A credit score of 700 gets you the best lending rate from the banks. But if you’ve missed some bill payments—or worse, filed for bankruptcy—you’ll have to work strategically to build your score back up. These tips will help you do it as quickly as possible.
KNOW YOUR LIMITS Try to keep your credit-card balance well below the limit. If your cards are almost maxed out, it suggests you’re overextended and more likely to make late or missed payments. The higher your balance, the more impact it has on your credit score.
CHECK YOUR SCORES—BOTH OF THEM Anyone contemplating a bank loan should check their credit score six months to a year in advance to ensure there are no surprises or errors. Just keep in mind that Canada has two major credit-reporting agencies: Equifax and TransUnion. This can lead to significant differences in scores, as these firms only synchronize their scores every two months.
STEER CLEAR OF RETAIL CARDS The next time you’re tempted to sign up for a Brick or Sears card, remember that each separate credit card application inquiry results in a ‘hard check’ that lowers your credit score by seven points. If your score is around 700 and you’re house hunting, signing up for a couple of retail cards could mean the difference between getting the best mortgage lending rate or a much higher ‘B-lender’ rate.
JUST PAY IT Paying off your debts quickly is one of the most effective ways to raise your score. If you’ve missed some bills and your score hovers around 600, it will likely take a year to boost it up 100 points to an optimal 700—assuming you’ve made good on all arrears. A score of 500, indicating bankruptcy, will take two to three years to repair.
HISTORY COUNTS If you have no track record of borrowing money and paying it back, chances are you’ve got a low credit score because lenders have nothing to gauge your credit worthiness against. So if you have a credit card but never use it, you can increase your score by making occasional purchases and paying them off. And think twice about closing an old account you don’t use anymore, as having a 10-year-old account actually helps you demonstrate a credit history.
TORONTO — Many consumers will soon find their debt loads heavier now that Canada’s central bank and the country’s biggest commercial lenders have raised their benchmark rates by one-quarter percentage point.
The country’s biggest banks raised their prime rates after the Bank of Canad hiked its overnight lending rate Wednesday by a quarter of a percentage point to 1.25 per cent.
It’s a challenge for Canadians still struggling to cope with the record amounts of consumer debt they amassed after the 2008 financial crisis because lenders use their prime rate as a benchmark for setting some other short-term rates including variable-rate mortgages and lines of credit. A hike is good news for savers as the prime rate also affects interest rates for savings accounts.
If you’re contemplating how to best take advantage of the increased rates or avoid falling into further debt, personal finance expert and Ryerson University business professor Laleh Samarbakhsh shared her advice.
Q: Now that the rate has gone up, what financial choices should I be making?
A: With the interest rate increase, debt becomes more and more expensive. Before you do anything, you have to understand what kind of debt you have to start with.
We have good types of debt and bad types. Good types can include any investment that is made to contribute to progressing your future. For example, a student loan is a good type of loan because you are investing in your ability to make more money. At the same time, debt you have from real estate or your primary residence is considered a good type of debt because you’re accumulating equity.
Focus first on what is considered bad debt like credit card debt, lines of credit or any kind of debt with higher interest rates and no future investment. Pay off the debt with the higher interest rate first, but also consider what debt you have that is tax deductible.
Q: If I have some money in a Tax-Free Savings Account, but also some debt, should I pull out that money in the account and pay off the debt?
A: A lot of times people might consider borrowing from a lower debt to cover a higher debt or borrowing from a TFSA to make a payment. My recommendation is if you have some tax deductibility because of debt you have, keep it. As much as paying off debt is important, if you won’t be able to pay off all your debt, you can use the deductibility you have from some to save on taxes and create an income to pay off the high-interest or bad debt.
We have had a successful year on the investing market, so if an individual makes contributions to their TFSA and has a portfolio with a higher return of 20 per cent or 25 per cent, it makes sense to keep that because the advantage is no tax being paid in the TFSA.
Q: What should I do if I have been looking at buying a home or if I just bought a home and am dealing with a mortgage?
A: For individuals who care about their credit score and are applying for a mortgage shortly, consider your credit limit. The types of debt that have a credit limit should be paid off first to release your capacity.
The typical concerns after a hike are usually individuals with mortgages because those are the biggest debts people carry. My advice would be for individuals with variable mortgage rates to consider locking down a fixed mortgage rate.
Q: What should I do if I have no debt, but want to take advantage of the hike?
