Who knew you could be living in a money-maker?
The roof over your head is likely the biggest asset you'll ever own. Trouble is you don't see any money from your house until you sell it – unless you follow the lead of some ingenious homeowners who have figured out a way to cash in on their homes while still living in it. You could be sitting on a pile of dough without even realizing them. Here's how you can make your home make money.
1. Become a landlord
The plan: Rent an apartment in your home. It could be a basement bachelor, a renovated attic, an entire floor or a detached, renovated garage. Renting an apartment can allow you to buy a house you might otherwise not be able to afford. "It also allows many seniors to hang on to their homes," says Susan Wankiewicz, executive director of the Landlord's Self-Help Centre, a nonprofit service that helps small-scale landlords in Ontario.
KA-ching!: Rents range from a few hundred dollars to more than $1,000 a month. When Rosalind Stefanac and her husband bought their first home in Toronto in 2002 for $300,000, they specifically looked for a property with an apartment that would help ease the mortgage payments. They rented out their basement apartment for $700 a month, which covered half the mortgage.
Reality check: It takes more than paint and wallpaper to make an apartment suitable to rent. Each municipality in Canada has individual standards regarding renting, and you'll need to ensure the space meets zoning codes. Stefanac spent about $10,000 on drywall, insulation, carpets, wiring and a new fridge – and it took 14 months of rent money to recoup the cost.
Being a landlord can also be stressful, especially when your tenant gets behind on the rent. After Stefanac's first tenant lost his job, he couldn't always make the rent and sometimes paid her partially with five- and 10-dollar bills. Carefully screen potential tenants by getting references, especially from previous landlords.
2. Put up a parking lot
The plan: Rent out your driveway or garage to people who need parking space (usually in major urban centres) or storage facilities for items that need to be kept indoors over winter, such as boats and motorcycles. Free classified ad websites such as www.craigslist.org and www.kijiji.ca have categories specifically devoted to parking and storage spaces for rent.
KA-ching!: Norm Gill, a retired school district employee whose Vancouver home is close to B.C. Children's Hospital (where parking spots go for $10 a day), rents out two spaces in his four-car garage for a total of $300 a month. "We built a new home and didn't realize how much it would cost, so this brings in a little extra money," he says. Rebecca Gruihn, a film student at York University in Toronto, rents out the parking space that comes with her apartment for $75 a month. "It's not a lot of money, but when you're a student, every bit helps," she says.
Make your property a star
The plan: Rent out your home as a set for a commercial, TV movie or feature film. Every province in Canada has a government-run film development corporation (British Columbia Film, for example) that lists properties available to location scouts and producers. All you need to do to get listed is send in photos of your home.
KA-ching!: Rental rates can vary from $500 to $5,000 a day, depending on the type of project (a feature film typically pays more than a TV production). When the Honourable Myra Freeman, lieutenant-governor of Nova Scotia, listed her Halifax home for sale in 2000, a location scout who went to the open house decided the 1970s details – yellow appliances, shag carpet and wallpapered rooms – were just right for the feature film Scotland, Pa., directed by Billy Morrissette and starring Christopher Walken. Freeman was pleased by the respect the film company showed for the property during the three-week-long shoot and says seeing a movie made in her home was an "exciting adventure." Over the past two years, Susan Harding-Cruz of Hamilton has earned $5,000 for renting out her home for three TV productions that each took three days to shoot.
Reality check: A movie shoot can upend your life, since you'll have to move out of your home during filming. You may have a crew of 50 people tramping through your house, so things can get broken. "This isn't for someone who is uptight about her home," says Harding-Cruz. "If you've got lots of precious things around, it might make you nervous." Check that the production company has adequate insurance to cover replacement costs. When one of Freeman's antique tables was badly scratched, the film company paid for a replacement.
4. Host a student
The plan: Host an international student in your home by providing a separate bedroom and three meals a day. Homestays, as they are called, can last anywhere from a few days to a year, and students can range in age from 10 to 60. The host family is expected to spend quality time with the student, helping him adjust to a new culture and often a new language.
