29 Jan

Breaking Up Is Hard To Do! Do You Need a Spousal Buyout Mortgage?

General

Posted by: Jenni MacDonald

When Breaking Up is Inevitable Consider a Spousal Buyout

Life can hit us hard and it’s hard to move forward.  But, we pull up our boots and take one step at a time.  When couples decide that a divorce (or Breaking up) is inevitable, if a house is involved, the question of whether the house has to be sold arises.

Spousal Buyout

You can apply for a mortgage products called a Spousal Buyout.  This product allows a spouse, who wants to keep a matrimonial home, get a mortgage up to 95% of the value of the property in order to payout an amount owing to the other.  In the past, if both names were already on the deed and mortgage, the maximum one party could pull from the house was 80% of the value as a refinance.

Requirements for a Spousal Buyout Product

The rules for the 95% mortgage product are quite stringent. You will need:

  1. An appraisal.  An appraisal report will already have been obtained in order to determine the Equalization of Assets during a divorce.  Unfortunately, in most cases, the same appraisal is not acceptable to a lender unless it was originally ordered by a third party (such as a Mortgage Broker or lender or lawyer) for the dual purpose of Equalization of Assets and Financing.  Also, an Appraisal Report is acceptable for 90 days (less with some lenders).  If the appraisal was ordered early in the divorce proceedings, another one may be needed by the time the details are settled.  If the value changes over that time, the negotiations between parties usually start again to determine payout amounts.
  2. A signed Separation Agreement written by or signed by a lawyer.
  3. An Agreement of Purchase and Sale between the parties.
  4. Proof of payout amounts.  The proceeds can payout the ex-spouse.  With this product, CMHC will not allow the funds to payout other debts.  Genworth and Canada Guaranty are more flexible in their requirements.  Keeping these facts in mind is important when the negotiations between parties take place.

Including a Mortgage Broker early in the Separation process can help ease you through this horrific experience.

24 Jan

Credit Scores – How do you score?

General

Posted by: Jenni MacDonald

All the recent mortgage changes translates into needing a strong credit score more than ever.  Most Lenders rely on the “Equifax” score.  Equifax calculates a daily “risk” score out of a maximum score of 900.  Using Creditkarma.ca, will access a TransUnion score which is not used by many lenders but is a good way to monitor activity.  Establishing a score of 700 or higher is considered an excellent score and opens the doors to the better interest rates and bank approvals.

PAYMENT HISTORY

This factor determines about a third of your score.  Even a one day late payment can negatively influence your score and shows on your bureau for 6 years.  It’s more important to pay the minimum payment on time than to pay a larger amount late.  Setting up all of your accounts on pre-authorized payments for the minimum amount will ensure that you will never have a late payment.

The MOST important advice I can give is to avoid having anything sent to COLLECTIONS.  No lender will provide a mortgage to someone with an unpaid collection.  Each one decreases your score by about 80 points.  If you are having a dispute with your cell phone or internet provider, pay the bill and then argue about it later!!!

AMOUNT OF CREDIT USED

Amount of usage is another large factor in determining your credit score.  The more of the limit you have used, the lower your score will be.  Keeping your balance under 30% of the total available amount will help your score increase.  If you are in a hurry to improve your score, consider calling your credit companies for a limit increase.  The secret to this trick: DO NOT use the increase !!

OTHER FACTORS

Your Beacon score is also calculated by AGE OF YOUR ACCOUNTS, TYPE OF CREDIT you have and  NUMBER OF ENQUIRIES on your bureau in the last 12 months.  Lenders want to see at least 2 different kinds of credit established for at least 2 years for a total limit of at least $2,500.  A combination of credit cards, loans and lines of credit are desirable.  If you make numerous calls looking for credit from different companies you will lower your score and is a red flag to lenders.  Keep in mind, if you close an account, your score could drop by almost 100 points!!

To have a closer look at your credit situation, make an appointment or apply online at jmacdonald.ca .  Start the year off strong!