Purchasing Homes

Is Debt Consolidation a Good Idea for Purchasing Homes?

Individuals dealing with a lot of outstanding debts can benefit a lot from debt consolidation. This method allows anyone with multiple debts to manage their liabilities better and get the chance to get more reasonable interest and terms. It is a recommended move to some, but whether it could benefit you or not depends on many factors.

Before you consider debt consolidation, you need to study how it can affect your overall credit score. This step is essential, especially if you plan to purchase a house. In case you do not know yet, consolidating your debts can lower or raise your credit score. This article will tell you all you need to know about debt consolidation.

What Is Debt Consolidation?

Debt consolidation is the process of combining all of your debts into one. You can get a better interest rate on this debt if you are lucky enough. But there is still a chance of getting a loan with a high-interest rate. In some situations, you will pay interest rates that are higher than the original ones. Before you grab this opportunity, you need to find a debt consolidation loan with good terms and conditions.

If you want to lower your debt, you need to consider charged-off debt consolidation. This type will lower your unpaid debts down to one debt. As long as the debt consolidation is done the right way, you could have an interest rate lower than your original one.

How Debt Consolidation Can Increase Your Credit Score

One factor that weighs into your credit score is your debt-to-income (DTI) ratio. This ratio is based on the amount of your debt compared with your income. If you are using a debt consolidation loan, you can lower your DTI ratio. 

It can increase your credit score in the long run. Once you combine all of your debts into one, the DTI ratio may be lower, and your credit score can improve.

Another one of the main reasons debt consolidation can get rid of your debts is that it can make payments easier for you. With this process, you won’t need to pay your debt at different times because everything will be under the same loan. This makes paying on time much simpler, and this can help raise your credit score.

How Debt Consolidation Can Lower Your Credit Score

There are also instances when your debt consolidation can lower your credit score. It will do so by decreasing your available credit limit. As you combine all of your debts into one, your available credit limit will also be lowered. 

A lower credit limit means you are using more than you can afford. If you use more than you can afford, you are more likely to be considered a risky borrower.

You need to watch out for the amount of credit you are using. If you have a lower credit limit, you need to make sure that you don’t use up all of it. Also, if you can avoid using up all of it and have a higher credit score, you can get better loan options.

Conclusion

Many people are afraid that debt consolidation can lower their credit score. But you need to know that the process can be done in a way that will not affect your credit at all or even improve it. Working with people who can get you the best debt consolidation loans for your home purchase is one way to make the most of this opportunity.

Ottawa Mortgage Services is an Ottawa-based mortgage agent that can help clients of all kinds find mortgage services that would best suit their needs. We also offer a debt consolidation service that can help you save your money, increase your cash flow, and fix your credit rating. Contact us to learn how we can help. 

looking at house

Review These Essential Questions to Ask Your Mortgage Agent

Taking out a mortgage is a significant decision in your life that shouldn’t be made lightly. To ensure that you are getting everything you need out of the process, you need to ask the right questions to your mortgage agent. The following questions will help you get the information you need from your mortgage company:

How Many Years of Experience Do You Have in This Line of Work?

A mortgage agent should be a professional who knows the industry well. You should be able to tell from the answers to your questions the level of experience your loan officer has. Maintain a healthy skepticism if your loan specialist is new to their job or the mortgage industry in general.

How Long Have You Worked for Your Company?

An experienced mortgage agent will also have been with their company for a time. You should be wary if your loan officer has only been with their company for a short time. You should ask for the loan specialist’s manager’s name and contact information if possible.

What’s the Best Way to Get in Touch With You?

By asking your mortgage agent this question, you will be able to know how receptive they will be to your calls, emails, or texts. Your loan officer should be able to give you several different ways to contact them. Additionally, the person you are speaking with should be able to answer your questions promptly.

Are You Part of Any Industry Groups?

Based on their answer, you can tell whether they are active in their industry or not. Questions like this will help you determine whether your agent is actively trying to improve their knowledge and skills.

Who Will Process My Loan Application?

You should be able to tell a lot about your mortgage agent based on their answer to this question. If they answer with their own name, you will know that they are the one who will be making your loan application. However, if they answer that you will have to deal with someone else, you will know that they are not the one who will be processing your loan.

How Long Is Your Typical Loan Process?

A good mortgage agent will be able to tell you how long their typical loan process takes. You can also ask each loan specialist to provide you with a ballpark figure of how long their process takes. Understanding the process and how it impacts you is very important.

How Will You Contact Me During the Process?

A good loan officer will have several ways they can contact you. Each method should be used in different circumstances. They should also be willing to communicate with you in a manner that is convenient to you.

What Type of Loan Do You Recommend for My Needs?

Your mortgage agent should be able to clearly explain the different loans that are available for your needs. They should also be able to explain each loan’s pros and cons clearly. Additionally, a good one should show that they are knowledgeable about each loan.

Conclusion

The mortgage process is long and tedious. However, it doesn’t have to drain your energy, stress you out, and make you feel like a head of cattle. By asking the right questions, you’ll be able to find a mortgage specialist who knows what they’re doing.

If you need mortgage services in Ottawa, trust Ottawa Mortgage Services. We are committed to guiding you through refinancing, preapproval, debt consolidation, and more. Apply now!

