Lets face it, having bad credit WILL affect your credit score and reduce your ability to obtain credit cards, car loans, personal loans and mortgages. There are some easy ways to ensure that you are a strong borrower when you go to apply for any of these and these methods don’t require you to have a lot of money either.
Your credit history is recorded along with millions of others by at least one of the two major credit reporting agencies in Canada; TransUnion and Equifax.
Your Credit Report contains personal information including your name, date of birth, current and previous addresses, Social Insurance Number and current and previous employers.
It also contains your credit history which includes information about all your credit cards and loans as well as any bank accounts you have.
In addition, you will find that any bad debts – items which were referred to a collection agency – along with bankruptcies also show up on the report.
The credit report will show inquiries made on the credit report. So if you have applied for 5 credit cards and 2 lines of credit in the past year then those inquiries will appear.
Your Credit Score is like a snapshot of your financial health. It is an indication of the risk you pose to a lender who is deciding whether or not to lend you money. TransUnion and Equifax use a point scale of 300 to 900 to report your score and the higher your score on this scale the lower your risk to the lender.
As it applies to mortgages, your Credit Score will play a determining role in what interest rates you qualify for and the general ease at which you can obtain a mortgage.
Here is a list from the Financial Consumer Agency of Canada (FCAC) on improving your credit score:
Always pay your bills on time. Although the payment of your utility bills, such as phone, cable and electricity, is not recorded in your credit report, some cell phone companies may report late payments to the credit-reporting agencies, which could affect your score.
Try to pay your bills in full by the due date. If you aren't able to do this, pay at least the required minimum amount shown on your monthly credit card statement.
Try to pay your debts as quickly as possible.
Don't go over the credit limit on your credit card. Try to keep your balance well below the limit.
The higher your balance, the more impact it has on your credit score.
Reduce the number of credit applications you make. If too many potential lenders ask about your credit in a short period of time, this may have a negative effect on your score. However, your score does not change when you ask for information about your own credit report.
Make sure you have a credit history. You may have a low score because you do not have a record of owing money and paying it back. You can build a credit history by using a credit card. See the next section to find out how.
You can go onto either of the Credit Bureaus Websites and actually download your credit report. This is something you should do periodically to ensure that everything is being reported accurately and to pick up on any inaccuracies that may be evidence of identity theft.
If your credit rating is hindering you from obtaining loans then feel free to contact me to discuss available options.
Friday, May 29, 2009
Thursday, May 21, 2009
Ontarios Upcoming Tax Harmonization
Anyone who will be buying a new home after July 2010 MUST make sure they are aware of the impending harmonization of GST and PST when it comes to new home purchases.
Below is a copy of Schulich Professor James McKellar's article in the Financial Post about the HST Tax.
Home is where the tax is
Ontario's impending tax harmonization scheme spells disaster for those building, buying or selling homes
James McKellar, Financial Post
Reuters
The recently announced harmonization of the GST and PST in Ontario is about to wreak havoc on the housing industry, one of the pillars of that province's economy. It is a textbook case of poor government policy that will distort the province's housing market over the long term, with a particularly devastating impact on the building industry.
Consider the following: When tax harmonization in Ontario takes effect in July, 2010, someone buying a new condo in Toronto costing $500,000 -- the current median price in that city -- will pay approximately $40,000 in additional taxes. If the same buyer considers moving up to a $600,000 purchase, the tax goes up another $17,000, for a total additional tax burden of close to $60,000. Total sales taxes on a new home purchase will exceed the 13% tax on an imported luxury car and the 15% sin tax levied on a glass of wine or pint of beer purchased at the local watering hole. But will new home purchasers be willing to pay these sky-high sales tax increases and, if not, what are the consequences?
The unintended short-term consequence is the likely delay or even cancellation of some "shovel-ready" housing projects that are in the pre-sale stage. This does not bode well for labour markets and particularly a construction industry that, according to Statistics Canada, is already suffering among the highest job losses of any industry in the country. Why is government intent on spending taxpayer money to create infrastructure jobs and bail out the auto industry, all in the name of job creation, and at the same time charting a course to bring much of the housing industry to its knees?
