Canadian Personal Finance Blog

Have you received an email about an overdue parking ticket or a delivery from UPS lately? Have you blindly clicked on the link in that email? Odds are you are now a victim of phishing, and you had better change all your passwords and turn on lots of security settings on all of your accounts.

As I saw with my daughter and her experience with Phishing, the Phishers are getting much more clever and are relying on your false sense of security. If the email looks official most folks will readily click to easily track or fix a simple problem.

What kind of emails do they send?

• Overdue parking ticket reminder. By the way, how did they get your email address for a parking ticket?
• Income Tax related notices, and no the CRA still doesn’t take iTunes cards to pay your taxes (I checked). Again, how does the CRA know your email address?
• Your bank or other financial institution has found a problem with your bank account or credit card and you just need to click here to fix it. Worse, they have a new App you can run on your phone, just click here to download it.
• Fed Ex or UPS has a package that they couldn’t deliver, so you need to reschedule the delivery.

All of these seem straight forward and far too easy to bamboozle you.

What should you do when you receive one of these phishing hooks?

• Don’t open it, surprisingly, depending on how your email reader is set up, that alone can be lethal (make sure you don’t allow auto-execute scripts on your email reader)
• If you have opened the email CLICK ON NOTHING.
• If you are on GMAIL you can contact Google here about the email
• Delete the email (and then empty your recycle bin)

As we become better at not falling for these tricks, the tricks just get trickier, or as Roddy Piper used to say, “Just when they think they got the answers, I change the questions!”.

Preface: As most readers know I take a dim view on Guest Posts, however Sean Cooper is a friend of this site, and this content is topical.

Imagine this: after weeks and weeks of house hunting, you finally find the “one,” your dream home. You make and offer and it’s miraculously accepted. Congrats, you’re finally able to call yourself a homeowner! Well, almost. Unless you’re able to pay for your home in cash (can you adopt me?), you’ll have to take out a mortgage. If you’ve never applied for a mortgage before, you’re probably wondering how the process works (unfortunately, they don’t touch this stuff in school).

Let’s look at the four main factors lenders look at to qualify you for a mortgage and why.

1. Your Income

A mortgage is a lot of dough, even for banks. Lenders won’t just approve anyone for a mortgage. The banks are looking for someone earning a steady paycheque over at least the last couple years (someone who’s a salaried employee). If you’re a self-employed or contract employee, you’ll have a  lot tougher of a time qualifying for a mortgage. (Although a talented mortgage broker can help you find a lender well suited to you.) The reason for this is simple. The banks only want to lend to someone who will be able to afford to consistently pay their mortgage.

However, there are things you can do to help qualify for a bigger mortgage if you’re buying in a pricey real estate market like Toronto or Vancouver. By earning more income, you can qualify for a bigger mortgage and afford a more expensive home (all things considered equal).

If you aren’t able to qualify for the mortgage you were hoping, you might want to consider applying for a mortgage with a partner. It doesn’t have to be your romantic partner, it could be a brother, sister, aunt or uncle. If you have two incomes when applying for a mortgage, it will be a lot easier to get it approved to buy your dream home.

2. Your Down Payment

Similar to your income, the larger your down payment, the easier it will be to qualify for a mortgage. Ideally, we could all afford to make a 20 percent down payment, but that’s just not realistic, especially in cities like Toronto. Even putting 10 percent down can be challenging in pricey markets. Your down payment matters to lenders because they want to know that you have skin in the game.

If you’re unable to save up 20 percent towards your down payment, aim for a minimum of 10 percent. Besides, if you’re buying a home for under $1 million, you’ll be required to put at least 10 percent down on your portion of the sales price between $500,000 and $999,999. By putting more than 5 percent down, your mortgage will be smaller, helping you save on mortgage interest over the life of your mortgage.

But coming up with a larger down payment is easier said than done. How can you do this? By boosting your income or cutting back on expenses. To earn extra income, you could start your own business in your spare time. For example, if you’re skilled at photography, you could become a wedding photographer. Ways to save on expenses include carpooling and taking public transit more often and brown-bagging your lunch. If you could save yourself $50 a month extra, that’s more money you could put towards your down payment.

3. How Much Debt You’re Carrying

Besides how much money you make and your down payment size, lenders also care about how much debt you’re carrying. The reason is simple: the more debt you’re carrying (car loans, credit card, student debt, etc.), the tougher it makes it to make your mortgage payments on time and in full should you run into financial difficulties, such as job loss.

The banks use two main debt ratios when qualifying you for a mortgage: the gross debt service ratio and total debt service ratio. Most lenders require you to meet the minimum debt ratios to qualify for a mortgage. At times lenders may be willing to waive one of the debt ratios, but it’s at their discretion. For instance, they may only be willing do it if your other factors are strong (you’re earning a high salary and you have a decent sized down payment).