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Everything You Need to Know About a Mortgage Stress Test

We expect the best every day: We carry umbrellas when it’s cloudy, pop Gravols before a long flight, and buy travel insurance when going overseas. We don’t take on mortgages without doing a similar type of preparation! A mortgage stress test is a good way of preparing yourself for a potentially bad situation. This blog post will help shed light on how this test works.

Everything You Need to Know About a Mortgage Stress Test

The stress test is used to determine the maximum amount of money that you can afford to borrow. It is calculated by looking at how much your mortgage payments will increase (relative to the present interest rate) if you have a higher interest rate for a set period of time. The set period is either 2 or 3 years, depending on the lender.

Why do I need a stress test?

The stress test ensures that you have enough money to comfortably pay off your mortgage, even when rates increase. It is a way for the bank to ensure that you will have enough money left over after paying your mortgage.

How does a stress test work?

When you apply for a mortgage, the bank or lender will find the maximum amount that you can afford to pay after a certain period. This is the maximum amount that you can afford to borrow. They then calculate how much money you would need to have on hand if interest rates increased by a certain percentage (~ 2-3%). They then use the greater of these two figures to determine the amount you can borrow.

How to stress-test your mortgage

There are two different types of mortgage stress tests – an interest rate stress test and a credit stress test.

Interest Rate Stress Test

The interest rate stress test is used specifically to show that you can afford your mortgage if interest rates increase by a certain amount. This is a mandatory test for all borrowers who apply for a mortgage. The test uses a common mortgage stress test formula, where the mortgage rate is multiplied by the amount that you borrowed and then divided by the purchase price of your home.

Credit Stress Test

The credit stress test is used to show the lender that you can still pay off a mortgage if interest rates increase, even if you have a bad credit score. This test is not mandatory, and only some lenders require it. This test is also used to assess your ability to pay off your mortgage if interest rates increase and your credit score decreases.

Conclusion

The stress test is used to determine whether you can afford your mortgage in the case of an interest rate increase. It is mandatory for all mortgage loans. If the lender does not perform a stress test, the risk of default increases. You can do your own test by using an online mortgage calculator. If you have further questions about the stress test or about taking out a mortgage in general, seeking advice from a mortgage agent is the right way to go. 

If you are a first-time home buyer in Ottawa, contact Ottawa Mortgage Services. We provide mortgage agent services for first-time home buyers, self-employed individuals, commercial clients. We also help with refinancing, pre-approvals, and debt consolidation.

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Home Equity Loan vs HELOC: Which Should You Choose?

Home is where your heart is, but according to a recent survey, it’s also the heart of your investment portfolio. It’s worth a lot of money and can be an asset that you strategically use to your advantage. To do so, you have to make sure that you take steps to protect that investment. Otherwise, you increase your risk of foreclosure or power of sale.

Canadians typically use their homes as stepping stones to their investments. A home is an asset that’s valuable in the ways you use it strategically. It helps you reach your goals. That’s why you need to know how to protect it if you want it to continue serving you well. Home equity loans and home equity lines of credit are different ways of doing that, but it is important to know how they differ. Here are the steps you need to take when comparing a home equity loan to a HELOC.

Home Equity Loan vs HELOC: Which Should You Choose?

What is a Home Equity Loan?

A home equity loan is a loan that’s secured by the equity in your home. That means it’s backed by the value of your home and your mortgage. The amount you can borrow depends on the value of your home and your mortgage. It’s usually a fixed-rate loan where you can borrow 80% to 85% of your home value. That means that with a $100,000 home, you can borrow $80,000 to $85,000. You have to repay it over 10 to 15 years.

What is a HELOC?

A home equity line of credit, or HELOC, is similar to a loan. It’s unsecured and doesn’t require any collateral. It enables you to borrow money in as little as $2,500 increments. You can access that money when you need it up to your line of credit limit. It has variable interest rates, so they can change over time.

Because of the way a HELOC works, you pay interest only on the money you borrow. When you borrow money, it’s called a draw. You don’t pay interest until you take a draw. You repay the borrowed amount and the accrued interest. That’s why they are often called “interest-only loans.”

That means that when you take a HELOC, you pay just interest, which is usually much more affordable than a loan. HELOC rates are usually lower than for a home equity loan, and you can use them for other purposes. It’s also a way to use your home as equity to fund renovations, consolidate debt, pay for education and more. It’s a revolving line of credit. That means you can draw money as you need it and repay it when you can.

You have to pay interest on a HELOC whether or not you have a draw. The interest rates for both the home equity loan and HELOC may be fixed or variable. You can choose either to suit your needs.

Which Should You Choose?

A HELOC is better than a home equity loan if you want to save money, and you don’t need all the money immediately. The interest is less expensive, so you save money on interest. That’s especially true if the rates are variable. That’s also true if you want flexibility with the money. You can access the money as needed with a HELOC, whereas you must take the loan amount in a home equity loan.

But a home equity loan is better if you need an immediate source of emergency cash. If you are in dire straits, a home equity loan is available to you immediately. Because it’s a secured loan, you don’t have to jump through hoops to get one when you need it.

If you are looking for a home equity loan in Ottawa, come to Ottawa Mortgage Services. We provide mortgage agent services for first-time homebuyers, self-employed individuals, commercial clients. We also helps with refinancing, pre-approvals, and debt consolidation.