A: Saving is making even more sense now because savings accounts will have fairly higher interest rates, so if you have no debt, my recommendation is to start with capping your Registered Education Savings Plan contributions first because that brings you tax savings.
Once the RESPs are capped, I would also invest in a Tax-Free Savings Account. The interest you make is tax-free, so I recommend maximizing your TFSA contribution.
After that, there are lots of forums and markets for investment and you can consult with your financial adviser about what is best to invest in at the time.
Q: Some economists think we might see further interest rate hikes later this year. Should I act on those rumours now?
A: It’s hard to predict what is going to happen, but we know the decade of low interest rates are over. It’s important to be more careful with spending and what kind of debt we are taking on and how and what the plan for repaying it is.
If you’re concerned, take action sooner rather than later and don’t let it bring mental pressure to your daily life.
This interview has been edited and condensed for clarity and length.
Source: MoneySense.ca – by Tara Deschamps, The Canadian Press
Being a landlord isn’t without its challenges, but covering one’s bases in the following ways is bound to yield quality tenants and rents.
Every real estate professional understands the importance of location, and so should every landlord. Steve Arruda, a sales agent with Century 21 Regal Realty, has been a landlord for 18 years and advises taking one’s time performing due diligence on prospective neighbourhoods.
“You want to know where you’re investing in and what the demographics are in that neighbourhood, and whether there are universities and families there,” Arruda told CREW. “I’ve rented in depressed neighbourhoods, and it’s challenging. The price may seem really tempting, but then you attract a lot of renters who may not have the best incomes, and they could become problematic because there are issues each month with payment. Location is one of the most important things. Make sure you know where you’re investing and what the demographics in that neighbourhood are.”
If investing in a house rather than a condominium, ensure big ticket items like furnaces, wiring, roofs and windows are updated “because those are the things that are quite costly to repair,” added Arruda. “It’s good to have those larger items updated, otherwise if they fail, it’s always at an inopportune time like winter, and you’ll be left with an angry tenant.”
Beyond material concerns, Arruda says landlords invariably become arbiters in disputes between tenants, unfairly or not, and that managing personalities is a delicate art.
“When you have a house with four units, like a multiplex, it’s hard to get everybody to get along, and you’re their first line of defence,” he said. “So, managing personalities, managing expectations and being able to handle that
stress level are crucial, because for an inexperienced landlord, the first call they get because of an issue with a tenant or an issue with a clogged toilet can make their already stressful life even more stressful. Always be prepared for anything, whether issues with tenants or the property itself.”
Additionally, tenants need to be thoroughly screened, and Arruda recommends landlords run their own credit reports and confirm bank statements are real. Even calling an employer to confirm the information provided by potential tenants isn’t beyond the realm of the reasonable. As well, call their previous landlords to find out what kind of people they are.
Over 18 years, Arruda also learned that units with dishwashers, washers and dryers are not only highly sought after, they attract good-quality renters.
Renu Ashdir, a sales agent with iPro Realty Ltd., says clients for whom she seeks rental accommodations flock to buildings with amenities like gyms, but warns too many amenities—especially swimming pools—result in higher condo fees.
“If you’re a person in your 20s and 30s, fitness amenities are the most used,” she said, adding older tenants prefer the security of a concierge. “People care about the kind of neighbours they have in a building and whether or not there’s transit nearby.”
Most importantly, says Arruda, “Look after your renters and know rental laws.”
Source: Canadian Real Estate Wealth – by Neil Sharma12 Jan 2018
It’s no secret that it’s expensive to live in Mississauga. Recent data released by the Toronto Real Estate Board (TREB) indicates that, as of December 2017, detached houses were running buyers approximately $910,216 (up from the high 800s in November and down from the $1 million mark they hit in winter 2017).
And while the market could cool or stabilize in 2018 due to the Ontario government’s Fair Housing Plan and the OSFI stress test (a test that some say could disqualify up to 10 per cent of prospective buyers from the market), the fact remains that Mississauga is a desirable city to call home—and therefore a costly one.
But while the city might contain housing that’s (unfortunately) too costly for many residents (hence the city’s affordable housing plan), it’s still attracting buyers.
Zolo, a tech-powered brokerage company, has some interesting stats about the Mississauga market and what neighbourhoods are the most highly sought after.
