Archive for the ‘Money and Credit’ Category

Getting Rid of Your Debts FAST!

Sunday, September 15th, 2013

A friend mentioned that we take a look at a TV program called “Till Debt Do Us Part.

Gail Vaz-Oxlade - Till Debt Do Us Part

Gail Vaz-Oxlade - Till Debt Do Us Part

The SLICE network program is hosted by financial expert Gail Vaz-Oxlade who uses tough love advice and techniques to help couples get out of debt.

In the programs I’ve watched,  couples are dealing with consumer debt issues ranging from $20,000 to a whopping $100,000.  This does NOT include their mortgages, if they have one.

Over the period of a month, Gail conducts a “reality” session where she shows a couple where their money is going and how much they actually owe.  It is no surprise to me that many of the couples have NO idea how much they owe. They are in total denial about their monthly spending.

In one episode, a couple was spending $8000 MORE each month than they were making.  In many of the episodes the couples are regularly spending thousands of dollars more than they are making … which is the reason they are in debt, and the reason they cried out to Gail for help.

Gail starts her tough love rescues by confiscating all debit and credit cards and by placing the couple on a cash diet.  And diet it is … variable spending (food, clothing, entertainment, transportation) is drastically cut.  Drastically cut! So far I’ve seen cuts of anywhere from a  50% to 90% DECREASE in the monthly variable spending budgets.

The totally amazing thing is, almost all the couples manage to cope with the cuts and some of them even have money left in their cash jars at the end of the month.

The second amazing thing is, the couples develop debt payback plans that get rid of their debts in three years or less.  One couple went from racking up a $60,000 debt to developing a plan to pay it off in less than two years.

The show is well worth watching.  You will be entertained and educated.  The SLICE network regularly runs old and new shows.

The “Till Debt Do Us Part” series has several specialty programs including a series of shows focusing on couples who have huge mortgages and are on the verge of losing their homes.  The most current set of programs focuses on couples about to have a baby, or more babies or couples who can’t afford their kids!

This season, Gail has a new series called “Princess” … if you guessed it is about spoiled women who are totally selfish, indulgent and who are overspending themselves and their families into near bankruptcy, you guessed right!

My advice is to watch a dozen or so of the shows.  If you don’t get the SLICE network you can watch many of the episodes online.

Here’s a link to Till Debt Do Us Part
In addition to the schedule and online episodes you will find some great articles and extra videos on budgeting and debt reduction.

Here’s Gail’s Website >> Gail Vaz-Oxlade
Gail has loads of great advice on her personal website, articles, worksheets,  and links to her books.

http://www.gailvazoxlade.com/

How Your Credit Score Is Calculated

Thursday, March 21st, 2013

Your Credit ScoreYour credit score is a number which potential creditors use to determine if and how you will pay your debt. Your credit score is calculated using your credit history. When you apply for a mortgage, lenders use your credit history and score to make their decisions.

Scores range from 300 to 950.  If you get a score of 750 or above you’ll qualify for the best loan rates and terms. If you get 620 or lower, you’ll pay higher rates IF you qualify. The absolute minimum credit score for insured mortgages is 620.

In determining a credit score, a number of factors in your bill-paying history are considered:

Payment history – approximately 35%

Do you pay your bills? Tardy or missed payments, collections, and especially bankruptcies all affect your payment history. If you have not paid bills in the past, but are paying on time now, this will be factored into the equation.

Credit utilization – approximately 30%

Credit utilization involves the amount of debt you currently have in comparison to the credit you have available. The higher your credit utilization, the lower your credit score will be. Keep your credit card balances at less than 30% of your credit limit.  For example, if you have a total limit of $20,000 on your credit cards, you need to keep the balances under $6000.

Credit history – approximately 15%

The longer your credit history the better.  Don’t close credit cards or bank accounts that you’ve had for a long time.

Credit History Inquiries – approximately 10%

Every time you apply for for credit, the inquiry is added to your credit report. Too many applications put up a warning flag to lenders.  For example, if you are shopping for a mortgage with a number of banks and finance companies each one will request your credit history.  *One of the benefits of working with a Mortgage Broker is the fact that we only ask for your credit history ONCE!

Only those inquiries made in the past year are part of the credit score calculation.

Mix of credit – approximately 10%

Though this isn’t a significant part of the equation, having a mix of different types of credit is a good thing.  For example credit cards, personal bank loans, and a car loan show a range of credit situations that include installment and revolving credit.

Make sure you have at least one credit card as soon as you are eligible, but don’t take out other loans just to improve your credit score!

If you are applying for a mortgage with us, we will request your Credit Score.  We can discuss the results with you and let you know if you need to improve your score and how to do it.

Call Justin at  604-736-1855

What is a Readvanceable Mortgage?

