want to be absolutely clear about what it entails before committing. Bookmark this blog post for referencing the basics of co-borrowing and contact us for an obligation-free mortgage consultation.

Co-borrower Defined

Let’s start by describing what it means to be a mortgage co-borrower. Sometimes called a “co-signer” or “co-applicant,” a co-borrower is anyone who is on the mortgage. This means that the mortgage co-borrower provided their income, assets, and credit history to help you qualify for the loan.

This can be any person in your life. A life partner, a friend, a parent or even a business partner. A co-borrower can be any of the above!

Both you and your mortgage co-borrower are equally responsible for the monthly mortgage payments. 

Who Can Be Your Mortgage Co-Borrower?

Typically, mortgage co-borrowers are spouses or partners, but anyone can be a co-borrower. Parents, children, a close friend, or a business partner are examples of co-borrowers. Although not legally required, both borrowers are usually on the title as well. It’s also not necessary that both borrowers live in the home. In this case, the co-applicant who does not live in the house is referred to as a “non-occupant co-borrower.”

The process of applying for the loan together is essentially the same in all of these situations. A mortgage application and credit check will be completed, as well as a review of bank statements, income, work history, and debt –just like applying for a loan as an individual. 

The Benefits of Having a Mortgage Co-Borrower

The main reason that people decide to co-borrower is that it often makes it easier to qualify for a mortgage, qualify for a lower rate, or to qualify for a larger amount. Considering this, it only makes sense to add a mortgage co-borrower if they are bringing additional assets or income.

If the mortgage co-borrower is a spouse and their financials don’t help the situation, it probably best not to add them as a co-borrower. You can, however, add your spouse or partner to the property title. Rules regarding the non-borrowing spouse vary by province so, please contact us for guidelines that pertain to you. 

The most common reason that people have trouble qualifying for a mortgage is that their debt-to-income (DTI) ratio is too high. In other words, the amount you own is too high,, considering how much money you have coming in. When you add a co-borrower, you also add their income. That means that your DTI is now lowered, making it possible for you to qualify. 

Co-borrowers, Credit, and Mortgage Rate

When considering the credit scores of co-borrowers, the lowest of the two will be used to determine the mortgage rate. Also, if the lowest score is below the minimum credit score required, you won’t be able to qualify for that particular loan. 

Beyond the credit score, credit history is also taken into consideration and can very helpful for first-time homebuyers with little credit history. 

Should You Have a Mortgage Co-Borrower?

If your mortgage co-borrower does not make it easier to qualify for a loan or help you to qualify for a lower rate, it’s probably best not include them in your loan. Remember, you can always add someone to the property title without adding them to the mortgage. 

Doing so allows them to have ownership of the property without being liable financially for the debt. 

Need help determining whether adding a co-borrower would benefit you? We can help! Start the contact form today and we’ll talk you through your option in buying a home with a co-applicant. 

Low-interest rates are the most common reason borrowers refinance but are there other reasons? Yes! There are several beneficial reasons to refinance your home equity and here’s a brief list that we’ve compiled through our years of experience. 

All of these may not apply to you, but we bet you can find several reasons that apply to you!

Want to learn about your specific refi scenario? Give a call today and see what a difference refinance your home equity can make in your life.

1. To Get Cash

 A cash-out refinance is the most convenient way to access your home equity. Use the money to pay for higher education, make home improvements, invest in an income property, or pay off debt. Today’s low rates make a cash-out refinance a smarter choice than taking out a personal loan. 

2. To Get Rid of Mortgage Insurance

If your loan-to-value ratio (LTV) has decreased, refinancing your loan could eliminate mortgage insurance . Combining the savings from getting rid of mortgage insurance with a lower rate means even bigger savings.

3. Your Borrower Profile Has Improved

Your financial health has a significant impact on your loan terms. If your credit score has gone up and you’ve removed negative items from your credit history, you probably qualify for a better rate. Refinance your home equity with a lower rate for extreme savings!

Not sure if this applies to you? Contact us for a free review!

4. To Switch To A Conventional Loan

Maybe you weren’t too keen on the original mortgage, but you agreed because it was the only one you could qualify for. Refinance your home equity in a convential loan for increased savings. Now that you’re in a better situation, you have more home loan options to choose from. Low rates combined with no mortgage insurance makes conventional home loans one of the most popular loan products in this situation.

5. To Reduce Your Loan Term

Changing your 30-year mortgage to a 15-year loan saves you money thanks to the lower-interest-rate that you pay over the shortened loan term. While this is a more aggressive way to pay off your mortgage, your savings could mean thousands of the life of the loan. 

6. To Increase Your Loan Term

Maybe the opposite suites you better. Maybe you started with the idea of paying off your mortgage as quickly, but now making large payments isn’t feasible. Refinancing to a 30-year term can ease the burden by reducing your monthly payments into one that you can comfortably afford. 

7. To Change To A Fixed-Rate Home Loan

A variable-rate mortgage (VRM) is a mortgage product that offers a low fixed rate for a time. After that, your rate adjusts to current market rates. Many homeowners refinance their home equity, or their mortgage amount into a fixed-rate mortgage right before the first adjustment to avoid a significant increase in costs. 

Depending on the previous rate you qualified for, the current one might be even more favorable than it was with your original VRM!

8. To Change into an Interest-Only Loan

Refinancing into an interest-only loan offers some of the lowest monthly payments. If you need to free up your monthly cash-flow, an interest-only mortgage might be just what you need. 

