Ever wondered why your credit history matters more than you think, especially when applying for a mortgage? Siobhan Bent, a seasoned mortgage broker, is here to take the complex world of credit scores and interest rates and make them simple. Siobhan brings over twenty years of industry knowledge to our chat, and you'll definitely want to hear her take on how banks, employers, and insurers utilize credit scores. She'll also share her savvy tips on building and maintaining a robust credit history.
Shifting gears, we dive into the nitty-gritty of home buying and financing options. First-time homebuyers, listen up! Siobhan guides us through some appealing financing options you might not even know about, including the First Home Savings Account and the Shared Equity Program. Hear her explanation of the 5% down payment rule and the 20% minimum down payment for million-dollar properties. And for those considering investment properties, Siobhan's insight on managing cash flow is invaluable. Finally, we'll share some outside-the-box strategies to protect and enhance your credit score. So, grab a notepad, and tune in for an episode packed with practical tips and actionable advice to secure your financial future.
Join the The Financial Moment community on:
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Email: info@thefinancialmoment.com
Grab this FREE guide with 10 easy tips to keep your budget on track!
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Ever wondered why your credit history matters more than you think, especially when applying for a mortgage? Siobhan Bent, a seasoned mortgage broker, is here to take the complex world of credit scores and interest rates and make them simple. Siobhan brings over twenty years of industry knowledge to our chat, and you'll definitely want to hear her take on how banks, employers, and insurers utilize credit scores. She'll also share her savvy tips on building and maintaining a robust credit history.
Shifting gears, we dive into the nitty-gritty of home buying and financing options. First-time homebuyers, listen up! Siobhan guides us through some appealing financing options you might not even know about, including the First Home Savings Account and the Shared Equity Program. Hear her explanation of the 5% down payment rule and the 20% minimum down payment for million-dollar properties. And for those considering investment properties, Siobhan's insight on managing cash flow is invaluable. Finally, we'll share some outside-the-box strategies to protect and enhance your credit score. So, grab a notepad, and tune in for an episode packed with practical tips and actionable advice to secure your financial future.
Join the The Financial Moment community on:
Instagram
Facebook
Website
Email: info@thefinancialmoment.com
Grab this FREE guide with 10 easy tips to keep your budget on track!
Submit guest suggestions HERE
Hello everyone.
Speaker 1:My name is Carolyn. Welcome to the Saving for your First Home podcast. I am the CEO of the Financial Moment. We offer money coaching for those who are ready and willing to make financial changes in their lives. For the most of us, there comes a point in time where we think to ourselves it would be really nice to own property, but it sometimes can feel like a pipe dream and not very easily obtainable. So I created this podcast to give you all the information and tools you need to take the steps forward toward home ownership. Take it from me my husband and I started our lives together, working part-time jobs with a young child. Fast forward, through many hiccups and failures, we stepped our feet into our very first home. For us it was a pile of dirt, but eventually our family home was built on that dirt. Now we are in the midst of growing our investment property portfolio. I created the savings for your first home podcast to give you easy, actionable tools for you to do the same. If you have that same gut feeling that I did and want to create a life for yourself and your growing family, but don't know where to start, you are in the right place. Let's do this. Hello everyone, welcome back to the Saving for your First Home podcast. I'm Carolyn, your money coach.
Speaker 1:Now, today we are very excited because we are inviting Siobhan Bent onto our show today. She started her journey over 20 years ago by purchasing her very first investment property at the young age of 23. Can you believe that she fell in love with the industry and after a short time she quit her full-time job and dove headfirst into entrepreneurship as a mortgage broker. So I know she understands the importance of financial literacy and she is super committed to educating, empowering her own community with lots of tools and resources and opportunities that will create legacy for their families. So let's welcome Siobhan onto the show. Welcome, siobhan, welcome to the podcast. I'm so glad that you decided to come on and share your knowledge with all of us. Hello.
Speaker 2:Carolyn, thank you for having me. It's a truly honor to be in your presence and to speak with your audience. I'm so happy that we're doing the same thing, essentially right. So being able to find and connect with people who share the same interests, share the same passion about educating the masses is truly delightful. So thank you.
Speaker 1:Yes, again welcome. I'm excited because you know this topic that we're going to get into is probably one of the hotter topics, I think, out there right now. Everybody is thinking about what the interest rates are doing to the housing market, and so your knowledge and expertise is so needed right now, so I'm very happy to share that with the community, thank you. So when do we think about credit history? You know a lot of people make mistakes as they kind of go through you know your 20s, you're going through college. You know you kind of made some errors here and there. You've gotten introduced to credit these types of things when you're starting to head out of that season. How do you establish a strong credit history?