KA-ching!: You can earn about $500 to $800 a month per student and can host more than one student, says Robin Wilson, managing director of Canada Homestay International, which has a network of 4,000 homeowners across the country. Laura Williams, a Vancouver-area energy manager and single mom to three teens, hosted a 16-year-old Brazilian boy and received $800 a month. "It was a positive experience for my kids," says Williams. "They loved getting to know Felipe and treated him just like a brother. And they are hatching plans to go visit him in Brazil now that he is back home."
Reality check: You, the homeowner, lose some privacy, and students may test their newfound freedom since they are away from their families, often for the first time. Felipe had trouble sticking to a curfew because he hadn't had one back home.
5. Run a bed-and-breakfast
The plan: Offer one or more rooms in your home to travellers who are visiting your area.
KA-ching!: Rates vary widely, from about $50 to $200 a night, depending on how luxurious the accomodations are and where you are located. Debbie Gaspich purchased her 150-year-old home, the Martin House Bed and Breakfast, in Jordan Village, Ont., (close to Niagara-on-the-Lake and the popular Shaw Festival) with the intention of continuing to rent out the rooms to pay for the renovation and upkeep of her large property. She began by renting just a couple of rooms and earned $7,000 in her first year. Today she rents five bedrooms, as well as a small cottage on the property, from May to October and earns $25,000 annually. She manages the B&B on top of a full-time job.
Reality check: Changing sheets. Preparing brunch. Keeping your home tidy. Engaging in small talk early in the morning even if you don't feel up to it. Running a B and B can require a lot of work and energy.
6. Go back to the land
The plan: If you own a large parcel of land in a rural area, you can rent it to farmers to raise crops or livestock.
KA-ching!: Depending on where you live and what the land is used for, rates can vary from $20 to $200 an acre, says Kevin Hursh, an agriculture consultant in Saskatoon. "There are different values for different crops – you can earn more if you rent your land to harvest soybeans instead of wheat or barley, for example." Six years ago, Tami and Daniel Blais sold their house in town and moved to a $130,000 country home that came with 160 acres outside Battleford, Sask. Instead of farming the land themselves, they rent 80 acres to a local farmer. The farmer keeps two-thirds of the profits and pays the other third (about $3,000 a year) to the Blaises as rent. "We use the money to pay our property taxes and insurance," says Tami.
Reality check: The odour of manure in the fields and the noise of combines swathing the crops may be a bit of a nuisance, but for most people in rural areas this is just part of country living. More concerning is the potential for pesticide drift when crops are sprayed. Also cattle or horses may get out and require rounding up.
7. Tap into your equity
The plan: Apply for a home equity loan. One-quarter of Canadian homeowners have borrowed against the equity in their home, according to a recent Ipsos-Reid survey. These loans are easy to qualify for and have lower interest rates than other types of loans (usually around prime). Plus, banks typically require that you pay only the interest expense of the loan.
KA-ching!: This is an easy way to get access to a lot of money without having to wait too long. "Many banks will lend you up to 80 per cent of the value of your home, 85% with some private lenders, minus any outstanding mortgage".
Reality check: Because they are so easy to acquire, you can land in more debt than you can handle. If the market turns downward and your $300,000 house is suddenly worth only $250,000, you've lost a lot of the equity in your home and still have the loan to repay.
by Anne Bokma
Posted by Steven Porter. Steven is a licensed Mortgage Agent with Mortgage Architects and a retired licensed, real estate broker with 30 years experience in residential real estate. He can be reached at 1-905-875-2582; steven.porter@mtgarc.ca or online at 1800Mortgages.ca
Tuesday 23 August 2016
10 Things to Know About Second Mortgages
When I talk about second mortgages, I don’t mean it in the sense of getting a mortgage on a second property. In this case I’m talking about a second mortgage, following an existing first mortgage secured by the same property. Second mortgages aren’t for everyone, so I’m going to highlight what I think are the top ten things you should know about them to determine if one is right for you.
