Rob McLister, CMT

That is Taco Bell’s slogan. It’s meant to remind us that fast food doesn’t end with hamburgers. Tacos are pretty tasty in their own right.
In the lending world, the closest equivalent to “the bun” is the 5-year fixed mortgage. Like hamburgers are to fast food, the 5-year fixed is to mortgages. It’s been the most popular term in Canada for years.

Yet, despite its prevalence, qualified borrowers owe it to themselves to think outside the 5-year fixed. A little extra risk can sometimes yield a lot more reward.
Fixed 5-year mortgages are especially popular in uncertain/rising rate markets (like today’s). People who can’t afford rate risk, and those who cannot qualify for shorter terms, often choose a 5-year fixed by default.

Even individuals with rock-solid financial resources frequently gravitate to 5-year terms. Much of the time that’s because they don’t want to overthink the safety of a longer-term mortgage. In other cases, it’s because no one has ever shown them how much 5-year fixed terms really cost over the long run.
No matter how popular 5-year terms are, however, mortgages are not a one-size-fits-all proposition. For those who can stomach the chance of higher rates at renewal, various compelling alternatives exist. One happens to be the 3-year fixed.

Lenders like Merix Financial, HSBC, and others still have three-year rates in the 3.35% range or better. That’s 59+ basis points below current 5-year pricing.
At those rates, (from a purely mathematical and hypothetical perspective) the 3-year fixed performs better in our internal simulations than any other term, be it a variable or a 1, 2, 4, 5, 7 or 10-year fixed.1 Read the rest of this entry »

Seeking a sure-fire investment return? Look no further than your mortgage.

Paying it down as quickly as you can will, in most cases, result in a stellar return on your investment.

Prepayment options are worth exploring because paying down even a small amount of principal
(the true cost of the mortgage loan minus the interest) has huge benefits over the life of a mortgage.

Mortgages are front-loaded when it comes to interest meaning, in the early years,
most of the money you pay goes toward paying the interest on the amount you borrow as opposed to the principal.

For instance, if you borrow 95% of your home’s value, you’re paying $3 of interest for every $1 of principal you pay.
So, by paying an extra $1 of principal, that’s $3 less you’ll have to pay in interest, at least in the early stages of a mortgage.

Range of Prepayment Options

There are a variety of ways to make prepayments work to pay down your mortgage faster.
We can discuss your specific needs, but following are some general rules.

Most lenders allow you to make a lump-sum payment of anywhere between 10% and 25% of the value of your mortgage per year.

The lump-sum payment is based on either the original amount you borrowed or the amount currently outstanding.

Since mortgages decrease with each payment, it’s best to negotiate a lump-sum payment option based on the original amount you borrow.

That way, if you come into an inheritance, a big bonus or save a large sum of money, you can pay down the largest amount possible. Read the rest of this entry »

When you fill out a credit application there are a number of important items that the bank or mortgage company is looking for. I have written this article to hopefully help you to see your application from the mortgage broker and the lenders point of view.

The mortgage broker is looking to see what the risks are in doing business with you. It is up to them to recommend your application to a lender. If they recommend bad applications the lender will eventually not want to take their applications

Here is what the mortgage broker and lender need from you in order to make a good qualified decision. The sooner you can supply this information the easier it will be to get your application approved.

Application Process

Personal Information

It is very important to use your correct name and employment information, plus birth date, licence. This way when a credit bureau is done on you they are sure they have the right person . Without this info a different Jane Smith may pop up with problems on their credit.

There are several sections on a credit application. They are as follows.

Inquiries Section

This section of a credit bureau tells the mortgage company how many people have made inquiries on your account. If there are too many inquiries they want to know why. This can affect your rate or even whether they want to deal with you. Don’t shop around. Go to a mortgage broker and let them do your credit bureau once and shop the full market for you. In Canada they have about 45 sources of regular mortgage money and numerous sources of private funds.

Judgement Section Read the rest of this entry »

If you are thinking you want to buy a home the first step to is to make sure you have good credit.

This is many people’s reason for starting to pay attention to their credit situation, either that or a car purchase.

Without good credit you will have difficulty obtaining a mortgage or other loan & will only obtain it with high interest rates and expensive terms.
You will be put in the position of paying arranging fees, yearly fees plus the high interest rate which will also cause you to have much higher payments than necessary.
Building good credit can usually be done in one to two years.

The first step you need to take is to get in touch with your local credit bureau. In both Canada and the U.S. usually this is Equifax. There are others as well, just check for your local credit bureau at google.com. Most of them give you one free credit report per year. Get a copy.

Find out your current Beacon Score. The Beacon Score is a number and it is basement on your paymednt history.
If you pay all of your bills in 30 days or less you will have a very high Beacon score. If you have bad debt, or written off debt it will be very low and the lower it goes the less inclined lenders will be to lend to you.

Any current credit that you may have, credit cards, bank loans, student loans you want to start making your payments regulary, meaning every 30 days. To learn how to get out of debt go to Financial Fitness and download the free guide. you will need to follow this for the next year or two. It will help you to alleviate debt as well as build your credit rating.

Ignore the banks suggestions on how to pay your credit cards or debt. If you only ever pay off the interest you will always be in debt and probably will never have great credit. Always paying the minimum will never put you ahead of the game. You need to organize yourself and take specific steps on a monthly basis to improve your financial situation. Our two page guide on Financial Fitness can help you do this. It is Free and it is simple. There is no need to spend a lot of money online or at the book store to get started just click on the link to get our Free download.