4. Your Credit

The last factor lenders look at when qualifying you for a mortgage is your credit. Banks review your credit in a couple ways: your credit score and credit report. The credit bureaus Equifax and TransUnion assign individuals a three digit number as your credit score. Credit scores typically range from 300 to 900. (It’s better to have a higher credit score than it is to have a lower credit score.) Lenders are looking for a credit score of 700 or higher. Your credit score matters to lenders because it indicates how likely you are to repay your mortgage and other debt.

A decent credit score can be a huge asset. It shows that you are able to use credit in a responsible manner. (You pay your bills on time and in full.) It can also help you qualify for a mortgage with the big banks and other well-known lenders and obtain the best mortgage rate. If your credit score is below 700, you may have to pay a higher mortgage rate or your application could be turned down.

To make sure your credit is in good shape, it’s a good idea to look at your credit score and credit report at least once every six months. You’ll especially want to review it before applying for a mortgage. If there are any issues, you can hopefully get them resolved before you apply for a mortgage.

Disclaimer: Contact a mortgage professional to see if the strategies mentioned apply to your specific situation.

Author Note

This post was written by Sean Cooper, bestselling author of the book, Burn Your Mortgage. Sean is also the managing editor ofmortgagepal.ca.

A friend of this web site is Doug Hoyes (CA, CPA) and he gave me a copy of his book Straight Talk on Your Money to review. As most folks who have given me their books know, I am atrocious at reading and following up on books, however, Mr. Hoyes had an ace in the hole, he has published an Audiobook. I subscribe to Audible, so I used one of my credits to purchase the book and was pleasantly surprised.

Amazon Link

Mr. Hoyes’ presence and narration of the book is excellent. Many times authors fool themselves into thinking that only they can bring their story to life, but Mr. Hoyes’ experience with his podcast has served him well.

This is a book for anyone wanting to learn about how your financial plans can go awry. The stories told are of ordinary folks, who had some very bad luck, or things just got out of control. If you think you have everything under control, read the book you will feel less confident and see where your plan might need tweaking.

If you think you have your life insurance story in place, please read the There is More to Death than Life Insurance section. I did like the section about Never Loan Money to Family or Friends as well. I won’t ruin it for you, but it really does make sense to me.

The book is an excellent read and the audio book is really great to listen to while commuting or on long car trips too. Mr. Hoyes’ delivery on the audiobook is top rate (and his son engineered the book as well, and the sound balance was very good). This is not a classic How To financial book but it gives concrete examples about how life is variable and things can go wrong.

Straight Talk on Your Money is an excellent financial read.

Open Disclosure

I do like Mr. Hoyes, I have only met him a few times, however we have spoken many times on-line, and I have been a guest on his podcast twice. Mr. Hoyes  is a bankruptcy trustee (and an accountant), and he seems to genuinely care about his customers as well. Mr. Hoyes did give me a copy of his book, however, I bought the audiobook version myself. I am not receiving any payment for this review. If you click on the Amazon link I will make a small commission. Please keep this in mind reading my review.

My daughter is running into the same issue that I did when I had my TD E-series orders rejected, due to my investment risk profile. She has set up a TFSA, unfortunately with TD Mutual Funds (not TD Direct investing). As we learned to use TD E-series funds in a TD Mutual Fund account, you must complete many steps. None of these steps include the change your investment risk profile to stop having your TD E-series orders rejected.

I have talked about how to use the E-series funds to set up a simple Couch Potato investment portfolio, so my daughter is going to use this for her TFSA account.

The application to allow you to use TD E-series Index Funds in your TD Mutual Fund account is straight forward and easy to fill in. You must do this if you end up with a TD Mutual Fund account, which is what you end up getting steered into if you go into a TD Branch. My daughter thought she was opening a TD Direct Investing account, but it ended being a TD Mutual Fund.

If you fill in the form, you assume that you then buy E-series funds (they even show up in your list of funds that you can buy), however, that is incorrect.

The E-series funds are Index funds with low MER fees (and I use them in many of my accounts, as full disclosure, but I am not receiving any recompense for talking about them). Many different web sites have talked about them, and how useful they are, but they are tricky to use in a TD Mutual Fund account.

A TD Mutual Fund Investing Risk Profile is filled out when the account is first opened, and periodically after that (every year or two). The profile questions usually push folks into a lower risk Balanced profile, and evidently the E-series funds are far more riskier funds.

The E-series Funds have turned into the red-headed step-child of the TD Mutual Funds group. None of their staff seem to want to sell them or use them in any kind of form. It is easier to use TD E-series funds in a Questrade account than a TD Mutual Fund account.

My opinion is that due to the E-series being lower cost, the TD Mutual Fund reps don’t make much money (if any) off them, so they are less motivated to sell them. Why the TD Mutual Fund on-line system seems to default to E-series orders rejected, is another issue.

Simple Solution to E-Series Orders Rejected ?

A simple fix which I will suggest to TD Mutual Funds who be to add the following “initial” block.

Ο  I allow the TD Mutual Funds group  to alter my Investment Risk Profile to allow me to use the E-series funds in my investment portfolio.

Name:  ________________           Initials: _____________

Seems straight forward to me. I doubt this will happen, it is too straight forward and nobody makes money.