1. Get the cash you need quick
A second mortgage is a great way to access any available equity quickly without having to break the terms you presently have in place for your first mortgage. This way you will avoid any potential payout penalties associated with that first mortgage.
2. Types of second mortgages
Basically, you can get a home equity line of credit (HELOC) secured by a 2nd mortgage behind your first mortgage, or a 2nd mortgage that is a separate loan on the property. The HELOC is limiting, because it is only available for up to 65 percent of your home value and has strict qualifying requirements - whereas the 2nd mortgage loan can go as high as 95 percent of your property value depending on the lender, private lenders being the most flexible.
3. Private lenders have looser qualifying guidelines
If you are having problems qualifying for a 2nd mortgage with the lender who presently holds your 1st mortgage or any other lender for that matter, you may want to have a look at what private lenders have to offer by going through an independent mortgage professional. As you are not dealing with a large and potentially rigid institution, private lenders tend to be more flexible when it comes to qualifying and will work with you to find a solution that works for both you and them. Keep in mind - they lend on a smaller scale so, while their qualifying guidelines and document requirements are a bit looser, they tend to be more selective about the property they use to secure the mortgage. Talk to your favorite mortgage professional about how second mortgage lenders products are different than going through a typical first mortgage lender.
4. Higher rates and fees
While the HELOC usually comes with favorable terms like interest-only payments, an open term and a low variable interest rate, they are restrictive in their loan-to-value and qualifying guidelines. Private second mortgage lenders, on the other hand, are more adaptable in that they know they will not be paid out first in the event of a sale or a default. Because they are essentially taking on a greater risk being paid out second, they will likely charge higher interest rates and an upfront fee. But don't worry - there are still deals to be had. Some mortgage professionals have established relationships with a private lender that afford them competitive terms. Or, some first mortgage lenders have arranged special discounted rates through an exclusive relationship with a second mortgage lender, allowing them to offer a blended product for the customer that enables them to borrow more.
5. Watch out for renewal fees and increased payout penalties
Private lenders usually consist of an individual or group of individuals lending out their capital in the form of real estate secured financing (also known as mortgages). As private lenders are not a bank, they are not governed by the usual bank rules and can lend to higher loan-to-values, ask for less qualifying documentation and charge higher renewal and payout penalties at their discretion. This information will be disclosed in your mortgage commitment or in the documents you sign with your lawyer. So, whichever type of 2nd mortgage lender you choose to go with, ensure you fully understand all the terms and fees involved in borrowing those funds.
6. Short term is best
I recommend only using a second mortgage as a short-term financing solution. Higher interest rates, coupled with larger penalties and fees should propel you to find a less expensive financing solution if possible. If you have no other options available to you, know exactly what you are getting into and find out what is necessary to avoid private lending again. You may need to fix your credit or aggressively reduce your mortgage amount in order to build enough equity to eventually combine the two mortgages you have into only one, at a competitive rate with a lower payment amount.
7. When would taking a second mortgage make sense?
Most importantly, there has to be sufficient equity in your home to support a second mortgage as the “A” lenders will only allow you to refinance up to 80 percent of the home's present value. If you are in the first year or two of a closed fixed rate mortgage term, or your mortgage rate is higher than rates offered today, there could be a large penalty involved in accessing equity via breaking your term to refinance. In this case, a second mortgage could be a potential solution for you to access funds from your home. Alternatively, if current interest rates are higher than the rate on your existing first mortgage, instead of a second mortgage, you could consider refinancing your first mortgage to access home equity. I would ask your favourite mortgage professional for some savings calculations that should help you with your decision on how to obtain that equity, and if it's worth it to do so.