Speaker 2:Well, first of all, you got to know where you're starting from. I've had, over my years, I've talked to several clients who'd be like I don't know, I haven't looked at my credit in a couple years. I'm like, how is that even so? Right, I believe that your credit report is like your adult report card, and you know, many years ago, credit wasn't. It's always been a thing, but it's never been an essential tool in the life, and so these days, you need credit for just about everything. So it's something that you need to be aware of and be on top of. So the first thing I would say is obviously to pull your credit to make sure where you stand. How do you build your history is obviously looking back to see what things did you do incorrectly, things like using too much debt right.
Speaker 2:A lot of times people are extended credit and think that it's an extension of their income, and so you know, they live by just paying the minimum payments and so they're carrying debt for a long period of time and over the course of years that can impact your credit negatively. So I would say know where you are. Then the next thing is reflect on your past behaviors and make adjustments accordingly. So if you know that you've carried debt for a long time, make sure that you're trying to pay down that debt or pay off the debt. Ultimate goal should be to not have any debt and to just use your credit in instances that is going to help you move further. Right? Never buy anything that you can afford to pay for cash.
Speaker 2:Pre-chain, pre-chain, all right, and I do understand. You know the climate that we're in. You know incomes aren't moving as quickly as everything else is, so I do understand where credit does play a role in filling that gap, but definitely focus on trying to make every effort possible to reduce your debt as much as possible and then use it how it should be used. Use it and pay off your balances every month if you can, right. Use it and earn some rewards if you can, but it's literally to be used for things that you can afford and not for things that you can't afford.
Speaker 1:That is so true. You've hit on some really good points. I love the point that you made about being the adult report card. Oh, yeah, right, because once we get out of school, we kind of forget about these things Absolutely. And that's how the banks are looking at us right? They're just pulling it up and saying, ok, did you get an A or not?
Speaker 2:Yeah, and even without your permission, exactly Sidebar.
Speaker 1:It's so true. And then the other thing is that I've actually read an article that your credit score can be used by employers as well.
Speaker 2:Absolutely. So many different things are used looking at your credit now, Insurance, something, I say, cell phones Like I've had a phone for almost 30 years and they didn't pull my credit then, had they pulled it I probably wouldn't have it, but that was not part of the process, right? And so everything is looking at your credit as a reference point to see what type of person are you. How are you managing your money? It is debt, but it does speak to in the eyes of the person who's pulling it. How do you handle money? So, yeah, you want to be on top of that.
Speaker 1:Yeah, I just want to stress the point that you made about habits, because I talk about that a lot on this podcast that you can know where you came from. But if you don't change those habits moving forward, then what is the point Essentially? So some really good stuff there. Now I know that obviously we talk that credit score is very tied to a lot of different things whether or not you borrow or you're an employer or whatever. But how does it exactly tie to the mortgage rate that a bank will offer or another company will offer?
Speaker 2:So what I like to teach is that the credit score is a very vital point of the conversation about your eligibility and qualifications. However, it's not the be all and end all. It doesn't stop right there. Your credit score is only a reflection of what's actually happening in the body of your credit. So how much debt do you have? How many times are you applying for credit? How frequently are you applying for credit? Where is that credit being held?
Speaker 2:Those are all the factors that impact the score, and so what the lenders are looking at is they're looking at the score as a measuring stick, but they ultimately are looking at your debt load. How long you've had this debt? Are you making your payments on time? And so let's say you've done everything that you should be able to do. Your score will give you access to the top tier type of lending.
Speaker 2:So, in terms of a measuring tool, 680 is, I would say, the sweet spot. Anything above that, it's probably a reflection of your good spending habits, but anything less than that, I wouldn't say that it is going to detrimentally affect a score, unless you've had a very critical situation where you've had to go bankrupt or you are a consumer proposal and you are now working your way out of that. But the higher the score, the top tier. So there's a wide range of lenders that you can access to and you don't necessarily have to say have 900 to get the best interest rate available to you, but anything over 680 and you have access to the best rates on the market.
Speaker 1:That's great, because it's good to have a median and I think that if someone's aiming for something, that we know what the marker is. And 680 is the marker and there's so many tools now out there that you can actually check your credit score without paying for blacks or trans union or anything. You can just check your credit score and know exactly where you are, and to have that median is a great measuring tool. Definitely, I will say that.
