October Newsletter

October Newsletter

We have some great tips for you this month now that Fall is in full swing! As we move into October, this is a great month to touch on credit scores and all the tips to make it less spooky! Plus, why invest in a home inspection as well as seasonal home preparation tips!

Low Credit is Spooky! Get Better Credit With The 5 C’s

When you buy a home, it’s a big step. As such, lenders will want to make sure you can manage your credit. Established credit is one of the determining factors in accessing the best products and rates. Accessing a lower rate can save you thousands of dollars in interest not paid to the lender.

There are several considerations lenders review before granting credit:

Character

The first C focused on yourself and your habits, which comes down to whether or not it is your nature to pay debts on time. The determining factors for your credit character include the following:

  • Whether you pay your bills on time
  • Whether you have any delinquent accounts
  • Your total outstanding debt
  • How you use your available credit:
    • Quick Tip: Do not use all your available credit. Consider increasing your credit limit versus utilizing more than 70% of what is available each month. For example, if you have a limit of $1,000 on a credit card, make sure the balance does not exceed $700.
    • Do not use more than 30% of your total credit limit.
    • If you exceed the 30% rule, consider paying off the amount over the 30% figure before the next billing date.

Capacity

The second component is your capacity. Capacity is your ability to pay the loan and factors in cash flow versus your outstanding debt.

  • How many years have you been with your current employer?
  • How long have you been self-employed?

There is a difference between what you think you can afford and what a lender has determined you can afford. Lenders base their decisions on your debt service ratio. Your debt service ratio is your total monthly debt divided by your total gross monthly income. It determines whether you can afford to pay back the loan.

Capital

The amount of money that a borrower uses towards their loan. Typically, this is your down payment amount. Quite often, having a larger down payment allows the borrower to access more competitive rates. A mortgage with a down payment more significant than 20% does not require default insurance which reduces the risk to the lender, who, in turn, passes the savings to the borrower.

When considering this component, it is good to look at how much you have saved and the source of the down payment (i.e. personal savings, TFSA, RSP, or gift from an immediate family member).

Collateral

Collateral is the security used against a loan for repayment. For auto loans, the car would be repossessed and re-sold if the loan is in default. Mortgage lenders typically consider the value of the property you are purchasing and other assets. They want to see a positive net worth; a negative net worth may result in being denied a mortgage. Overall, loans with collateral backing are typically more secure and lower interest rates and better terms.

Conditions

The loan conditions can also influence the lender’s desire to provide financing. Typically, specific loans, such as a car loan, home improvement loan, or mortgage, have a particular purpose instead of a personal loan.

Understanding the five C’s of your credit will help you with cleaner loan conditions. A misstep in any of these factors can negatively affect your ability to access competitive mortgage products and rates.

Why Invest in a Home Inspection

While home inspections might not be the most exciting part of your home buying journey, they are significant. They can save you money and a considerable headache in the long run.

There can sometimes be pressure to make an offer right away without conditions in a competitive housing market. However, no matter how competitive a market may be, you should never skip out on things designed for buyer protection—specifically, home inspection.

The décor and the layout of your potential new home may be appealing, but what is under the surface may be where headaches lie. Make sure you understand any possible hidden problems before you make the potentially most significant purchases of your life.

There are five reasons that a home inspection might be the best $300-$500 you ever spend:

It Provides an “Out”

When buying a new house, it is always best to avoid taking chances. A house may look great but may have hidden structural issues such as cracked foundation or roof damage that can quickly turn into expensive repairs. A home inspection can help reveal significant deficiencies, often providing an “out” for the buyer. If you find something that will cost a considerable amount to replace or repair, use this as a negotiating item and ask for a price reduction. A leaky roof may cost thousands to repair or replace. Ask the seller to share the repair cost with you. If the price cannot be re-negotiated if issues come to light, then it is best to walk away on the basis that the home will cost you too much in the long run.

Confirms Safety and Structural Integrity

Another benefit of having a home inspection is finding issues and confirming structural integrity. During an inspection, the inspector will review everything from the attic to the furthest reaches of the basement and look for mould, holes in the chimney, saggy beams, or improper wiring.

Reveal Illegal Additions or Installations

Home inspections can also reveal hidden additions or DIY installations that may cause trouble down the road. Suppose the seller wired the house improperly or used substandard materials. In that case, it not only could cost you big in the future but it could even null and void your home insurance should something happen!

Forecast Future Costs

A home is an ongoing expense, much like a car requiring regular maintenance and updates. For instance, water heaters typically last for 6-10 years; the life of a good roof is around 20 years, while furnaces can last up to 25 years. The home inspection report will include an estimate on the remaining useful life for each of these big-ticket items. It provides a heads up on future expected costs and gives you time to save for their eventual replacement.

Peace of Mind

Perhaps most importantly, getting a home inspection is essential for your peace of mind. Purchasing a home is a considerable investment. One that will take you 25 or 30 years to repay. Having a clean home inspection will make you feel much better about your investment. You will know that the house is safe and that you won’t run into any surprise problems down the road. While a home inspection isn’t free, peace of mind is priceless, and a few hundred bucks are worth it!

If you need help getting started with your home inspection, reach out to us directly for some help or a few referrals!

Fall Home Tips

It’s hard to believe it’s October already! Even though Fall has begun, there are a few things you can do still to ensure your home is well-prepared for the season:

Inspect Your Gutters

It is essential to clean and inspect your gutters to ensure they are working correctly as the rain and snow season hits. If they are clogged or damaged, it could result in a flooded interior and damaged exterior, so don’t wait!

Check for Drafts

Many homeowners are spending extra money heating their homes due to drafts in the Fall and Winter, but it doesn’t have to be that way! Check on all exterior doors and windows to confirm adequate sealing. To do this, close a door or window on a strip of paper. If the paper slides easily, you need to update your weatherstripping.

Have Your Furnace Inspected

In Canada, we are no strangers to chilly evenings! To ensure you are comfortable throughout the colder months, be sure to have your furnace inspected by an HVAC professional. They can check leaks, test efficiency, and change the filter. They can also conduct a carbon monoxide check to ensure air safety.

Fix Any Concrete/Asphalt Cracks

This one is easy to ignore. It could quickly become a more significant issue. When water gets into existing cracks during the colder months, it will freeze and expand, causing the gap to become even more prominent.

Turn Off Outdoor Plumbing

Since your garden will not need attention until the Spring, it is a good idea to shut off and drain all outdoor faucets and sprinkler systems. Depending on where you live, you might also want to cover them to prevent freezing during the winter months.

Change Your Batteries

It is a good idea annually to check that all smoke detectors and carbon monoxide devices are working. While you’re doing your Fall and Winter home preparations, this is an excellent time to test your existing gadgets.

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