8. One, two, me
If you have a second mortgage on your home, you are third in line to benefit from any equity available once the property sells and all costs associated with the sale (including any real estate fees) have been paid. Your first mortgage holder gets their mortgage balance owing, then the second mortgage is paid out, then the fees associated with selling. Finally, you will receive the remainder as proceeds of the sale. Second mortgage financing reduces the equity you have in your home and you should keep that in mind if you’re selling soon and want to maximize your profits earned.
9. Who you know makes a big difference
If you’re looking for a Home Equity Line of Credit, visit your personal banker as well as a independent mortgage professional to explore the options available to you as not all HELOCs are the same. I mentioned this as some lenders have what is called a “bundled product” which allows you to access home equity a number of different ways under one umbrella. This could include lines of credit, or various credit card accounts, fixed and variable rate mortgages, and more. When it comes to private financing, who you know matters more than what you know. Access to multiple private lenders, instead of just one or two, optimizes the best solution for your financing needs. In addition to access to more financing options, working with a mortgage professional who has experience with both private and second mortgage financing can also benefit you, especially if you're still unsure that it's the best solution available to you at this time.
10. Have an exit strategy
It is usually the intention of a majority of homeowners to pay down their mortgage balances as quickly as possible and a second mortgage can only cause delays in reaching that goal. Before you commit to second mortgage financing, ensure you have an exit strategy planned in order to protect your assets. Work with your mortgage professional on a plan that either has you paying off the 2nd mortgage financing quickly, or an eventual refinance solution in place to avoid the renewal of your second mortgage multiple times.
By Jackie Woodward
Posted by Steven Porter. Steven is a licensed Mortgage Agent with Mortgage Architects and a retired licensed, real estate broker with 30 years experience in residential real estate. He can be reached at 1-905-875-2582; steven.porter@mtgarc.ca or online at 1800Mortgages.ca
1. Get the cash you need quick
A second mortgage is a great way to access any available equity quickly without having to break the terms you presently have in place for your first mortgage. This way you will avoid any potential payout penalties associated with that first mortgage.
2. Types of second mortgages
Basically, you can get a home equity line of credit (HELOC) secured by a 2nd mortgage behind your first mortgage, or a 2nd mortgage that is a separate loan on the property. The HELOC is limiting, because it is only available for up to 65 percent of your home value and has strict qualifying requirements - whereas the 2nd mortgage loan can go as high as 95 percent of your property value depending on the lender, private lenders being the most flexible.
3. Private lenders have looser qualifying guidelines
If you are having problems qualifying for a 2nd mortgage with the lender who presently holds your 1st mortgage or any other lender for that matter, you may want to have a look at what private lenders have to offer by going through an independent mortgage professional. As you are not dealing with a large and potentially rigid institution, private lenders tend to be more flexible when it comes to qualifying and will work with you to find a solution that works for both you and them. Keep in mind - they lend on a smaller scale so, while their qualifying guidelines and document requirements are a bit looser, they tend to be more selective about the property they use to secure the mortgage. Talk to your favorite mortgage professional about how second mortgage lenders products are different than going through a typical first mortgage lender.
4. Higher rates and fees
While the HELOC usually comes with favorable terms like interest-only payments, an open term and a low variable interest rate, they are restrictive in their loan-to-value and qualifying guidelines. Private second mortgage lenders, on the other hand, are more adaptable in that they know they will not be paid out first in the event of a sale or a default. Because they are essentially taking on a greater risk being paid out second, they will likely charge higher interest rates and an upfront fee. But don't worry - there are still deals to be had. Some mortgage professionals have established relationships with a private lender that afford them competitive terms. Or, some first mortgage lenders have arranged special discounted rates through an exclusive relationship with a second mortgage lender, allowing them to offer a blended product for the customer that enables them to borrow more.