9. To Buy Someone Out

Ready to fly solo? If you have a co-borrower and you now need to remove them, refinancing can do that. This is often the case when it comes to divorce or when a co-borrower was required to qualify. Refinance your home equity to buy out your partner is also an option!

10. For Investment Protection

Some homeowners like to take out some of their equity even just to set aside for a rainy day. Home prices adjust all the time. So if you see your home value has gone up, you might want to access that equity while it’s on the upswing. 

11. To Lower Your LTV

On the other hand, you may have recently inherited some cash and are looking to reduce your mortgage balance. Instead of just applying that lump sum into your current loan, consider refinancing into a shorter-term loan as well as use the lump sum. This way, your rate will be lowered, your loan will be paid off faster plus your monthly payment may not even increase!

12. Consolidate Debt

Have a second mortgage? Refinancing can consolidate your loans into a single one. A second mortgage comes with higher interest rates, so consolidation makes sense if you want to both save money and the headache of dealing with several mortgages.

13. Take Advantage of A Loan Program Before it Expires

Some specialty loan products are available only for a limited time. If you want in on that deal, refinancing your current loan is how to do it. Want to learn more about what specialty loan products you qualify for? Contact us! We’re the mortgage specialists, and we’re ready to answer all of your refinancing questions.

A bad credit mortgage doesn’t exist – but there are certainly ways to either turn bad credit into better credit, or find a temporary mortgage solution. 

In many situations, government programs exist to help borrowers who have bad credit! We have relationships with many of these types of companies – we recommend going with a company that has an excellent track record.

If you’re worried that your credit is too low to get approved for a home loan, you’re not alone. Low or bad credit is something that many Canadians are facing. But even with poor credit, there is good news! There are government loan programs made for borrowers with lower credit. Also, consider that poor credit is not a permanent situation. Starting right now, you can increase your chances of getting approved for a loan by raising your credit score.

What Credit Score Do You Need To Get a Home Loan?

Credit score, also called a FICO score, is a three-digit number that rates your creditworthiness. It’s based on your credit history, and it tells lenders the probability of you repaying your debts. The higher the score, the more likely it is that you’ll pay back your loan.

A low credit score implies that you’re a higher risk for the lender. Usually, a low credit score means paying a higher interest rate. However, if your FICO score is very low, you may be too much of a risk at the moment, and your mortgage application will be denied.

Here is a breakdown of credit scores:

Exceptional credit = 800 and above

Very good credit = 740 to 800

Good credit =670 to 740

Fair credit = 580 to 670

Poor credit = under 580

If you find yourself in the “poor credit” category, you still have options for buying a home. The minimum score needed depends on the loan type. For example, the minimum score for a conventional loan is 620, but certain government loans or private loans allow for credit scores even below 580. Other factors go into loan approval. We also consider you downpayment amount and your income. In other words, poor credit does not automatically exclude you from getting a home loan.

What’s Your Credit Score? 

You can request a free copy of your credit report every year from each of the three credit reporting companies: Transunion, Experian, and Equifax. 

You can also use credit reporting startups such as Borrowell or Credit Karma.

A pre-qualification with us also comes with a “soft” inquiry. This type of credit inquiry does not affect your credit score. However, it does allow for you to get an idea of which loan programs you qualify for, the possible rate, and a ballpark range of how much you are eligible to borrow. 

Fixing Bad Credit

If your score is low enough that you cannot get approved for a loan, the next steps are to take a few months to concentrate on raising your credit. The surest ways to raise your score include making timely payments, paying more than the minimum every month, dispute errors, and don’t open any more credit. 

Here are a few more tips for raising your credit score:

• Some credit bureaus give your credit for paying utility and cell phone bills on time. Contact us to learn more.
• Keep unused credit open, use it every once in a while and pay off the charges immediately to prove “revolving” credit.
• Ask the creditor to increase your credit, but do not use it. 
• Negotiate outstanding balances with a cash settlement. 

Purchasing a home with bad credit can be difficult, but it’s not impossible! Government-backed loans are designed for borrowers that need more lenient requirements. Plus, raising your credit score can happen relatively quickly with a few months of dedicated work.

Curious as to how close you are to buying a home? Book a call to speak with us, and you’ll know exactly where you stand. 

Most of the time, the goal is to put as little down as possible on a home, but paying more money upfront has its advantages. Here are just a few of them for you to consider.

Pay Less Interest

Putting a large down payment can save you thousands of dollars of accrued interest over the loan term. This is especially true with 30-year mortgages.

Acquire Lower Interest Rates

A larger lump sum can also reduce your rate! Basically, the larger the down payment, the less risk it is to a lender, thus lowering your interest rates.

Supplements Employment status

Similarly, if you have issues with employment status, you can lower your rate by putting down larger payment upfront. With a large down payment, you reduce your “riskiness,” and lenders can offer you a better mortgage rate, regardless of credit score.

Avoid Mortgage Insurance

If you opt for a conventional mortgage, a substantial down payment can help you avoid paying mortgage insurance. To qualify, you must have a loan-to-value ratio (LTV) of 80%. That means that you’ll need to make a down payment of at least 20% of the home price.

Large Down Payment Mortgage with Bad Credit

Even if you have bad credit, a large down payment can offset that and alow you to qualify for a mortgage

If you’re unable to put down a large sum all at once, there are still affordable options! Consider the following loans and contact us to learn more about each of them (and more!): Government of Canada provide better financing options for borrowers making a small down payment.

There is also the option of waiting and saving for a large down payment. However, with government loans, it may not be necessary. Contact us today to see which is the fastest and most affordable option for you.