Financial institutions look at your credit report and credit score to decide if they will lend you money. They also use them to determine how much interest they will charge you to borrow money.

If you have no credit history or a poor credit history, it could be harder for you to get a credit card, loan or mortgage. It could even affect your ability to rent a house or apartment or get hired for a job.

If you have good credit history, you may be able to get a lower interest rate on loans. This can save you a lot of money over time.

A credit score of 760 and above is generally considered to be an excellent credit score. The credit score range is anywhere between 300 to 900. The higher your score, the better your credit rating. Your credit score helps lenders to assess your credit capacity.

You can request a free copy of your Equifax credit report online, by phone, by mail or in person. 

You are entitled to free credit reports from each of the two nationwide credit reporting agencies.There are four ways you can request a free copy of your Equifax credit report: Online, by phone, by mail, in person.

Can I get a Mortgage with a Low Credit Score?

Typically, if your credit score is less than 600 or even 650 in some circumstances, getting approved for a mortgage that you can afford, may be a challenge. Each lender has its own formula for determining the level of risk they will assume when evaluating your mortgage application, so it is difficult to provide a one size fits all answer. 

There are also companies that specialize in mortgages for purchasers with weak credit histories, who may charge a higher interest rate or insist on a higher down payment. As each purchaser’s situation is different, you should speak with a range of potential lenders and choose the one that best meets your needs.

A Lender- Banks are generally referred to as A lenders. 

B Lender- Financial  institutions which cater to people who do not fit the A lendor category.

Please reach out if you need a lender referral? 

Equifax

https://www.consumer.equifax.ca/personal/education/credit-report/how-to-get-a-free-credit-report//

Transunion:

 https://www.transunion.ca/product/consumer-disclosure#articleSection4

Know the Rules! Down Payment Rules!

In Canada, federal mortgage rules that came into effect on February 15, 2016, require larger down payments for higher priced properties. For houses under $500,000, the minimum down payment is 5%. For higher priced homes, the minimum down payment is 5% for the first $500,000 and 10% for the remaining portion. Finally, if your purchase is above 1 milliion or more 20% of the Purchase price is required.

Mortgage loan insurance (MLI)

In Canada, lenders require mortgage loan insurance when your down payment is less than 20% of the purchase price. There are a few companies that offer mortgage loan insurance. Your potential lender will provide the information you need. Mortgage loan insurance protects lenders against mortgage default, and enables you to purchase homes with a minimum down payment starting at 5% and still obtain interest rates comparable to those with a 20% down payment.Your mortgage loan insurance premium is a percentage of the mortgage amount and is influenced by a number of factors such as whether you will occupy or rent the property, whether the loan is to purchase the property, for construction on the property, if you are refinancing, and the size of your down payment. 

Other Closing Costs
Once you’ve settled on a down payment, it’s important to have at least 3-5% of the purchase price of your home for closing cost. These can vary by city, and can include land transfer taxes, a REALTOR® commission, HST,  moving fees, and lawyer’s fees.

Closing Costs: Before Closing

Deposit (usually 5% of the purchase price, paid within 24 hours of your offer being accepted)

Property Appraisal ($400- $500, often paid by the lender)

Home Inspection ($400-700, paid to the home inspection company at the time of the inspection)

Closing Costs: On Closing

Balance of Purchase Price (the purchase price less your initial deposit. Usually the bulk will come from your lender and become your mortgage)

Legal Fees (amount varies depending on purchase price – approx $1,800 for a $500,000 purchase)

Title Insurance (sometimes included in your legal fees, $250-$400)

Mortgage Broker Commission (if applicable, usually paid by the lender)

Property Survey (if required – $1,000-$2,000)

Ontario Land Transfer Tax (varies depending on the purchase price – see our Land Transfer Calculator)

Property Tax Adjustment (reimbursement to Seller of property taxes they paid beyond the closing date)

HST (generally only applicable on new construction condos and houses)

Tarion Warranty Fees (warranty on new construction condos and houses only, not resale) – click here to estimate Tarion Fees

Provincial Sales Tax (only applicable on chattels purchased from vendor – amount varies)

Adjustments for Utilities/Condo Fees/etc (reimbursement to Seller for prepaid utilities, etc.)

