Month: January 2020

Finance Basics for YOUTH ! This Sunday at 1pm!

General Joel Scott 21 Jan

Money and Finance is the only game in the world, you HAVE to play, but no one tells you the rules!

Think of it like swimming lessons. In the deep end, it’s scary, there’s a good chance you could drown if you don’t know how to swim. So that’s why you learn to swim in the shallow end first before you venture into deeper waters.

As young adults, you get thrown into the deep end in the world of money with no life jacket. It’s a deep pool with plenty of sharks. Protecting yourself and learning the basics of how to swim in the shallow end is the best way to start.


This Sunday January 26th at the YMCA Cobourg,  I invite you to join us in the shallow end of the money pool!!

I am hosting a workshop on finance basics aimed at youth and young adults. Parents, you’re welcome to join us too!! It’s a chance for young people to be introduced to the world of money, budgeting, and begin the path of learning about healthy finances.


Y Members can sign up by phone 905.372.0161
Non-Members $25 www.ymcanrt.org

Yours in Success!

Joel

7 WAYS TO REPAIR YOUR CREDIT SCORE FAST AND SAVE THOUSANDS!

General Joel Scott 17 Jan

Life Happens.  I get it.

You get blindsided with some major unforeseen expense, or catastrophic life event that affects your income or ability to pay your bills.  When life happens, your credit score can pay a hefty price. And that can result in costing you thousands in unnecessary interest costs. (for more on this – click here)

Sometimes it’s not a life event, it’s just that you’ve gotten a little excited about buying stuff.  A little old-fashioned over-indulgence and you’ve ended up with some credit issues.

Regardless, if you’ve found yourself with damaged or bruised credit, there are ways to get your score back up relatively quickly. Here’s 7 things you can do immediately to repair your credit score and improve your chances to dig out of any credit hole.

  1. Correct errors on your credit report.

This one is easy. You can secure a free copy of your credit report from either of the agencies in Canada that track your credit. Review the report and make sure there are no errors or unknown issues like a fraud in your name.  Identity theft leaves you holding the bag on your credit report (and sometimes the payments).  If you do find an error or fraudulent record on your report, you can call the agency and follow their protocol for having it removed. This improves your score.

Equifax             1-800-465-7166          www.Consumer.Equifax.ca

Trans Union    1-800-663-9980          www.Transunion.ca

  1. Increase your credit limit.

Sounds nuts right?  I’m having credit issues, so I should increase my credit limits?  Although it’s counter intuitive to managing your credit, increasing your limits improves your utilization. For example, if you have a $1000 limit on a credit card, and your balance is $600, your utilization is 60%, which could cause your score to drop. If you ask for an increase to $1400, your utilization changes to 42% which could help your score go up. Reminder that preferred utilization is 40% or less to keep healthy credit.

  1. Pay your bills on time – every time. (if not contact lender)

This one is critical and easy to execute. When your monthly bills come in, pay the minimum payment no matter what. This is a minimum. If you can pay more than minimum payment, great. Otherwise don’t miss a payment ever.  This keeps the score moving up.  If you can’t make a payment for any reason, call the creditor to let them know. They can put a note on your file to help, or make arrangements to adjust the payment with you.

  1. Set up automatic payments

This one is best especially if you have regular steady income.  If you automate your payments on the same day monthly, this ensures you never miss a payment and helps you budget more efficiently. Automating payments of all kinds is beneficial for this reason. The less you have to keep track of the better!

  1. Use your credit more. (Responsibly)

Again, this is something that may seem counter-intuitive but using credit regularly and paying it off on time is an excellent way to increase your score fast. An easy way to execute this is to use your credit for small purchases, on a regular basis, and pay it off right away.  For example, put a tank of gas on your credit card, and pay it off right away.  This shows responsibility with credit and helps your score increase.

  1. Keep a low credit card balance and pay monthly.

Ya easier said than done, but if you have a card with a low balance, pay it off and keep it paid off as you go. A good tie in with number 5 above.