Hardest hit will be people living in the Greater Toronto Area (GTA). The provincial government indicates that 75% of new home purchases in Ontario fall below the $400,000 threshold. But in the GTA, 54% of new home purchases last year were predominately high-rise condominiums, and in Toronto, where the majority of new condominiums are being built, the average asking price is currently just over $500,000.
For the consumer, there is one way to dodge the tax: Buy on the resale market where PST and GST do not apply. For a $600,000 resale purchase, the tax savings would total $78,000. But the sheer magnitude of the difference in sales tax between new and resale product will distort housing markets in the long run.
How will builders respond to the new tax regime? They will pursue one or more of the following options: Get as much product below $400,000 as possible; use cheaper building materials and finishes; eliminate upgrades and even some standard finishes; eliminate sustainability and "green" features if they cost more; strip down landscaping, exterior finishes and features; and keep units small.
Ontario cities can all but forget the drive for new inner city family housing after July 1, 2010. And the province can forget its sustainability and "green" initiatives as well as its intensification targets when it comes to new higher-density housing. Builders will gravitate to projects that fall below the $400,000 threshold or jump to the luxury end where the sales tax bite will not be a disincentive to would-be buyers.
Ontario's home builders have delivered quality product at a cost that has ranked for decades among the lowest in the Western world. But if the government refuses to move from its current position, the long-term unintended consequences on the performance and efficiency of our housing markets will be significant and long-lasting.
When it comes to home owners, the real losers in the harmonization scheme are the middle-income households that are upwardly mobile; those contemplating an expanding family; and the elderly who are considering downsizing. For the ageing couple who might consider a new $600,000 condo in lieu of the family home they have occupied for the past 30 years, why pay $94,950 in sales taxes? They will probably opt to stay put. For the household contemplating children and needing an extra bedroom, a resale unit will be a far cheaper option than a new unit.
Bottom line: the harmonized tax regime will curtail new housing supply in key sectors of the new homes market and will redirect demand to the resale market. In the long run, this will put upward pressure on house prices.
Tax harmonization is being sold on the grounds that it will benefit the Ontario economy at large. In the case of housing, it will do the exact opposite. The crippling new tax regime, announced in the midst of what may be the largest economic contraction since the Great Depression, will undermine one of the essential foundations of a strong economy -- housing choices at affordable prices.
jmckellar@schulich.yorku.ca - James McKellar is professor of real estate and infrastructure at the Schulich School of Business, York University.
Below is a copy of Schulich Professor James McKellar's article in the Financial Post about the HST Tax.
Home is where the tax is
Ontario's impending tax harmonization scheme spells disaster for those building, buying or selling homes
James McKellar, Financial Post
Reuters
The recently announced harmonization of the GST and PST in Ontario is about to wreak havoc on the housing industry, one of the pillars of that province's economy. It is a textbook case of poor government policy that will distort the province's housing market over the long term, with a particularly devastating impact on the building industry.
Consider the following: When tax harmonization in Ontario takes effect in July, 2010, someone buying a new condo in Toronto costing $500,000 -- the current median price in that city -- will pay approximately $40,000 in additional taxes. If the same buyer considers moving up to a $600,000 purchase, the tax goes up another $17,000, for a total additional tax burden of close to $60,000. Total sales taxes on a new home purchase will exceed the 13% tax on an imported luxury car and the 15% sin tax levied on a glass of wine or pint of beer purchased at the local watering hole. But will new home purchasers be willing to pay these sky-high sales tax increases and, if not, what are the consequences?
The unintended short-term consequence is the likely delay or even cancellation of some "shovel-ready" housing projects that are in the pre-sale stage. This does not bode well for labour markets and particularly a construction industry that, according to Statistics Canada, is already suffering among the highest job losses of any industry in the country. Why is government intent on spending taxpayer money to create infrastructure jobs and bail out the auto industry, all in the name of job creation, and at the same time charting a course to bring much of the housing industry to its knees?
