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How to get a copy of your Credit Bureau

Lenders look to credit reports to assess the risk of a given borrower. Your credit score is a number from 300 to 900 that reflects how you have handled your finances in the past. The lower the number, the more risky you appear to lenders, so you are likely to be offered higher rates. It is always recommended to keep an eye on your credit. In Canada, you can receive a free copy of your credit report once a year from both Equifax and TransUnion. The bureaus refer to your credit report as “client file disclosure” and “consumer disclosure” respectively. Ordering your “free report by mail” does not effect your score. Check your report for errors inconsistent with your true financial history and balances such as late payments; amount owing; or missing accounts. If you do find an error, report it it to the credit bureau to be corrected.

Interest Rates: Fixed vs Variable

Fixed Interest Rates

Fixed rates are often viewed as the safest choice – no surprises. You can rest easy knowing exactly how much interest you are paying and that regardless of fluctuations in the prime rate (for better or worse), you interest will remain unchanged.

Fixed interest rate can be taken on 1, 2, 3, 5, 7 and even 10 year terms. Note the distinction between term and amortization; term is when your mortgage is up for renewal while amortization is the total time it will take to payoff your debt.

Now, say you committed to a 5 year term, but three years in you want to take advantage of a different lenders product. To do this, you will need to beak your mortgage. THERE WILL BE A PENALTY. The size of penalty varies depending on the lenders current rate, the rate you held, the length remaining on your term, and balance outstanding. Lenders charge a penalty using the greater of the Interest Rate Differential (IRD) or three months interest.

Variable Interest Rates

For those of us that are comfortable with a little uncertainty, Variable rates provide potential for interest saving and term flexibility.

Variable rates are based on a lenders prime rate; plus or minus a set premium of discount. These rates are mostly available on 5 year terms. However, unlike fixed interest rate, the penalty is calculated only using 3 months interest. So, breaking the mortgage will likely be significantly less costly.