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Questions to Ask Before Getting a Mortgage

November 7th, 2011



Getting a mortgage is probably one of the most important financial decisions that you will make in your life. First, a mortgage involves some legality. Second, and more importantly, it involves a lot of money. Therefore, it is just rational for anyone planning to get a mortgage to exercise prudence especially in the earlier stage of the game.

It is indeed a worthy effort to shop around for products that would offer the best mortgage rate – Toronto or elsewhere. After all, since you will be “stuck” with this financial responsibility for long, might as well get the best one that you can obtain.

Before getting a mortgage, make sure that you have asked yourself the following questions. More importantly, make sure that you have answers to the questions below:

1. How much amortization can you comfortably pay?
Knowing how much money you are comfortable giving out on a monthly/yearly basis will help you in choosing your mortgage. Remember, this amount should not be too heavy for you – this should not take on a very large chunk of your budget as you will be paying for this loan for years.

If on the first year you’re already crippled with your payables, then you probably have not shopped for the best mortgage product available for you.

2. How much money can you set aside for down payment?
Usually, a mortgage would require a down payment. Therefore, this should be one of your considerations in choosing a product. How much money do you have on hand that you can spare as down payment?

The usual case is, the bigger your down payment, the lesser would be your interest rate. So when you can, make a bigger down payment.

3. Do you want a long-term or a short-term loan?
Short-term loans impose lesser interest rates but require larger amortizations. On the other hand, long-term loans impose larger interest rates but require smaller amortizations. Which of the two scenarios are you more comfortable with?

Experts recommend that in any mortgage or refinancing – Vaughan or elsewhere – a short-term loan is always better. So if you can afford to buy a house and pay if off right away, do it. Don’t prolong as you have a price to pay for that, literally.

4. Do you expect your income to increase over the next few years?
Mortgages can either be fixed-rate or adjustable. The former is one where the interest rate remains constant throughout the term. The latter, on the other hand, means that the rate changes over the years, as determined by a few economic indicators. In addition, the term of an adjustable rate mortgage is usually shorter compared to fixed-rate.

If you expect your income to increase within the next five years or so, then getting an adjustable rate mortgage is more preferable. Your amortization may increase but since you have an increasing salary to pay for that, then you will always do fine. Once again, a short-term loan is almost always better than a long-term loan.

If you were able to satisfactorily answer the questions posed above, then you are ready to shop for mortgage products. Most importantly, if you have answered the questions above with conviction and determination, then you are ready to get a mortgage.

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The Difference Between Home Loan Modification and Mortgage Refinancing

October 12th, 2011



During these difficult economic times, more people are losing their jobs and having a tough time making their mortgage payments. This has resulted in millions of foreclosures and millions of people on the verge of losing their homes. Fortunately, there are opportunities out there that can help homeowners stay in their homes. Two options are Home Loan Modification and Mortgage Refinancing. When considering these two options, it is important to understand their differences.

Home Loan Modification

Home Loan Modification is when a lender and mortgage holder change the terms of a mortgage by changing the amount of the monthly mortgage payments. The goal is to make payments more affordable for the homeowner. If a lender is owed money, they will often prefer modifying a loan instead of advancing with a foreclosure as there are many fees associated with the process. Giving a mortgage holder the chance to bring the mortgage up to date and provide better terms is much easier and less expensive. Other benefits of a loan modification include: it does not depend on a person’s credit score, it usually results in a lower interest rate, and it allows lenders to get rid of a bad asset and sell the new loan on the open market. For many homeowners, refinancing is not an alternative. For homeowners who cannot make monthly payments or have recently lost their job, a loan modification may be a good solution. A homeowner will have to provide proof to show that their current loan has put them in substantial financial difficulty.

Mortgage Refinancing

Mortgage Refinancing means the terms of an existing mortgage are withdrawn and a new mortgage is put in place that offers better rates and terms and conditions. You are actually paying off your existing mortgage with a new mortgage. The conditions and terms are negotiated by the lender and homeowner and they both agree to the new terms. The result is usually better terms and payments. The major difference from loan modification is that mortgage refinancing will involve fees and penalties, and home loan modification does not have these fees. Mortgage refinancing involves paying such fees as title fees, escrow fees, lender fees, appraiser fees, and taxes. Most home owners refinance in order to lower their interest rate, to extend the life of their loan, or to pay off other debt. Lenders normally require that homeowners who are looking to refinance have a good credit score, equity in their home, and proof of job security.