CMHC Insurance Premium (insurance premium charged if you have less then 20% down payment – click here to estimate CMHC insurance)

Closing Costs: After Closing

Moving Expenses ($1,000+)

Utility Connection Charges (varies)

Redecorating and Renovating Costs (varies)

Immediate Repair and Maintenance Costs (varies)

The main goal of the mortgage stress test is to ensure that borrowers can afford their mortgage payments even if interest rates increase. All federally regulated lenders require you to be stress-tested to qualify for a mortgage. 

You must pass the stress test when applying for a new mortgage, switching lenders (if the mortgage is uninsured), or refinancing your mortgage. However, you won’t be required to pass the stress test if you’re early renewing at the same lender or switching your default-insured mortgage to another lender at maturity.

Qualifying rate: The higher of 5.25% or your mortgage rate + 2%, whichever is higher. 

The stress test was designed to prevent borrowers from overleveraging themselves financially when they obtain a mortgage, which could make any future increases to interest rates a strain on their budget. The test reduces your borrowing capacity and may disqualify you, as you’ll need to prove that you can still afford mortgage payments if rates increase.

Calculating Your Qualifying Rate

The qualifying rate is determined by taking the higher value of either:

• The current benchmark rate, which is currently 5.0% or 

• The contractual mortgage rate plus 2%. 

The qualifying rate criteria are the same for both insured and uninsured mortgages. However, if you have an insured mortgage and are switching lenders, the stress test qualifying rate will not apply. You will instead be stress-tested based on only your contractual rate (the rate the lender offers you).

How to calculate your stress test rate (example):

To understand how the stress test is applied, consider the following example: 

You’ve been approved for a mortgage with an interest rate of 4.79%. According to the stress test rules, you must demonstrate that you can manage payments at an interest rate of 6.79%, as it’s higher than the current benchmark rate of 5.00%. 

Now, if interest rates fell and you were offered a rate of 3.19%, you would need to demonstrate you can manage payments at the benchmark rate of 5.25% since that rate is higher than the rate offered plus 2% (3.19% + 2% = 5.19%). 

Here are some home buying incentives that may be available to you

1. Land Transfer Tax Rebates:

   - First-time homebuyers may be eligible for a rebate on the provincial land transfer tax, which is payable when purchasing a property.

2. Home Buyers' Plan (HBP):

   - A federal program that allows first-time homebuyers to withdraw up to $35,000 from their Registered Retirement Savings Plans (RRSPs) tax-free for a home purchase.

3. Municipal Incentives:

   - Some municipalities offer their own homebuyer incentives, such as grants, rebates, or property tax relief. Please check the municipality of where you would like to live to see if programs are available.

Kawartha Lakes and Haliburton County 

4. GST/HST New Housing Rebate:

   - A rebate on the Goods and Services Tax (GST) or the Harmonized Sales Tax (HST) for new homebuyers.

5. Ontario Renovates Program:

   - Provides financial assistance to low-income homeowners for necessary home repairs and modifications. Please check to see that programs are still running as some have changed and some programs have a deadline for applications. Here is the

 Kawartha Lakes and Haliburton County 2023 application

6. Energy-Efficiency Incentives:

   - Various programs and incentives encourage homebuyers to choose energy-efficient options, such as rebates for energy-efficient appliances or home upgrades. 

Ontario Efficient Homes Rebate  

7. Home and Vehicle Modification Program (HVMP):

   - Offers financial assistance to individuals with disabilities for necessary home modifications or vehicle adaptations.

8. Homeownership Program for Indigenous Peoples:

    - Programs specific to Indigenous peoples may offer financial assistance or incentives for home buying on or off-reserve.

11. Low-Income Energy Assistance Program (LEAP):**

    - Provides emergency financial assistance to low-income individuals and families experiencing difficulty paying their utility bills.

It's crucial to verify the current status and details of these incentives as they might be subject to changes or updates. Additionally, eligibility criteria and application processes may vary for each program.  Contacting relevant government agencies can provide the most accurate and current information tailored to your specific situation.