Mortgage Broker

14 | Consumer Guide 2015 mbabc.ca Then again, you may not want a mortgage at all, but a home equity line of credit (HELOC) instead. A HELOC allows you to qualify for your maximum loan amount, then withdraw funds and pay down the line of credit many times over at your own convenience. Payments fluctuate depending on current interest rates and the outstanding balance over the month. "This can be a great option for investors," says Panjwani. "It provides access to funds that are available to draw down at any time a future opportunity arises." It's also possible to obtain a combination loan – part fixed-rate mortgage and part variable- rate line of credit. Finally, your mortgage broker will also help you choose the lender that's right for you. If you're going with a variable-rate mortgage, it's important to pick a lender that will automatically offer you the best rate should you choose to lock in to a fixed rate down the road, rather than one that will force you to negotiate a new rate, ? How creditworthy are you? One of the key factors in how much you'll qualify to borrow is your creditworthiness. Lenders want to feel confident you'll pay them back, and applicants with high credit scores and good credit reports gain access to better rates and a wider range of mortgage products. A "credit report" is a detailed history of how consistently you meet your financial obligations, such as loan, bill and credit card payments. A "credit score" is a number between 300 and 900 that is calculated based on your debt payment history, how often you seek new credit, how long you have had credit accounts and how much of your credit limits you use. This number represents your overall creditworthiness – how reliable you are when it comes to meeting financial obligations – and the higher the number, the better, explains Dustan Woodhouse, a mortgage broker with Canadian Mortgage Experts – Dominion Lending Centres. He points out that few lenders will accept an application from someone with a score below 600, and self-employed applicants generally need a score closer to 700. "At minimum, you want to have at least two trade lines (such as a credit card or line of credit), each with a limit of at least $2,500, to establish a meaningful credit rating," says Woodhouse. "Lenders want to see that you've been given enough room to get in trouble but haven't done so." For an even better score, he recommends having three to five trade lines with limits of $5,000 to $10,000 – this establishes "depth of credit" and shows you're able to manage credit well. Maintaining a healthy credit score is relatively simple, and Woodhouse offers several easy-to-follow tips: • Check your credit report regularly: Watch for issues or mistakes on your credit report by ordering it free of charge from Equifax (www.equifax.ca). If you want to know your credit score, you can order a more comprehensive report for a fee. • Resolve disputes: If there's an issue on your credit report, take care of it right away. "It's great to be morally right in the dispute, but little things like the gym membership that you didn't cancel and got sent to collections, or the parking tickets you didn't pay, can devastate your credit rating," says Woodhouse. Paying off outstanding bills can often bump up your score in as little as 90 days. • Pay your bills on time: While it's good practice to pay your credit card off each month, it only counts against your credit score if you miss the monthly minimum payment. Most credit card companies offer a direct-debit option to automatically withdraw the minimum payment from your bank account each month, and signing up for this is a no-brainer way to preserve your score, says Woodhouse. • Steer clear of your limit: While carrying a balance on your credit card does not necessarily affect your credit score, be wary of carrying too much, warns Woodhouse: "It's safe to say that if you carry 75 per cent of your credit, or reach your limit, that's negatively impacting your score." Once you've found a property you love, your mortgage broker can help determine which mortgage product best meets your needs and your qualifications.

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