Speaker 2:The scores. Because one question I do get all the time how come I pull my score and I see different score? So depending on where you're getting that information could reflect a different score, but they all understand it the same way 680 is considered great, right? 680 and above is considered great. So you definitely want to shoot for the stars, but if you hit the how's it go Shoot for the moon. If you hit the stars, that's still in a good spot.
Speaker 2:So if you're trying to get 800, great, but if you get 680 or even 679, there's something that you can do. You can do different things to get yourself to that space.
Speaker 1:Yeah, so good segue into the next question was are there specific factors that these lending institutions are looking for? So you have the credit score, but are there other factors that they kind of consider, like how many loans you have outstanding credit cards, things like that? Are there other things that?
Speaker 2:they consider so. Lenders use what's called debt to income ratio, so ensuring that you're not living off of credit. So utilization your credit cards should not be maxed out. Any lines of credit that you have should not be maxed out, cause one impacts your eligibility and your purchase power. But they also want to know that you're not living off of credit, right. So some of the things that you can do that make it look favorable for you is is keeping your balances low, keeping utilization low. So if you do have a few accounts and you can balance those out, that would help. It'll help with your score one, but also look like you're utilizing your credit efficiently, right. Making your payments on time is like the game changer.
Speaker 1:Right.
Speaker 2:Making sure you're making, at the very least, the minimum payment, gets reported by the due date. That will help for sure, because those people don't understand, as those cause the most hurt, most pain to your credit making late payments. And so you know, just a one late payment can hit you 30, 40, 50, sometimes you know more points. There's no specific number that we can know, but it will definitely affect you if you are applying for a mortgage and you see that you have a current late payment. So making sure that your payments are paid on time every month and keeping your balance as low, I think would be the best things.
Speaker 1:Great point because a lot of my clients. Sometimes they get into this cycle where they see the due date and they figure, oh if I paid the day before. But you don't realize that it takes time for that money to get from your bank to the institution and clear the account, post it. Yeah, all of a sudden now you have a late payment.
Speaker 2:I do also encourage my clients five day minimum, like don't wait till the due date. Five day minimum, exactly.
Speaker 1:So important. All right, so now you know we've built our credit, we're in a good place. What about actually investing in real estate for investment purposes and not just for our primary residents? How does that help to kind of diversify our portfolio?
Speaker 2:Well, one as an investment. You're looking at cash flow, right. So, you have the opportunity. If it's the right investment, you have the opportunity to earn income now, but also in the long term, right? So if you keep the property for several years, you know you're gonna be paying the mortgage down right, so your balance is gonna be reducing while you're collecting rents right, Because if it's an investment property, I'm assuming you're gonna rent it out. You're collecting rent, so you're getting cash flow, but the property is also gonna appreciate over time, right.
Speaker 1:So that's how it will help with your diversification Cash flow, now that you can also reinvest in the property or into other properties or into other investments, but also on the long term aspect, where your property is gonna appreciate, yeah, I agree totally and I think that there's some other factors that we also need to communicate up there for people, Cause I think a lot of people they wanna invest in real estate and they think it's you know, oh, rent's coming in, that's great, but there's so many other factors like property tax. Oh, of course, you know all the different things that come with a home that you have to be aware of so that you actually are cash positive, you know.
Speaker 2:And so that's why so? That's why I use the term cash flow right Cause most people think just they're renting the property.
Speaker 2:But no, there's definitely calculations that you should factor in even before you sign the dotted line and purchase and investment property. Right, you have to know what the market rents are. How much can you actually collect from this property? Is it a two-family property? Can you collect for upstairs and downstairs? Right. And then you obviously have to go through the expenses. What is it gonna cost? Over and above the mortgage, the property tax Most times you know the tenants will pay the utilities. But what if that property is vacant? Right, that means you're gonna be responsible for it. So you have to make sure that you know all of the numbers and ensure that that investment is going to cash flow and that you won't be in a cash flow negative position.
Speaker 1:Exactly, yeah, so important and okay. So my audience are probably in the situation where they're just about to buy their very first home. So it's so exciting, Right. They're saving, they're doing the work. What are some financing options that do they have? Like, do they always have to go to the top five banks? Like, what kind of options do they have to borrow to create that mortgage?
