You always here the term, but people always ask me what it means. “Accelerated Weekly or Bi-Weekly Payments”.

So here goes……..

Mortgage payments are calculated on (12) Monthly or (24) Bi-Monthly payments per year.

But when you pay Bi-Weekly you make 2 extra payments (26) per year. So you pay the same yearly amount but roughly 8 % less per payment.

So Bi-weekly accelerated means you pay the Bi-monthly amount 26 times per year or roughly 8% extra per year and in this way you Accelerate your payments.

So for example:

$500,000 Mortgage Payment = $1058.19 / bi-month (24) or $25407.12 / year

$500,000 Mortgage Payment = $977.17 / bi weekly (26) or $25407.12 / year

$500000 Mortgage Payment = $1058.19 / Accelerated Bi Weekly (26) or $25407.12 / year

I Hope this helps

As always, feel free to reach out anytime.

Tom Parent

Parenting people to their dreams!

When conventional lenders (such as banks or credit unions) deny mortgage financing, it can be easy to feel discouraged. However, it is important to remember that there is always an alternative!

If you’re seeking a mortgage, but your credit score is damaged in some way and big institutions won’t lend you the money, you’ll find yourself in what’s commonly referred to in the industry as the “Alternative-A” or “B” lending space.

Much like the A Lender space (big banks, credit unions, etc.), there are various companies which operate in the B lending space. Alternative lenders cater to individuals who lack a strong credit history, or a guaranteed income (recent immigrants, or the self employed, for instance). As a result, these lenders generally have lower entry qualifications, which are offset by higher interest rates.

Why is alternative lending necessary? 

• CRA arrears
• Income issues such as non-traditional income as with self-employed borrowers
• Credit issues such as low credit score, credit arrears, current mortgage or even bankruptcies
• Unexpected liens on title
• Foreclosure situations
• Unique financing needs/opportunities

Beyond B-lenders are another alternative, which are known as Private or Unregulated lenders. These could just be individuals with money who are looking to invest. They are not regulated by any agency, and their rates and fees could be quite high.

These lenders are not required to stress test mortgage applicants, but many will abide by lower qualification rates. As a result, getting approved for a loan through an alternative or uninsured lender can be much easier than going through a traditional bank or credit union. Again, it is vital to pay close attention to the deal an unregulated lender offers. Lower qualification rates tend to come with baggage in the form of high interest rates or penalties.

Considerations for Alternative Mortgages Due to the “B” Lender space, it is important to take a good look at the conditions for these mortgage products to ensure that you won’t get trapped with rates you can’t afford.

Before considering an alternative mortgage, there are a few things you should ask yourself:

1. What issue is keeping me from qualifying for a mortgage today?
2. How long will it take me to correct this issue and qualify for a mortgage?
3. How much do I currently have available as a down payment?
4. Am I willing to wait until I can qualify for a regular mortgage, or do I want/need to get into a certain home today?

If you are someone who is ready to go ahead with an alternative mortgage due to a bruised credit score, or you don’t want to wait until you’re able to qualify with a traditional lender, these are five questions you should ask when reviewing any alternative mortgage product:

1. How high is the interest rate?
2. What is the penalty for missed mortgage payments? How are they calculated? What is the cost to get out of the mortgage altogether?
3. Is there a prepayment privilege? For example, are you able to avoid penalties if you give the lender a higher mortgage payment once a month?
4. What is the cost of each monthly mortgage payment?
5. What does it look like when it comes to renewal?

When it comes to the alternative lending space, things can get a bit murky. If you are struggling to obtain an A-Lender mortgage, I would be happy to discuss your options with you and help you source an alternative.

You might be surprised to learn that you don’t need to be one of the Ultra rich or make six figures to have a second property. You just need to have knowledge, determination and financial planning!

If you are purchasing a secondary property with the intention to rent, here are a few extra things to know:

1. The minimum down payment required is 20% of the purchase price, and the funds must come from your own savings; you cannot use a gift from someone else.
2. Only a portion of the rental income can be used for qualifying and determining how much you can afford to borrow. Some lenders will only allow you to use 50% of the income added to yours, while other lenders may allow up to 80% of the rental income while subtracting your expenses. This can have a much higher impact on how much you can afford.
3. Interest rates typically have a premium on them when the mortgage is for a rental property versus a mortgage for a home someone intends on living in. The premium can be anywhere from 0.10% to 0.20% on a regular 5-year fixed rate.
4. If you do eventually want to sell this property, do note that it will be subject to capital gains tax. Your accountant will be able to help you with that aspect if you do decide to sell in the future.

Prior to taking on a secondary property, you will need to have your down payment in order (whether from savings or home equity) based on the minimum requirements, and also have sufficient credit score to qualify. In addition to the down payment, you will also need to pass the stress-test and prove that you can financially carry your existing mortgage and the new application.

If you are looking to purchase a rental property, give me a call before you start. I would love to help review your financial situation, current mortgage and equity, and help you make a plan. The keys to success are right around the corner with a little bit of expert advice!

A credit score is a Credit Rating. There are 2 different Credit Rating sources, Equifax and TransUnion. Equifax is by far the more popular.

All the Creditors you deal with including Car Loans, Credit Cards, Communication Services etc., all report to Equifax on a monthly basis about your debt servicing. They report missed payments, how much you owe, bankruptcies, how many months you are late with a payment and so on.

they report on:

R – Revolving credit (Credit Cards)

I – Installment Debt (Car Loans)

M – Mortgage

C = Line of Credit

O – Open Account (a new account where they borrower hasn’t had to make a payment yet)

From there they develop a Rating represented by a number. So the higher the number the better of rating to a maximum of 900.

Typically anything above 680 is considered very good. Below 680 is considered a little bruised. So Prime A institutional lenders generally deal above 680. Where Subprime Lenders deal below 680.

Even if you have a history of bad credit, its not to late to start to repair it.

Here are some ways to repair Damaged Credit Ratings:

1. Create a Budget – this helps you be realistic about  your spending habits. Be honest with yourself though about needs and wants when creating a budget.

2. Pay Down existing debt – this may be overwhelming but with a budget it will be much easier.

3. Pay bills on time – This is very important. In fact it counts for 35% of your credit score.

4. Credit Utilization – Try to keep you balance below 35% of the limit. In fact if you have one Credit Card maxed out and you have another Credit Card with a very low balance, you should transfer some balance to this card.

5. Apply for new credit sparingly – every application for credit is reported as a “hard inquiry” and all though this has limited impact on your score, a hard inquiry can work against you  (if you already have bad credit).

6. Get a Secured Credit Card – this is credit secured by cash. So if you deposit $2000 toward your card, you now have $2000 to spend.

7. Transfer balances with caution – its a good idea to balance your debt with Credit Utilization in mind but be careful of the Interest rates. This may negatively affect you.

8. Keep old accounts open – once paid off it is very tempting to close that account, but actually your credit “history” is more easily tracked and calculated with older accounts as you appear more credit worthy to Lenders with older accounts. Also if you have a lot of credit cards maxed out, closing an account can affect your credit utilization (average credit) negatively as opposed to having Zero owing on an account.

Thanks for reading

Tom Parent – Mortgage Agent.

Parenting people to their dreams.