The stats point out the obvious—home prices are, generally speaking, getting higher and higher every year. According to Zolo, the asking price of homes for sale in Mississauga has increased 11.09 per cent since January last year. Also, the number of homes for sale has increased 75.28 per cent.
According to Zolo’s current data, the median asking price for a detached low-rise is $1.1 million. Other home types are also expensive, with sellers asking about $660,000 for a townhome and $429,000 for a condo
While those prices are indeed high, they’re not terribly surprising. Bordering Canada’s biggest and arguably most economically and culturally successful (sorry, Vancouver and Montreal) city, Mississauga has a lot to offer. Besides proximity to Toronto, Mississauga offers a low unemployment rate (nine per cent, according to Zolo) and a slew of ambitious development projects (the LRT and Inspiration Lakeview and Port Credit initiatives, to name a few).
As for now, the median listing price of a home (and this is all home types combined) sits at $585,000. The median selling price is only a little below asking at $570,000—so sellers are, on average, walking away with enviable profits.
In Mississauga, homes typically sell in less than a month (again, this is all home types combined).
And while homes are expensive, they’re not Toronto expensive.
“There was a time when you could buy a house in Mississauga for just under $100,000. That’s no longer the case,” Zolo writes. “Still, buyers know there are good deals in this western GTA city, with most properties selling for significantly less than surrounding areas. But to grab a piece of Mississauga’s real estate, you need to act fast.
So, which neighbourhoods are the best to invest in?
According to Zolo, the city’s top five neighbourhoods are Streetsville (#1), Applewood (#2), City Centre (#3), Port Credit (#4) and Lakeview (#5).
As for why, the neighbourhoods—beyond being well-known—are hot, Zolo’s data suggests the homes are selling quickly (25-36 per cent are selling within 10 days or less) and for more than asking price (11 to 17 per cent).
Another interesting fact is that, as of now (and this could change), Mississauga remains a city of homeowners.
According to Zolo’s data, 25 per cent of residents rent while 75 per cent own their homes. While rental rates are increasing, the data suggests that—at this stage, least—renting is still cheaper than owning. According to Zolo, renters pay an average of $1,062 a month while homeowners pay about $1,519.
So while it’s impossible to say where house prices will stand in 2018, it’s hard to dispute the fact that Mississauga is—and will remain—a popular (and likely expensive) city to call home.
Crazy high prices are no longer the only thing keeping prospective buyers in B.C. from jumping into the real estate market or trading up for bigger or better pads.
As of Monday, all borrowers will need to pass a stress test before they are allowed to take out mortgages from federally regulated institutions such as banks, regardless of how large their downpayment. People who fail the test won’t be able to buy, and estimates have put the ratio of those who will flunk as high as one-in-five.
What is a stress test?
It’s all about subjecting prospective home purchases to a “What if?” scenario. Specifically, what would be the shape of a given buyer’s finances if interest rates were to suddenly spike.
The concept is relatively new. Insured mortgages in Canada were already subjected to such tests, but they now apply to uninsured mortgages as well, explained Samantha Gale, the CEO of the Mortgage Brokers Association of B.C.
How high is the bar?
Potential buyers will be tested against the greater of either the Bank of Canada’s five-year benchmark rate (now 4.99 per cent) or the rate offered by a lender plus another two per cent.
“For example, if they were to get a mortgage with an interest rate of three per cent, they now need to qualify to show that they can afford five per cent,” Gale explained.
What if the bar is too high?
Those who fail the test will need to look for something cheaper on the market.
“If you were to buy a home worth $700,000 last year, this year you might only be able to afford a home worth $560,000. That’s quite a big discrepancy,” Gale said, adding that it is probably more important than ever to speak to a mortgage broker to see what the options are.
Why put buyers to a test?
The federal government is concerned about Canadians’ debt levels, Gale said. Because it has the tools to regulate banks, it is easy for Ottawa to impose mortgage rules rather than rules on other forms of borrowing, she said.
Gale said she did not believe a housing crash like that experienced in the U.S. a decade ago is in the cards. “Generally speaking, people want to stay in their home. They find a way to pay their bills, to pay their mortgage,” she said.
Do the new rules affect you?
Quite possibly. If you are buying and need to borrow from a bank, they will, and they will also apply to anyone looking to refinance.
While those seeking to renew mortgages under existing terms will not need to re-qualify and be stress tested, those shopping around for a better rate will. “One of the challenges might be that a certain lender might not offer a competitive rate at renewal time, knowing that buyers can’t really shop around,” Gale said.