Speaker 2:Well, so first let me identify what a first-time home buyer is. Oh, first-time home buyer is ideally somebody who has never owned property before, right, but there's been an expansion on that definition. You could have purchased a property before, but as long as you haven't owned in the last four years, you can be considered a first-time home buyer again. There are some initiatives out there that the government has so graciously gifted us with. I mean, the first one being being in Canada. We do have access to purchase a property with a minimum of 5% as a down payment, and that only applies to a property up to $500,000. Anything over and above $500,000, you will have to pay a 10% of the difference.
Speaker 1:That is such a great point because in Toronto, where we're living in GTA, you can't get a house for $500,000. Everything is close to the million-dollar mark, if not more. Yes, people think, oh, I should have saved 5%, but really in fact you're probably likely going to have to save 10.
Speaker 2:And not more. Anything over a million is 20% minimum, right, but I also like to stress that it's not just 5%. You have to understand that it's 5% of what you qualify for. Ah, there we are. So you know, it's up to 5%. It's 5% up to $500,000, which would equate to $25,000, right, but do you even qualify for $500,000? That's the determining factor. So the minimum down payment required is 5% or up to 20% on a million dollar property. There's a program that they recently launched that I actually really like and I don't like much things from the government. Just to say what they've recently announced, that they have a program called the first home savings account that will allow first time home buyers to save their down payment in this account with after tax dollars and allow it to grow, meaning it can be invested and grow, and then you don't be taxed on the profits.
Speaker 1:Oh, very similar to a TFSA.
Speaker 2:It's actually TFSA's cousin. I like to say it.
Speaker 2:Right, I like to say it's kind of in the middle between the RRSP program, the home home buyers plan and the TFSA, and so this is specifically for people who are, again, first-timers, never purchased before or never owned a property in the last four years. There's also, if you are recently divorced, you also can reclaim that first-time home buyer status as well and access those programs as well. The other program is called the shared equity program, and so, again, first-time home buyers, and what this is is that you will have to have a minimum of 5% down payment and the government will match your down payment. So if you have 5% and you are looking at a resale property, which is a property that is currently lived in or currently owned, and you're purchasing it from the vendor, they will give you an additional 5% of the purchase price. However, there's always a catch. There's always a catch. It's called shared equity, meaning that you are going into a partnership with the government on this property.
Speaker 2:Interesting, right, but I understand the concept. It's, you know, to help people get into home sooner rather than having to wait. You know, three, four, five, six, you know however many years it'll take for them to actually save up that 10%. If you are interested in a new construction property, they will give you an additional 10%. So, in total, you're going into this deal with 15% down payment, which would, you know, make your monthly payments a lot lower than had you either one waited or two go, try to go in with 5%. So those are some programs that the government has recently implemented to help first timers In terms of financing.
Speaker 2:You know, any lender can lend up to 95%, again based on your qualifications, as long as the lender approves your, your profile, but is also subject to what's called default insurance. So we have CMHC, which is Canada Mortgage Housing Corporation yeah, 23 years, and I still fumble that. We also have Canada Guarantee and Sagan, and so these companies will protect the lender in the event that something you know you're not able to make your payments. Then they can recruit, but what they that allows them to do is lend up to 95% of the purchase price.
Speaker 1:Okay so that's helpful for someone that doesn't have the additional Absolutely. Give them a little bit of a protection. I'm guessing.
Speaker 2:Absolutely, absolutely. Both protects the bank, but it gives you the opportunity to get into your home a lot quicker.
Speaker 1:Okay, okay, okay. So now we're ready and we're getting into this market. You know it's 2023 and so what are some of the risks that we should be worried about or kind of protect ourselves against in this type of market if we wanted to purchase a home?
Speaker 2:I think the first thing is to never overextend yourself. Right, don't want a home so badly that you will max out your budget. Yes, right, so I can pre-qualify you for a home that's 750,000, but does that mean you can actually afford it?
Speaker 1:Mm-hmm.
Speaker 2:Right, when I do go through the qualifications, I'm only factoring just a few things off of your monthly expenses, but I don't factor in like you know, I speak to a lot of moms. I don't factor in childcare, I don't factor in daycare or extracurricular activities. Those are things that cost money that doesn't get added to the application. Right, so you may be able to, on paper, afford 750,000, but does it make financial sense?
Speaker 1:Exactly.
Speaker 2:I think that's the first risk.
Speaker 1:Yeah, no, that's a big one, because, you know, in my realm I teach budgeting and that is the key right. You have to understand all your expenses, not just what the bank is telling you. Oh look, you can buy a million-dollar home. Well, you know what?
