Mortgages Made Easy Blog

When it comes to mortgages, your credit score can be the difference between getting a good mortgage rate and qualifying for a mortgage at all.

As a mortgage and finance professional, it’s my job to guide you through some simple, yet important steps to help you get your credit score right where it needs it to be so you can realize your mortgage goals and dreams.

Five key factors

Credit scores can range for a low of 300 to a high of 850. The higher the numbers, the more loan-worthy you become to lenders.

Up to 1 in 8 people applying for a mortgage may not qualify because their credit score is between 500 and 600. Here’s a simple chart that let’s you know how mortgage underwriters assess applicants:

Scores are determined using 5 factors...

• Payment History accounts for 35% of your score. Late payments have a negative effect and missing a big payment hurts your score more than missing a small payment.
• Outstanding credit balances also account for 35% of your score.  Keeping your credit card balance below 70% of your available limit will make a positive difference in your credit score.
• Your credit history accounts for 15% of your score.  An experienced borrower often scores better than a brand new borrower.
• The type of credit you owe accounts for 10% of your score.  A mix of credit cards, auto loans and mortgages is better for your score than a high concentration of credit card debt.
• The number of inquiries made about your credit history accounts for 10% of your score. Each formal inquiry can cost 2-50 points on your score, so if you apply for a lot of credit, it can negatively impact your score. 

Here’s a tip

I’m an expert at helping my clients employ debt strategies that can help improve their credit score. Here’s just one example:

When a credit report is run, it’s simply that day’s snapshot of your credit profile.  If you get approved for a mortgage, you need to be sure to stay very responsible with your spending. If you were to decide to go on a major shopping spree after you qualified for your mortgage and as a result, increased your credit burden, you could change your debt ratios and find you’re no longer qualified for that mortgage. 

If you’d like more information or help on maximizing your credit score, just drop me a line or email me.

Looking for a mortgage? Wondering if you qualify? Interested in refinancing? Our secure and completely confidential “no obligation” quick-form can give you answers, fast. Find it here.

When it comes to mortgages, you have two options: fixed rate and variable rate. Fixed rate means just what it says; your mortgage is at a fixed rate for the entire length of the mortgage. A variable rate mortgage is linked to the prime lending rate which fluctuates, and can change with market conditions.

Many people still choose fixed rate mortgages, but during this unprecedented run of historically low interest rates, a fixed rate can actually be a costly decision.

 We understand our business and we know that every client wants the lowest rate possible, but like I always say, rate – though important, is really only one component of the best mortgage possible. I’ll prove it through a series of questions every borrower needs to have clear answers to...

How does your lender calculate penalties?

No one wants to be in this situation, but life happens, and that includes emergencies like separation, divorce, sickness, death or being forced to sell as part of an international move for work. In these situations, big banks use a formula called Interest Rate Differential, which never favours the borrower, so in an emergency, you’ll pay through the nose when your mortgage is with a major bank.

By comparison, Monoline lenders like ICICI Bank, Street Capital, First National, MCAP and CMLS are the best lenders to be with.  They don’t use the same calculations as the big banks and as a result, in an emergency their penalties are dramatically lower by comparison. 

Where is your lender at when it comes to pre-payment or your mortgage?

Prepayment of your mortgage is a great thing if you can do it. It reduces the length of time it takes to pay down your mortgage and can eliminate thousands of dollars in interest as well. There are many ways to prepay a mortgage and I can share them with you when we connect. Again, you really need to know where mortgage lenders stand on prepayment to ensure you get the best terms for your goals and situation. But if you find yourself with extra money, with the right mortgage you can choose to repay up to 10%, 15% or even 20% of the original principal amount of your mortgage at any time during each year of the mortgage term. Again, this can have a massive impact on mortgage and interest payments. You just need to understand where your lender stands.

Is your mortgage portable if you decide to buy and sell in the next five years?

If your mortgage isn’t portable, you will have to start the mortgage process all over again, and you could incur additional costs including a penalty to break the mortgage early as well as higher rates. Portability is a great thing if you think you might sell and buy again within this 5-year window. Also, does your lender offer bridge financing? If there is no bridge financing in place and it ends up being needed, you may have to break your mortgage, pay a penalty and then start all over again, again with the possibility of facing higher mortgage rates. This can be a costly proposition.

Does your lender register a “collateral mortgage” against your property?

A collateral mortgage is where a lender registers a higher amount than the mortgage you are actually borrowing.  The lender advises clients that by doing this, they will save legal fees if they ever have to re-finance in the future.  If this is the case with your lender, then you need to know that for these types of mortgages to be transferrable in the future, you will be required to pay legal fees for that to happen.  Banks who register this type of charge tend to offer clients higher rates on renewal because most clients don’t have the money to pay legal fees to move their mortgage for a better rate.  Collateral mortgages are something you really should know about, regardless of your rate.

These are just a few of the really important questions a real mortgage pro makes a point of answering. The bottom line is that sometimes the best mortgage goes way beyond just getting the best rate, and this is exactly what I do best.

I specialize in mortgage terms and conditions that a lot of people ignore, and as a result, I save my clients a lot of money over the life of a mortgage. I’d like to do that for you as well, so I hope you drop me a line or call me.

Looking for a mortgage? Wondering if you qualify? Interested in refinancing? Our secure and completely confidential “no obligation” quick-form can give you answers, fast. Find it here.