  1. Monitor and request a copy of your credit report/score.

Energy flows where your attention goes. You may have heard this before.  It’s true of your credit report. This is good practice to get into at least twice a year. This allows you to be aware of your credit and how you’re using credit. It also allows you to be aware of fraud if you get targeted. If you’re focused on and aware of your credit score and credit health, you’re less likely to behave in a way that damages it.

If you have questions or concerns about your credit and your ability to secure financing, please contact me at any time.

Yours in success!

Joel Scott

905-376-1625

joels@ndlc.ca

 

 

Credit 101-Knowing the Basics Can Save You $$ Thousands $$

General Joel Scott 7 Jan

Quick, what’s your credit score? …….waiting…….waiting…..oh, you don’t know?  Don’t panic, most people don’t know their credit score.  Why would you? Who cares? Why is it important to know?

Well the answer is simple. Knowing your credit score, and how it can impact you, can save you thousands of dollars.

To understand the world of credit and how it can save you thousands, you first must know the basics of what your credit score is, and how it is measured. There are 2 aspects to your credit world. Your Credit Report, and Your Credit Score.

Your credit REPORT is a summary of your credit history:

  1. It contains your personal information. Name, address, DOB, employer etc…

  2. It also contains a review of all your past credit history. This includes all loans, credit cards, mortgages, lines of credit, and other credit vehicles you’ve used over your lifetime. It also shows any occasions where you’ve applied for credit and when your credit report was requested by a lender.

I get asked about sourcing your credit score from places like Credit Karma and asked if they sell your information to 3rd parties? Good news is, they don’t sell your info. The bad news is, they do sell tailored, targeted advertising by financial companies so after you open an account with Credit Karma, you may start to receive offers from various financial companies.

I recommend you source your credit report and score from either of the 2 agencies that monitor credit in Canada. You can request a free copy of your full credit report for free by mail.  Best to check both agencies to see their guidelines.

Equifax          1-800-465-7166          www.Consumer.Equifax.ca

Trans Union    1-800-663-9980          www.Transunion.ca

Your credit SCORE is a measurement of 5 components:

  1. Payment history 35% – Do you pay your bills on time, every time? Do you miss or skip payments? Do you pay less than minimum payments?

  2. Utilization 30% – How much credit do you use? If you have for example $10,000 in credit available on a card, and your balance is $8,000, your utilization is 80%. Anything under 40% is optimal. Paying off cards monthly is ideal

  3. Length of credit history 15% – How long have you been using credit? Most lenders require a minimum of 2 years of credit history, with at least 2 different credit vehicles open.

  4. New Credit 10% – Have you recently opened any new credit vehicles? If you’ve recently opened several credit cards, this could cause a hit to your credit rating. Lenders view it as shopping for credit.

  5. Types of Credit Used 10% – What credit vehicles are you using? Mortgage? Line of credit?

The Impact of Having Strong Credit 

Knowing the basics of credit and having a strong credit score has a direct affect on your ability to get loans, interest rates on your mortgage, credit card approvals, and even a job or housing application. It’s good practice to review your credit report and score frequently – make sure there are no errors or fraud on your report and look for ways to improve your score.

Let’s assume you have a healthy score of 750 and are looking for a mortgage. A higher score like this opens you up to what we call “A” rates, or best rates available.  If you have a score of 600, you don’t have access to those rates, and we must source your mortgage from a “B” lender where rates are higher and sometimes carry extra lending or broker fees.

Scenario 1

A $400,000 mortgage with a credit score of 750.

Assuming an A rate of 2.74% fixed for 5 years, with monthly payments, and 25-year amortization.

Total interest paid over the life of your 5-year term = $50,575.16

Scenario 2

A $400,000 mortgage with a credit score of 600.

Assuming a B rate of 3.79% fixed for 5 years, with monthly payments, and 25-year amortization.

Total interest paid over the life of your 5-year term = $70,458.39

The difference in interest payments over the 5-year term of your mortgage is $19,883.23!!!

Would that be worth paying attention to your credit score?

This principal applies to all forms of credit. If you have solid credit, you have negotiating power and you’re open to lending options. Poor or damaged credit limits your choices and your access to preferred rates.