Wednesday, December 19th, 2012

A readvanceable mortgage is a feature of some mortgages, including HELOCs (home equity lines of credit).  They are made up of two parts:

1.  The “mortgage” portion
2.  The Line Of Credit (LOC) portion

Each time you make a mortgage payment, your lender increases your LOC by the amount of principal you pay off .
For example, if your monthly mortgage payment is $600 ($500 interest + $100 principal) your LOC will increase by $100 each month.
With a readvanceable mortgage, as soon as you make a payment you can “borrow back” whatever principal you’ve paid. The more payments you make, the higher your line of credit.
Readvanceable mortgages are an option for those needing a growing source of funds for:
o    Investments
o    Education
o    Emergencies
o    Job loss
o    Business investments
o    Rental property investment
o    Home improvements
o    Alternative to high rate loans
o    Debt consolidation
o    Emergency backup fund

New mortgage underwriting guidelines will require federally regulated lenders to limit all new HELOCs to a 65% loan-to-value ratio … down from the current rate of 80 percent.

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If you think a HELOC would be a smart precautionary move, please give Justin a call at  604-736-1855.

Renovation Revival

Wednesday, September 12th, 2012

The other day the Vancouver Sun ran an article saying that the recent Vancouver Real Estate slowdown has sparked a revival in home renovations.

Canada Mortgage and Housing Corporation’s 3rd Quarter Housing Market Outlook reports that …

In B.C., spending on renovations in 2011 was $7.6 billion. Spending is expected to remain stable in 2012 and grow to $7.8 billion next year.

The Sun reports
With year-to-date resales down 18 per cent in Vancouver compared to a year ago, it’s no longer the smoking hot sellers’ market it was a year ago. In fact, the Real Estate Board of Greater Vancouver reported that July sales were the lowest since 2000, with sales 31.2 per cent below the 10-year July sales average.
Vancouver Housing Market Slowdown | Averbach Mortgages
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Some of the slowdown in the market place is being blamed on the New mortgage rules introduced by the federal government in July 2012.  We’re not convinced that this is responsible for the drastic drop in sales … but we do know that many of our clients are making their renovation plans and refinancing in order to take advantage of what are still amazingly low mortgage rates.
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If you are considering a renovation and would like some advise on your options … please give Justin a call at  604-736-1855.
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Good News – Bad News From The Bank of Canada

Wednesday, April 18th, 2012

Once again, Bank of Canada’s Mark Carney and Finance Minister Jim Flaherty were warning Canadians about their ever increasing debt burdens.

As of today, the Bank of Canada rate remains at one percent.  However there are signs that the economy is improving, which is the good news … the bad news is that when it improves, the Bank of Canada rate WILL go up, and mortgage rates will also increase.

“As expected, governor Mark Carney and the Bank of Canada again maintained interest rates at a stimulus-level one per cent Tuesday. But his upbeat assessment of the economy sent the clearest and most hawkish signal yet that rates will be moving higher – probably sooner, rather than later.”

Regina Leader Post

Jim Flaherty gave Canadians this stern warning:

“Interest rates are going to go up. There’s only one way they’re going to go. Get realistic about it and say, ‘will I be able to afford my mortgage at a higher interest rate or not?’ Do the arithmetic and figure it out”

There IS cause for concern:

In 2001 less than 1% of consumer spending was financed through home equity  … today 3% of everything Canadians spend is money that is borrowed against our homes.

Equity lines of credit have increased 800%,  from $8 billion in 2001 to a staggering $64 Billion in 2012.

What can YOU do about it? 

Averbach's Onlne CalgulatorUse our online calculators to figure out what your mortgage payments will be when rates increase.  Can you afford the increase in monthly fees?

Better yet … do the calculations above and increase your payment to the increased amount today. You will not only rest assured that you can make the extra payment, but you will be paying off your mortgage faster. When the time comes to renew (presumably at higher rates) you will already have paid down a chunk on the principal portion of your mortgage.  ** Call your mortgage lender to see if you are able to make increased monthly payments against your mortgage. Many mortgage loans allow extra monthly or yearly payments.

Glimmer of Hope for Debt Beleaguered Canadians

Wednesday, January 11th, 2012

Over the past two years almost every time Finance Minister, Jim Flaherty and Bank of Canada President,  Mark Carney have issued a press release or spoken on camera they have been warning Canadians about their growing levels of  consumer debt.

There is finally some good news. Apparently some Canadians have started listening.

According to Equifax the average credit card debt fell in 2011 by 3.4 per cent.

It’s important to note that this drop is in credit card debt. Other types of consumer debt are still at record high levels.

Nadim Abdo, vice-president of consulting and analytical services for Equifax Canada cautions …

 ”Although this appears to be a good news story for Canada, there remains some concerns about the high level of debt Canadians carry on average. The main concern is how the Canadian economy may react to stressed global markets while our GDP is projected to grow at a very marginal rate in 2012. Canadians are at record-high levels of indebtedness with little room to maneuver. If there is to be another financial crisis, we can expect losses from serious delinquencies and bankruptcies.”

Equifax.ca  provides consumer and commercial information solutions including credit reports.
Read the Equifax news release here:
Vast Improvement in Consumer Debt According to Equifax Canada-but Sustainability is a Concern

Find out more more about the report and what other experts are saying:

CTV News:  Canadians handling credit card debt better: Equifax

Globe and Mail:   Debt still rising, but Canadians better at paying credit cards: Equifax