5. Watch out for renewal fees and increased payout penalties
Private lenders usually consist of an individual or group of individuals lending out their capital in the form of real estate secured financing (also known as mortgages). As private lenders are not a bank, they are not governed by the usual bank rules and can lend to higher loan-to-values, ask for less qualifying documentation and charge higher renewal and payout penalties at their discretion. This information will be disclosed in your mortgage commitment or in the documents you sign with your lawyer. So, whichever type of 2nd mortgage lender you choose to go with, ensure you fully understand all the terms and fees involved in borrowing those funds.
6. Short term is best
I recommend only using a second mortgage as a short-term financing solution. Higher interest rates, coupled with larger penalties and fees should propel you to find a less expensive financing solution if possible. If you have no other options available to you, know exactly what you are getting into and find out what is necessary to avoid private lending again. You may need to fix your credit or aggressively reduce your mortgage amount in order to build enough equity to eventually combine the two mortgages you have into only one, at a competitive rate with a lower payment amount.
7. When would taking a second mortgage make sense?
Most importantly, there has to be sufficient equity in your home to support a second mortgage as the “A” lenders will only allow you to refinance up to 80 percent of the home's present value. If you are in the first year or two of a closed fixed rate mortgage term, or your mortgage rate is higher than rates offered today, there could be a large penalty involved in accessing equity via breaking your term to refinance. In this case, a second mortgage could be a potential solution for you to access funds from your home. Alternatively, if current interest rates are higher than the rate on your existing first mortgage, instead of a second mortgage, you could consider refinancing your first mortgage to access home equity. I would ask your favourite mortgage professional for some savings calculations that should help you with your decision on how to obtain that equity, and if it's worth it to do so.
8. One, two, me
If you have a second mortgage on your home, you are third in line to benefit from any equity available once the property sells and all costs associated with the sale (including any real estate fees) have been paid. Your first mortgage holder gets their mortgage balance owing, then the second mortgage is paid out, then the fees associated with selling. Finally, you will receive the remainder as proceeds of the sale. Second mortgage financing reduces the equity you have in your home and you should keep that in mind if you’re selling soon and want to maximize your profits earned.
9. Who you know makes a big difference
If you’re looking for a Home Equity Line of Credit, visit your personal banker as well as a independent mortgage professional to explore the options available to you as not all HELOCs are the same. I mentioned this as some lenders have what is called a “bundled product” which allows you to access home equity a number of different ways under one umbrella. This could include lines of credit, or various credit card accounts, fixed and variable rate mortgages, and more. When it comes to private financing, who you know matters more than what you know. Access to multiple private lenders, instead of just one or two, optimizes the best solution for your financing needs. In addition to access to more financing options, working with a mortgage professional who has experience with both private and second mortgage financing can also benefit you, especially if you're still unsure that it's the best solution available to you at this time.
10. Have an exit strategy
It is usually the intention of a majority of homeowners to pay down their mortgage balances as quickly as possible and a second mortgage can only cause delays in reaching that goal. Before you commit to second mortgage financing, ensure you have an exit strategy planned in order to protect your assets. Work with your mortgage professional on a plan that either has you paying off the 2nd mortgage financing quickly, or an eventual refinance solution in place to avoid the renewal of your second mortgage multiple times.
By Jackie Woodward
Posted by Steven Porter. Steven is a licensed Mortgage Agent with Mortgage Architects and a retired licensed, real estate broker with 30 years experience in residential real estate. He can be reached at 1-905-875-2582; steven.porter@mtgarc.ca or online at 1800Mortgages.ca
All the Ways Bad Credit Can Make Your Life Difficult
Anyone who has had bad credit knows that it can be a huge pain in the butt. Oh sure, it doesn’t seem to affect your day-to-day too much. But when it comes time to get a car, or fill out a rental application, that crappy credit score comes back to haunt you. Here are a few disadvantages of having poor credit, and what you can do about it.
Your Cable, Phone and Internet Bills Can be Higher
If your credit isn’t great, don’t be surprised if your cable, Internet, or cell phone bill comes with an extra fee. We’ve told you before: service providers are allowed to charge you more for having poor credit. It’s called “risk-based pricing”.