If there’s one question that’s been on everyone’s minds these past few months (maybe years), it’s likely been this one:
How much do I have to make to comfortably afford to live in Mississauga?
At a time when home prices have never been higher (although they are falling month-over-month and the feeding frenzy that characterized the winter months appears to be over), it’s normal to question whether or not a modest salary is enough to guarantee comfortable homeownership.
The article points out something that most people are well (and scarily) aware of: across the GTA, one million dollars is the going rate for an average single-family detached home.
“Even amid the recent blip in sales activity, that’s a full 21 per cent (or $199,000) jump in prices when compared to the same time last year,” TheRedPin writes.
For a simpler look into the market, TheRedPin broke down the salary you need to earn in order to buy an average home in the GTA. Keep in mind that you do not necessarily need to make this kind of money on your own—if your combined household income (the income you and your spouse, partner or housemate bring in together) reaches a certain amount, you might be able to afford a home.
GTA-wide, here’s the salary you need based on home type:
In Mississauga specifically, the average home price sits at about $748,952 (keep in mind this sum represents all house types—detached, semi, town and condo—combined). To afford a home, your needed household income is a fairly substantial $132,450. This will cover your average monthly mortgage payments of about $2,832.
The figures regarding GTA-wide prices factor in average prices from January to July 2017 for the entire GTA (so they’re not Mississauga-specific, naturally)
That said, they show a pertinent trend in the 905 region that Mississauga homeowners and buyers should pay attention to.
“Six-figure household incomes were required for all home types, except for condo apartments, which edged just below that threshold. Detached homes obviously led the pack in terms of needed household income, as it was the only home type that demanded a collective salary over $200,000,” TheRedPin writes. “While condos may not be the most expensive property type, buyers needed to earn approximately 24 per cent (or $17,000) more this year than they did last year to afford a high-rise apartment. On the other hand, detached-home buyers needed around 21 per cent ($35,000) more compared to 2016.”
The good news is that the market is indeed cooling. In May, the first full month the Liberal’s Fair Housing Plan was in effect (the plan that involves implementing a 15 per cent tax on foreign buyers and speculators), home sales declined 20.3 per cent and supply of properties on the market shot up a considerable 48.9 per cent (which is good, considering how low inventory drove prices sky high in early 2017).
So did the salary you need to buy an average property drop from May to July?
“For everything from detached houses to townhomes, the answer was yes,” writes TheRedPin. “The only exception was condo apartments, which saw prices increase collectively over the past three months.”
Looking to increase your homes property value? Here are five of the best renovations you can do to your home to increase property value. These five renovations can sometimes have a return on investment 5-6x what they cost.
Flooring is one of the most important aspects of your house. You will see an immediate rise in property valuation with the installation of hardwood floors. Existing hardwood floors that you can refinish are ideal as they are less costly to restore and in higher demand than new flooring materials. For the bathroom, tile will always be in demand and retain value exceptionally well.
Kitchens often look tired and dated, in large part due to old fixtures. Replacing or updating cabinet hardware, light fixtures, countertops and faucets will result in an immediate increase in your home’s value. This small, but effective upgrade will also revitalize the entire home. Pot lights are in high demand in open concept style homes.
The bathroom is the second most important room in the home in terms of valuation. If you can add a three-piece bathroom to a home with only one full bathroom, you will see a dramatic rise in the market value of your home. While you should never compromise bedroom space for a bathroom, try sneaking one in dead space in the home. Scott managed to fit in a 3-piece bathroom under a staircase – the width of the room measured just 44 inches. As an added tip, use glass for the shower to make the bathroom feel more spacious.
Kitchens are the single most important room in the home relating to valuation. The kitchen can make a significant difference in the value of your home. As such, it is crucial that you invest in having a modern, fresh and desirable kitchen. Modern cabinetry, under cabinet lighting and new appliances will all significantly increase the value of your home on the market. To save on cost without compromising construction and desirability, look at options like Ikea cabinets as opposed to custom cabinetry.
#1 An Income Suite
No surprise, but the single biggest way to increase the value of your home is to build an income suite within the property. Whether this is converting your basement into a rental, or another floor in the home, an income property will increase your home’s worth. The main reason for this is that it covers a portion, or sometimes all of your mortgage payments, and results in your home being cash flow positive – which creates real wealth that can supplement your income.