Know Your Numbers

Michael Hallett • Jul 27, 2017
Most people know their weight. Their height. Their age. Their birthdate. Their address. Their SIN. Even their income. Could you imagine if you always had to say to someone, “Can I get you that information when I get home? It’s written down in my planner… ”

Knowing your everyday numbers is important. It allows you to make quick and informed decisions.

Therefore I, as a Mortgage Broker, have made it my goal to know my numbers — to memorize certain things so that when called upon I can provide concise and detailed information in the simplest format. I am going to arm you with some quick mortgage number facts and mortgage industry calculations that I use daily.

  1. Payments are $400/month/every $100,000 mortgage amount with 20% down or more. Example: $400,000 mortgage = $1,600 monthly mortgage payment.
  2. Payments are $450/month/every $100,000 mortgage amount, 19.99% down or less. Example: $400,000 mortgage = $1,800 monthly mortgage payment.
  3. For every $10,000 mortgage amount increase, payment increases by $40/month with 20% down or more. Example: $420,000 mortgage = $1,680 monthly mortgage payment.
  4. For every $10,000 mortgage amount increase, payment increase $45 per month, 19.9% down or <. Example: $420,000 mortgage = $1,890 monthly mortgage payment.
  5. If rate increases by 0.25%, monthly payment increases by $13 per month per $100,000.
  6. If rate increases by 100% the monthly payment only increases by 33%.
  7. A $13,000 credit-card debt cancels out $100,000 mortgage money.
  8. A $400 per month vehicle payment cancels out $100,000 mortgage money.
  9. A $20,000 gross income services a mortgage of $100,000. Example: Household income of $120,000, qualifies for a $600,000 mortgage.
  10. A $400,000 mortgage balance (FIXED rate term) holds a penalty of approx $3,200 with a monoline lender. With a traditional bank, it’s closer to $16,000. This term paid out with 24 months remaining.

Knowing your numbers is likely going to change this fall. There are changes coming and they are not small ones. The federal government is going to make yet another amendment to the lending policy. Nothing specific or concrete yet. Coming this fall (2017) you are likely going to see your borrowing power reduced by as much as 25%. If today you qualify for a $500,000, that amount could drop to approximately $400,000 is as little as 3 – 4 months.

The bottom line is simple. Borrowers need to focus on what they can control:

  • Coming up with larger down payments, saved and gifted.
  • Earning more income. If you are self-employed, then you may want to restructure your reported income to CRA. Verified income will be essential. This is LINE 150 of our tax documents.
  • Good, strong, clean credit, both credit score and credit history.

Be sure that you know the power of your own numbers. Don’t be concerned with the past. Every day we move forward. Changes happen all the time; we need to adapt or be left behind. Asking WHY is sometimes not the best reaction but rather HOW. How do I adapt? How do I become current?

Overall, Canada has a very strong, dependable and stable financing and real estate market. The changes that are handed down by the federal government are mandatory, right or wrong… they need to be followed.

If you want to discuss how these changes may affect you, please contact me directly.

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MICHAEL HALLETT
Mortgage Broker

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By Michael Hallett 27 Mar, 2024
You’d think an online calculator is a pretty straightforward device, one that you should be able to place your confidence in, and for the most part, they are. Calculators calculate numbers. The numbers are reliable, but how you interpret those numbers, not so much, especially if the goal is mortgage qualification. If you rely on the numbers from a “What can I afford” or “Mortgage Qualification” calculator without talking to an independent mortgage professional, you’re going to be misinformed. Don’t be fooled. Even though an online mortgage calculator can help you calculate mortgage payments or help you assess how additional payments would impact your amortization, they’ll never be able to give you an exact picture of what you can afford and how a lender will consider your mortgage application. While mortgage calculators are objective, mortgage lending isn’t. It’s 100% subjective. Lenders consider your financial situation, employment, credit history, assets, liabilities, the property you are looking to purchase. Then, they will compare that with whatever internal risk profile they are currently using to assess mortgage lending. Simply put, they don’t just look at the numbers. An online calculator is a great tool to help you run different financial scenarios and help assess your comfort level with different payment schedules and mortgage amounts. However, if you rely on an online calculator for mortgage qualification purposes, you’ll be disappointed. The first step in the mortgage qualification process is a preapproval. A preapproval will examine all the variables on your application, assess your financial situation, and provide you with a framework to buy a property based on your unique circumstance. Securing a preapproval comes at no cost to you and without any obligation to buy. It’ll simply allow you the freedom to move ahead with confidence, knowing exactly where you stand. Something a calculator is unable to do. Please connect anytime if you’d like to talk more about your financial situation and get a preapproval started. It would be a pleasure to work with you.
By Michael Hallett 20 Mar, 2024
Divorces are challenging as there’s a lot to think about in a short amount of time, usually under pressure. And while handling finances is often at the forefront of the discussions related to the separation of assets, unfortunately, managing and maintaining personal credit can be swept aside to deal with later. So, if you happen to be going through or preparing for a divorce or separation, here are a few considerations that will help keep your credit and finances on track. The goal is to avoid significant setbacks as you look to rebuild your life. Manage Your Joint Debt If you have joint debt, you are both 100% responsible for that debt, which means that even if your ex-spouse has the legal responsibility to pay the debt, if your name is on the debt, you can be held responsible for the payments. Any financial obligation with your name on the account that falls into arrears will negatively impact your credit score, regardless of who is legally responsible for making the payments. A divorce settlement doesn’t mean anything to the lender. The last thing you want is for your ex-spouse’s poor financial management to negatively impact your credit score for the next six to seven years. Go through all your joint credit accounts, and if possible, cancel them and have the remaining balance transferred into a loan or credit card in the name of whoever will be responsible for the remaining debt. If possible, you should eliminate all joint debts. Now, it’s a good idea to check your credit report about three to six months after making the changes to ensure everything all joint debts have been closed and everything is reporting as it should be. It’s not uncommon for there to be errors on credit reports. Manage Your Bank Accounts Just as you should separate all your joint credit accounts, it’s a good idea to open a checking account in your name and start making all deposits there as soon as possible. You’ll want to set up the automatic withdrawals for the expenses and utilities you’ll be responsible for going forward in your own account. At the same time, you’ll want to close any joint bank accounts you have with your ex-spouse and gain exclusive access to any assets you have. It’s unfortunate, but even in the most amicable situations, money (or lack thereof) can cause people to make bad decisions; you want to protect yourself by protecting your assets. While opening new accounts, chances are your ex-spouse knows your passwords to online banking and might even know the pin to your bank card. Take this time to change all your passwords to something completely new, don’t just default to what you’ve used in the past. Better safe than sorry. Setup New Credit in Your Name There might be a chance that you’ve never had credit in your name alone or that you were a secondary signer on your ex-spouse’s credit card. If this is the case, it would be prudent to set up a small credit card in your name. Don’t worry about the limit; the goal is to get something in your name alone. Down the road, you can change things and work towards establishing a solid credit profile. If you have any questions about managing your credit through a divorce, please don’t hesitate to connect anytime. It would be a pleasure to work with you.
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