In December the unemploment rate in Canada stood at 5.8 per cent, a 33-year-low. While consumer bankruptcies have held steady over the last eight years.  Credit card debt has been higher than years in the past. We are hoping most are using them for the rewards then paying them off fast.

There is a common challenge today that most home buyers are faced with when looking to purchase a home. It seems that everything they like is just over the price range they are told they can afford.

“As home prices continue to escalate, there is the need for more flexible payment options to make the dream of home ownership a reality for more Canadians,” said Peter Vukanovich, president of Genworth Financial Canada.

As I wrote in “Buying Power: Choosing the Mortgage that is Right for You” (Vancouver View, May 2006), because of demand, mortgage insurers in this country announced that they were extending the standard of twenty-five-year mortgage amortization in Canada to thirty and thirty-five years. This change was embraced with open arms; in fact, six months later, one-fourth of all new mortgages have been based on these longer available amortization options. This fall, another milestone in mortgage lending has occurred. Genworth, an industry leader that supplies mortgage insurance to homeowners in Canada and twenty-three other countries around the world, has again redefined the standards. As of October 10, Genworth is now offering a forty-year amortized mortgage. This extended amortization further reduces a borrower’s monthly payment. This of course allows more buyers to afford homes of their own and increase their choice of properties by extending their price ranges. A quick example: a $200,000 mortgage with twenty-five-year amortization at six percent monthly payments would be $1,280. The same mortgage over a forty-year amortization would be $1,090, which is a savings of $190 a month. Since this announcement of the forty-year amortization, I have adjusted several clients’ maximum mortgage preapproval amount to new highs. Along with the longer amortization, there are a couple of mortgage lenders that will also allow a higher percentage of a client’s overall debt to go toward monthly mortgage payments. By using these two methods to help fine-tune the numbers, I have substantially helped to increase several clients’ home-buying power. For example, a client who was previously preapproved to a maximum purchase price of $200,000 was struggling to find a suitable place. We readjusted the numbers, and the client was able to requalify and purchase a property he was really happy with for $234,000.

By Grant Powell

Going through bankruptcy has been a topic of confusion and concern for people who are thinking of purchasing or already own a home. There are two overstated facts concerning bankruptcy and home ownership. The first is that once you’ve claimed bankruptcy, it’s almost impossible to get another chance to purchase a mortgage for at least seven years after the completetion of the bankruptcy process. The second is that if you currently own your own home, once you have filed bankruptcy you will have to give up procession of that asset. Both these myths are false.

The truth is that within two years of being discharged from bankruptcy, you can indeed get 100 percent financing for an approved mortgage. The best way to start in this rebuilding process is to get back to building your credit as soon as you have been discharged from the bankruptcy. I have worked with many clients who have gone through bankruptcy and cut up all their cards, and now only pay in cash. However, that philosophy doesn’t work in today’s society if you are looking to move toward owning your own home and building your net worth.

There are mortgage lenders who will give you another chance, provided that you are building credit with very few flaws this time around. The best way is to start small by getting a loan or credit card and diligently working away at increasing your credit limit. For example, use the credit cards every month and pay them off on time. By paying your credit card on time for a few months, the financial institution will likely offer to raise your credit limit. The trick is to keep doing this until you get a credit limit of at least $1,500. The reason for this is that the minimum credit any mortgage lender will want to see is at least twelve months of reestablished credit, with one loan or credit card with a minimum of $1,500 credit in good standing for a few months. The simple reason for this is that mortgage lenders want to make sure you are now able to keep regular spending habits before they lend you hundreds of thousands of dollars. The best advice is to realize your own particular present situation and work away at bringing about the result you wish to accomplish.

For more information on building credit, see my January 2006 Vancouver View article at www.grantpowell.ca/Articles.php.