Hardest hit will be people living in the Greater Toronto Area (GTA). The provincial government indicates that 75% of new home purchases in Ontario fall below the $400,000 threshold. But in the GTA, 54% of new home purchases last year were predominately high-rise condominiums, and in Toronto, where the majority of new condominiums are being built, the average asking price is currently just over $500,000.
For the consumer, there is one way to dodge the tax: Buy on the resale market where PST and GST do not apply. For a $600,000 resale purchase, the tax savings would total $78,000. But the sheer magnitude of the difference in sales tax between new and resale product will distort housing markets in the long run.
How will builders respond to the new tax regime? They will pursue one or more of the following options: Get as much product below $400,000 as possible; use cheaper building materials and finishes; eliminate upgrades and even some standard finishes; eliminate sustainability and "green" features if they cost more; strip down landscaping, exterior finishes and features; and keep units small.
Ontario cities can all but forget the drive for new inner city family housing after July 1, 2010. And the province can forget its sustainability and "green" initiatives as well as its intensification targets when it comes to new higher-density housing. Builders will gravitate to projects that fall below the $400,000 threshold or jump to the luxury end where the sales tax bite will not be a disincentive to would-be buyers.
Ontario's home builders have delivered quality product at a cost that has ranked for decades among the lowest in the Western world. But if the government refuses to move from its current position, the long-term unintended consequences on the performance and efficiency of our housing markets will be significant and long-lasting.
When it comes to home owners, the real losers in the harmonization scheme are the middle-income households that are upwardly mobile; those contemplating an expanding family; and the elderly who are considering downsizing. For the ageing couple who might consider a new $600,000 condo in lieu of the family home they have occupied for the past 30 years, why pay $94,950 in sales taxes? They will probably opt to stay put. For the household contemplating children and needing an extra bedroom, a resale unit will be a far cheaper option than a new unit.
Bottom line: the harmonized tax regime will curtail new housing supply in key sectors of the new homes market and will redirect demand to the resale market. In the long run, this will put upward pressure on house prices.
Tax harmonization is being sold on the grounds that it will benefit the Ontario economy at large. In the case of housing, it will do the exact opposite. The crippling new tax regime, announced in the midst of what may be the largest economic contraction since the Great Depression, will undermine one of the essential foundations of a strong economy -- housing choices at affordable prices.
jmckellar@schulich.yorku.ca - James McKellar is professor of real estate and infrastructure at the Schulich School of Business, York University.
Thursday, May 14, 2009
Housing Market Showing Signs of Recovery
For anyone waiting to see what the market is going to do before making the decision to purchase, this article may offer some perspective.
http://www.thestar.com/article/634381
From a mortgage professionals standpoint the combination of low interest rates, mixed with affordability and increased supply makes the present a great time for first time buyers to enter the market. The barriers of inflated housing values and expensive mortgages have all but been dissolved in the turbulent economy presenting a great opportunity for many.
http://www.thestar.com/article/634381
From a mortgage professionals standpoint the combination of low interest rates, mixed with affordability and increased supply makes the present a great time for first time buyers to enter the market. The barriers of inflated housing values and expensive mortgages have all but been dissolved in the turbulent economy presenting a great opportunity for many.
Wednesday, May 13, 2009
Closing Costs
So you’ve have been saving for your first house or condo, and have a fairly strong grasp of what kind of downpayment you'd be looking at in your particular price range and are now ready to move forward.
One of the major aspects of purchasing a home that many people fail to take into consideration is their closing costs.
Closing costs are costs that are over and above the cost of the purchase incurred by the purchaser. While not all costs apply in every situation, and there are differences based on region and province, I am going to outline what you should be prepared for when deciding if you are able to purchase.
The rule of thumb is to have around 1.5% of the purchase price available on closing. I would always suggest having between 2% or even 2.5% as a comfortable buffer After all its better safe than sorry.
What this means is that if you are purchasing a house for $300,000 then aim to have between $6000 and $7500 that can be easily applied towards closing. This figure is in addition to the down payment on the property which is for arguments sake a minimum if $15,000 at 5% down.
Now is also a good time to mention that if necessary you can borrow your closing costs when in a bind. This is not something I would recommend though because it is an additional debt that lenders will use in determining your ability to carry a mortgage.