Speaker 2:Can you really afford it? I would say the other thing to be caution of is not all mortgages are created equally, and so you know, going back to our credit conversation, sometimes you know people, are they really, really you really want to get into a home and you know, instead of patiently waiting to rebuild themselves, they'll go in and, you know, commit to a mortgage that is very costly, right On the front end, on the back end, without reading any paperwork, right, and so those are things that I think would be risky making sure that you're very aware of a deal that you're getting into right, understanding that whomever you're working with is explaining all the costs that are involved in the transaction. And then, mainly, do not overextend yourself.
Speaker 1:Right and understand what the bottom line is. Right, right, yeah. And then you know you can go back to your budget and see if it actually works. Absolutely so true. Well, having you on this show has been so awesome, so why do you think it's important to have a?
Speaker 2:mortgage broker in your corner? Oh, that's my favorite question, caroline. Well, I've been in the industry for over 20 years and you know our role in society has changed, right? We really thought of only for people who had bad credit, and that it couldn't be the furthest thing from the truth. What a mortgage broker does? It gives you access to options.
Speaker 2:Everyone's situation is going to be different, and where you are currently, you know you may be financially ready, but the bank may not like how your portfolio looks right, and so, therefore, you're limited with what the bank can offer you While you're working with myself. I have access to every tier of lending out there. I have access to the banks. I have access to trust companies. I have access to credit unions. I have access to what we call monoline lenders or mortgage lenders. I have access to private funds right, I have access to so many different types of lenders that you may be able to fit into their box, right, and get yourself into the home a lot quicker. But if you don't have that conversation with a broker, you won't know. We have been taught to go to the banks for everything. Right, it's just natural, right?
Speaker 1:That's where I'm coming from you know, took us to open our first bank account. Do you know what I?
Speaker 2:mean Absolutely, absolutely. And I have several clients who have, you know, been with an institution for years upon years and when they were ready to purchase they weren't able to get approved with that institution Right. So, again, working with a broker will give you a multitude of options that will help you to get into your home and a product that works for you.
Speaker 1:Yeah, and, like I said, having someone in their corner that's actually rooting for you, absolutely. Sometimes, the banks are really trying to just sell you something Sometimes, and they're not necessarily yeah, exactly, and they're not necessarily on your side, right?
Speaker 2:Absolutely.
Speaker 1:So yeah, the difference for sure.
Speaker 2:We're building a relationship right. My goal is to not just get you one mortgage. My goal is to educate you through the process and teach you how you can get another mortgage and then another mortgage right. And ultimately help you get your kids' mortgages. Typically the lending institutions that's not their business. Their business is volume getting as many deals approved and closed as possible. They're not really concerned with your the holistic look at your financial portfolio. So that's one of the. That's the benefit of working with a mortgage.
Speaker 1:That is the benefit, Absolutely so where can they find you? If anybody wants to reach out, where would they be able to find you?
Speaker 2:I am available on all social platforms. Instagram, though, is my playground. You go find me on Instagram. My business page is mortgages for moms, using the number four. I am on Facebook as well. I'm even on TikTok. I don't spend a lot of time there, but I like TikTok. I scroll a lot more than I put content out there. Yeah, or you can find me on my website at shivanbentcom.
Speaker 1:Absolutely. It's such a great conversation and I thank you so much for sharing all this knowledge with us. Thank you, it's really helpful, especially for a first time home buyer in the saving process. Just you know, having that information is golden. So again, much appreciated.
Speaker 2:Thank you for having me, carolyn. Thank you, okay.
Speaker 1:So wasn't that a great conversation, a lot of great points, especially about your credit. I can't stress enough how important it is to protect your credit score. As you've heard, it is used for everything and I know a lot of you may be discouraged because of the market and the way that it is right now. Things are expensive, interest rates are up, rent is expensive, but if we're building a foundation, this is one of the most important topics Understanding how to protect your credit, utilizing the government programs that are out there and then thinking beyond, outside of the box, perhaps buying property for an investment purpose, living and renting. You know there's so many opportunities out there. So don't get discouraged by the market conditions right now, because as you build that foundation, you are going to get better and better and be in a place when things are right for you to be able to act on it.
Speaker 1:So I hope you enjoyed this episode. It was great talking to my colleague, siobhan, and if you have more questions, don't hesitate to reach out. I'm only a DM away on Instagram and you can send me an email. I would love to hear from you and if you have topics that you'd like to learn about, please feel free to share them with me and I will add them to our roster. Alright, well, we will see you guys next week, thursday, same time, same place. Thank you for listening. We are committed to helping you place your very first steps into your new home. See you next time.