If you’re looking for some guidance on consolidation or need some ideas on reducing debt or interest payments, please reach out anytime. 905-376-1625 or email joels@ndlc.ca

Yours in success!

Joel

Mortgage Default Insurance – It Doesn’t Protect You, But It Does Cost You. Know before you buy!

General Joel Scott 2 Jan

When you’re applying for a mortgage, many people are faced with having to secure Mortgage Default Insurance or what most people refer to as CMHC insurance. This is insurance that protects the lender in the case of a default on the mortgage loan. It does not protect you or cover payments in the case of death or disability. Insurance that protects you can come in the form of Mortgage Protection Plan (which we offer), other life insurance policies or any number of products offered by insurance companies. Default insurance protects the lender.

Who Has To Secure Default Insurance?
Any time you’re securing a mortgage with less than 20% down payment, you are required to have mortgage default insurance. The exception being homes priced at over 1-million dollars. Mortgage default insurance is not available on homes purchased for more than $1 million; this means that a 20% down payment is required on these homes. If you’re buying a property between $500,000 – $999,999 a higher down payment is required. The minimum down payment is 5% of the first $500,000, and then 10% of the remaining amount. When your mortgage is insured, the maximum amortization period you can attain is 25 years.

How Much is Default Insurance?
This depends on your down payment. The premium you pay is tied to the amount of money you’re putting down. If you are putting down less than 20% of the purchase price, YOU pay the premium. This is referred to as an “Insured Mortgage”. If you are putting down more than 20% the lender will pay the premium. This is referred to as an “Insurable Mortgage”. Catch here, is that often-insurable mortgages carry slightly higher interest rates. An insured mortgage offers protection for the lender without the lender assuming the cost of the premium – so they offer preferred rates for these types of mortgages.
If you’re putting down less than 20% – the cost of the premium varies – this chart from CMHC gives an overview of their structure.

Image Courtesy: CMHC

Example:
You’re buying a $100,000 property. You put down $5,000. Meaning you’re borrowing 95% of the amount (your loan to value). In this case, your Default Insurance premium would be 4% of $95,000. Or $3,800. So, your total mortgage would be $98,800. Plus, your taxes on the premium. PST in Ontario is 8% which would be due on closing. The cost of the insurance can be rolled into the mortgage and paid off over the amortization period or can be paid at closing (which almost no one does). Taxes are not rolled in. The government gets paid up front.

Can I Shop for Default Insurance?
Not really, kinda sorta????  I say that with a little sarcasm, you see there is only 3 companies that offer default insurance and they’re often selected by the lender. Those 3 companies are: 1. Canada Guaranty 2. Genworth and 3. CMHC (Canada Mortgage and Housing Corporation). CMHC is government owned, Genworth is a publicly traded company, and Canada Guaranty is owned by a private investor collective made up of the Ontario Teachers’ Pension Plan and National Guaranty Holdings Inc.
As for shopping for Default Insurance, you or your broker/agent can request the lender apply to a specific insurer, but there are only 3 choices.

Can I Reduce My Default Premiums?
Yes. But you need to increase your down payment.
If you’re able to do this, it is recommended as it can save you thousands in interest long term. If you’re buying a home for $400,000 and you put 10% down (40k) Your mortgage is $360,000 plus your premium (3.10%) $11,160 bringing your mortgage to 371,1160. The interest difference over your 5-year term is substantial.

Scenario 1:  At 10% down payment with Default insurance – assuming 2.89% interest rate – and monthly payments. Total interest paid over a 5-year fixed mortgage is $49,551.

Scenario 2: At 20% down payment – same parameters -no default insurance – Total interest paid is $42,721.

***A savings of $6,830 (not including tax).

What Does it Look like for me?
If you’re looking to see what the numbers look like for your situation, click here

If you have any more questions on default insurance and how if can affect your purchasing, please give me a call or drop me an email anytime we can set up an appointment.

Yours in success!

Joel Scott
905-376-1625
joels@ndlc.ca