Deciding which option is best often depends on the homeowner’s personal situation. There are advantages and disadvantages with each type of home loan. If you have built up a lot of equity in your home, you should consider refinancing. If you have a poor credit rating, you may want to consider a loan modification. With the increase of mortgage defaults, homeowners should know there are options out there to save their home from foreclosure. It is just a matter of researching and choosing the best option that meets their particular needs.

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Credit Card FAQs – What If I’m Turned Down?

September 3rd, 2011



So, you’ve filled out the application and are waiting for your brand new, shiny credit card to arrive in the mail. But when the letter finally arrives, you’re not greeted with a new credit card, but a denial letter instead. What to do? Read the fact below and determine your next steps.

1. What are some of the reasons that I can get turned down for a credit card?

There are many reasons that people are turned down when they apply for credit cards. Every credit card company has its own rules and guidelines – and in many cases, those guidelines vary from credit card to credit card issued by the same company. Some of the reasons that you might get turned down for a credit card include:

a) Insufficient income. If your income is $25,000 a year, be sure that you apply for a credit card that will accept someone with a $25,000 annual income.

b) You’ve been recently rejected by too many other companies

c) Your credit history is poor. It will show if you’ve missed payments or made them late, or if you’ve defaulted on a loan in the past. Some lenders will overlook bad credit and offer you a credit card with a higher interest rate, or a secured credit card.

d) You don’t have a credit history. If you have no credit history, many lenders won’t consider giving you a credit card because they have no way of judging whether or not you’ll pay them back.

e) Your credit report may have mistakes in it.

f) Your available credit may already be higher than the credit card issuer is comfortable with. Remember, the more credit card debt or availability that you’re carrying, the thinner your income must be spread to pay them all off.

2. What can I do if I get rejected by a credit card company?

Anytime you’re rejected for credit, the credit card company is required by law to tell you the reasons on which they based their decision. They must also tell you which credit reporting agency they got their information from. If you’ve been rejected, you can write to, call or email the credit reporting agency that they contacted and request a copy of your credit card report for free. Look it over carefully to make sure there are no errors.

3. After I checked my credit history because I was turned down by a credit card company, I found that there were mistakes on it. What can I do to fix them?

Immediately write to the credit reporting agency from which you got your report and ask them to correct the mistakes. The more proof you provide to back up your claim of error, the better your chances of having the error completely expunged, but the credit reporting agency is required to at least note that you have asked for the report to be corrected.

4. If one credit card company turned me down, can I apply to another?

You can not only apply to another credit card company, you can apply for a different credit card product with the same company. Every credit card has different guidelines for acceptance. Just be sure to shop around and only apply for the one or two cards that you feel you have the best chance of being accepted for. Too many rejections in your credit history can hurt you when you’re looking for a loan for something important.

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Mortgage Points

April 16th, 2011



If you have ever gone looking for quotes on a mortgage in order to find out just what a mortgage might cost you, you have probably had the term points thrown at you. So what are points?

Each point is a fee and it is based on one percent of the total amount of the loan. There are a couple of different points, there are discount points and then there are origination points and lenders do not all charge the same amount of these points. Some lenders will charge you one point while others may charge you three.

Discount points are the points that are like prepaid interest on your loan that you are getting for your new home. Every point that you purchase will lower your interest rate to some extent. Most borrowers will be able to choose just how many points they want to purchase. There is a limit of course, usually around four points. The number of points that you choose to buy will depend on how much you want to lower you interest rate. One especially good point of these points is the fact that they are tax deductible.

Origination fees are different. These fees are used in order to pay for the costs of giving you the loan in the first place. You don’t get anything out of these points so most borrowers don’t like them as they are not even tax deductible. If you can try to get a loan that does not require you to get these types of points. Discount points on the other hand can be useful to you.

The choices that you make concerning the points to get will be affected by a couple of different things. For example, how long are you going to be living in this house? And how much of a down payment are you going to be putting down? If you are thinking of settling into this house for the long haul then perhaps discount points are a good way for you to go. Lowering your interest rate for years to come is always a good thing. Before making your decision take stock of your situation and see what suits your needs best.

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