Bank or Mortgage Broker?

Mortgages are like vehicles. A bank is similar to the brand, Ford or Toyota for example. How long you have a mortgage before it’s time to renew is like the model, a Fusion or Camry. The rate is similar to the car’s paint color, and the mortgage benefits such as prepayment privileges and portability are like the car’s benefits; 4-wheel drive, hatchback, four doors instead of two, etc.

A bank is like a sales person at a Ford or Toyota dealership. He or she is an expert, they know everything about every car on their lot; engine size, warranty, all available colours, and their fuel ratings. He or she can match any car to your needs and lifestyle, as long as it’s sold at their lot.

But what if they don’t have the most fuel efficient car? What if you don’t like the design or you need four doors and a trunk and all they have is two doors and a hatchback? Are you still going to buy from that dealership just because you went there first? No, you’re going down the street to check out the Chevrolet, maybe even BMW, Mazda, or the new Chrysler dealership. That sales person doesn’t want you to go buy from another lot down the street, but you are buying to satisfy your needs, not the dealership’s needs of selling their own cars.

Now imagine a dealership that sold every single make and model of vehicle. Imagine you could choose one of their sales people, and have them work only for you. They know just as much or even more about every make and model, they do all the research for you and tell you what you need to look for, they ask you the important questions; they have your best interest. That is a mortgage broker, your own personal expert.

Now, you may not need a personal expert to buy a car. But what about mortgages? Is a 0.10% lower interest rate a lot? Or will a 20% prepayment privilege instead of 10% be more advantageous? Can you switch lenders and move your mortgage? $15,000 or $5,000 penalty? How is it calculated? Fixed or variable? Is a collateral charge good or bad? 2-year term or 5-year? Big bank or monoline lender? How about credit unions? The list goes on.

So, a bank or mortgage broker? Put it this way; would you buy from the first dealership you visit or hire an expert? If you have any questions, contact a Dominion Lending Centres mortgage professional near you.

Ryan Oake

How to Get a FREE Copy of Your Credit Bureau

Think of your credit score as a report card on how you’ve handled your finances in the past. A credit score is a number that lenders use to determine the risk of lending money to a given borrower.

There is always someone willing to lend you money however, higher risk = higher rates!

Step 1 for good credit – you need to know your credit history
• In Canada there are 2 credit bureaus – Equifax and TransUnion.
• You can receive a FREE copy of your credit report from both Equifax Canada and TransUnion Canada once a year
• You can pay Equifax or TransUnion for a digital copy, which is much faster, BUT you have to pay, which sucks.

I recommend you order a copy of your credit report from both Equifax Canada and TransUnion Canada, since each credit bureau may have different information about how you have used credit in the past.

Ordering your own credit report has no effect on your credit score.
• Equifax Canada refers to your credit report as “credit file disclosure”.
• TransUnion Canada refers to your credit report as “consumer disclosure”.

Once you have obtained your free credit report, check it for errors:
• Are there any late payments that have been erroneously attributed to your credit history?
• Are the amounts owing in your credit report accurate?
• Is there anything missing on your credit bureau
o Sometimes the credit bureau has more that one file with your name, which can be merged, but it takes time.

If you find any errors on your credit report, you need to dispute them with your credit bureau.

How can I get a copy of my credit report and credit score?

There are two national credit bureaus in Canada: Equifax Canada and TransUnion Canada. You should check with both bureaus.

Credit scores run from 300 to 900. The higher the number, the greater the likelihood a request for credit will be approved.

The “free-report-by-mail” links are not prominently displayed, since credit bureaus would love to sell you instant access to your report and credit score online.

Equifax, the instructions to get a free credit report by mail are available here.

For TransUnion, the instructions to get a free credit report by mail are available here.

The bottom line: when it comes to financing your life, through credit cards, mortgages, car loans or any other kind of debt – your credit score has a BIG impact on what kind of terms you can negotiate.

Keeping an eye on your credit score is important — if there’s a problem or an error, you want to know and have time to fix it before you apply for a loan. If you have any questions, contact a Dominion Lending Centres mortgage professional near you.

Kelly Hudson

A guide to your Home Buyers’ Plan

Start at the beginning…
Registered Retirement Savings Plan = one of the best ways to save for retirement and your down payment and continuing your education. With an RRSP, your contributions reduce your taxable income. This is different from your TFSA (Tax Free Savings Account) which does not reduce your taxable income, but it does give you the added benefit of tax-free withdrawals. What does that mean? Well, with the RRSP you get a tax deduction meaning money back to you!
This is different from your TFSA, Tax Free Savings Account which does not reduce your taxable income, but it does give you the added benefit of tax-free withdrawals. But, reality is the RRSP will have a lower tax rate in retirement.
Everyone can save for their RRSP with as little as $50 per paycheque or more, depending on your budget. You can also go to your bank, sometimes your broker and see about a line of credit, that would be essentially secured by the RRSP, so that you contribute as much as you can qualify for. With this option when you get your refund, put those funds toward the RRSP loan, DON’T use it for the get away we all deserve!
An RRSP line of credit based on a 5-year term at prime rate +/- would equate to about $10,000 in a refund, based on 40% tax margin. If you retire in 25 years you would have approximately $107,296 in your RRSP and that is based on an estimated 6% annual rate of return.
Did you know that you can use up to $25,000 from your Registered Retirement Savings Plan, for each applicant, towards your down payment and closing costs this is the Home Buyers’ Plan (HBP)?
Do you meet the RRSP withdrawal conditions?
• Resident of Canada at the time of withdrawal

• You cannot withdraw more than $25,000

• Only the person who is entitled to receive payments from the RRSP can withdraw funds from an RRSP. You can withdraw funds from more than one RRSP as long as you are the owner of each RRSP. Your RRSP issuer will not withhold tax on withdraw amounts of $25,000 or less.

• Normally, you will not be allowed to withdraw funds from a locked-in RRSP or a group RRSP.

• Your RRSP contributions must stay in the RRSP for at least 90 days before you can withdraw them under the HBP. If this is not the case, the contributions may not be deductible for any year.

• Neither you nor your spouse or common-law partner or the related person with a disability that you buy or build the qualifying home for can own the qualifying home more than 30 days before the withdrawal is made.

• You have to buy or build a qualifying home for yourself, for a related person with a disability, or to help a related person with a disability buy or build a qualifying home before October 1st of the year after the year of the withdrawal.

• You have to fill out Form T1036, Home Buyers’ Plan (HBP) Request to Withdraw Funds from an RRSP for each eligible withdrawal.

Under the HBP, the home must better fit the needs of the disabled person than his or her current home. You can withdraw funds from your RRSPs under the HBP to buy or build a home, if:

• you are a person with a disability;

• you are buying or building a home for a related person with a disability;

• you are helping a related person with a disability to buy or build a home.

Regardless of the situation, you are responsible for making sure that all applicable HBP conditions are met. If, at any time during your participation period, a condition is not met, your withdrawal will not be considered eligible and it will have to be included as income on your income tax and benefit return for the year it is received. Valuable information at your fingertips and from your broker.

Check for more information at Revenue Canada here. If you have any questions, contact a Dominion Lending Centres mortgage professional near you.

Karen Penner