So we have established that you are going to need to have around 2% or so available on closing. Lets now take a look at some of these costs and what they are for. Again, this list covers things you may require and there may or may not be items on this lists that apply to your closing.
Provincial Sales Tax (PST)
On any purchase with less than a 20% downpayment in Canada, Mortgage Default Insurance is required. These premiums which are usually added to the amount of your mortgage – although you can pay them up front – require a PST charge to be paid on the premium at the time of closing. A Provincial Sales Tax rate of 8% will apply to your insurance premium. So if you had a premium of $2000 then you would be responsible for $160 at the time of closing.
Home Inspection Fee
So we have established that you are going to need to have around 2% or so available on closing. Lets now take a look at some of these costs and what they are for. Again, this list covers things you may require and there may or may not be items on this lists that apply to your closing.
Provincial Sales Tax (PST)
On any purchase with less than a 20% downpayment in Canada, Mortgage Default Insurance is required. These premiums which are usually added to the amount of your mortgage – although you can pay them up front – require a PST charge to be paid on the premium at the time of closing. A Provincial Sales Tax rate of 8% will apply to your insurance premium. So if you had a premium of $2000 then you would be responsible for $160 at the time of closing.
Home Inspection Fee
A home inspection carried out by a qualified and professional inspector is a cost that is of benefit you the purchaser, so you will be responsible for paying it. A thorough home inspection is something that should be done before purchasing the house and in my opinion is almost always worth the cost. A home inspection usually will cost somewhere in the range of $350 to $450 but larger homes or homes requiring more attention may be more costly.
Appraisal Fee
The lender will usually require that an appraisal is done on the property at your expense. This is done to determine the market value of the property as attained by the appraiser. An appraisal usually costs around $150 for a basic appraisal to $250 for a more thorough one, plus GST.
Property Insurance
All lenders will require that a certificate of insurance is available on the date of closing to ensure the property is adequately insured. This fee is dependent on the size of the property and what is being insured but the policy must usually be enough to cover at least the amount of the mortgage. The cost associated with this can vary between $200-$700.
Survey or Title Insurance Fee
The lender may require an updated survey of the land which can be costly. Most lenders will accept Title Insurance which offers protection from flaws in the title, and is only somewhere in the neighbourhood of $225.
The lender may require an updated survey of the land which can be costly. Most lenders will accept Title Insurance which offers protection from flaws in the title, and is only somewhere in the neighbourhood of $225.
Land Transfer Tax
Ontario requires a land transfer tax to be paid by the buyer on the transaction. The amount varies dependent on the purchase price of the land. Also, please note that if you are buying within Toronto, the City of Toronto has an additional Toronto Municipal Land Transfer Tax that is in addition to the Provincial tax. It is of note for the first time buyers that you qualify for a land transfer tax rebate up to a maximum of $2000.
Click the link for a tax calculator. http://www.torontorealestateboard.com/LTT_splash/ltt_calculator.htm
Click the link for a tax calculator. http://www.torontorealestateboard.com/LTT_splash/ltt_calculator.htm
Legal Fees and Disbursements
These are fees attributed to the lawyer or notary provided their services to you such as performing searches and processing the mortgage. You can expect at least $500 for these services plus applicable tax.
A note on GST – When you purchase a new construction home, GST is deemed payable. Make sure before you sign your agreement with the builder that you know who is going to pay it -you or the builder. Often the GST will be worked into the purchase price beforehand, but you should obtain confirmation of this. Also the Government offers a GST/HST New Home Rebate, so you will want to know who this will be payable to.
This list covers many of the costs associated with purchasing a home. Individual circumstances vary accordingly. One thing that I suggest to any new homeowner is to make sure they create a budget. I highly recommend you meet with your mortgage professional leading up to your home purchase to make sure you are planning appropriately.
This list covers many of the costs associated with purchasing a home. Individual circumstances vary accordingly. One thing that I suggest to any new homeowner is to make sure they create a budget. I highly recommend you meet with your mortgage professional leading up to your home purchase to make sure you are planning appropriately.
I will touch on budgeting and financial controls in a future post, so for now keep saving and happy house hunting.
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