You’ll want to check your monthly bill, or even call your service provider, to see if you’re paying extra. Then, review your credit report (which you should do anyway) and see why your score is so low in the first place. If there are any errors, write the credit bureau a letter disputing them. If that doesn’t work, there’s not much you can do to get rid of this fee aside from improving your credit.
It’ll be Tough to Apply for a Mortgage
If your credit is really bad, you might have a hard time buying a house. It’s difficult, but not impossible. Some mortgage lenders are becoming more lenient about low scores, especially if applicants have proven a year of on-time payments. You can get a mortgage loan with a credit score as low as 580, assuming you have the cash for at least 10% of a down payment. In some cases, you might even be able to get a loan with a 500 credit score, but expect to put down even more up front.
However, even if you can get a mortgage loan, your interest rate will be a lot higher than someone with great credit.
Even half a percentage point can cost you more in the long run, so you might consider improving your credit before taking out a mortgage loan. Of course, mortgage rates are really low right now, so you also have to consider the market, but your credit score plays a big role, too.
You’ll Have Higher Interest on Other Loans
High interest rates aren’t just limited to your mortgage. If you take out an auto loan or a personal loan, you can expect higher than average rates, too.
If your credit is really bad, you’ll probably have to take out a subprime auto loan (if you have to take out a loan at all). A subprime loan is a special loan for borrowers with weakened credit histories—and according to Edmunds, your interest rate on a subprime loan could be as high as 18%.
You may want to try to getting a loan with a local credit union, which might be a little more lenient. Also shop loan terms, not just monthly payment. You want to consider what you’re paying in total over time:
Look for the cheapest money — the lowest APR over the shortest period. Don’t be distracted by promises of a lower monthly payment over a longer period of time. If the only way you can make the payments is to take out a long-term loan, you probably can’t afford the car.
Credit card interest rates have a pretty wide range. According to Investopedia, they can be anywhere from 7 to 36 percent. If your credit score is poor, you can probably expect a rate of 22 percent or more, Investopedia says.
Work on improving your score, and when you notice it’s a little higher, call your credit card company and follow this script for a better rate.
You May Have Trouble Renting an Apartment
Renting an apartment can be a huge hassle if your credit isn’t great. Again, you’re seen as a risk, and the landlord or rental company wants to make sure you can pay on time each month. Luckily, there are a few things you can do to improve your chances of getting the apartment you want. We’ve detailed these methods here, but a few options include:
Provide a brief explanation: Add a statement to your credit report explaining any negative items.
Ask for a recommendation: If you’ve been current on your payments, ask previous landlords to offer a letter of recommendation stating that.
Offer an incentive: Offer to move in immediately, put down a bigger security deposit, sign a shorter-term lease, or a direct deposit from your bank.
Of course, cosigning is also an option, but not one that should be taken lightly. You may also want to consider looking for smaller, independent owners who might be willing to work with you.
When it comes time to turn on your water or electricity, the utility company might ask you to pay a security deposit if you have bad credit. If so, make sure you’re clear on what happens to this money when you move. In most cases, you’ll simply get it back when you move, but you want to make sure this is the case.
Really, that’s what the solution to all of this comes down to: improving your credit. Get a free copy of your report, review it thoroughly, then implement a few strategies to boost your score. Either way, it helps to simply be aware of each of these drawbacks so you’re prepared when the issue comes up. While there are some workarounds to each of these hassles, fixing your score is the best long-term solution.
Original article by Kristin Wong, edited for Canada by Steven Porter
Posted by Steven Porter. Steven is a licensed Mortgage Agent with Mortgage Architects and a retired licensed, real estate broker with 30 years experience in residential real estate. He can be reached at 1-905-875-2582; steven.porter@mtgarc.ca or online at 1800Mortgages.ca
Your Cable, Phone and Internet Bills Can be Higher
If your credit isn’t great, don’t be surprised if your cable, Internet, or cell phone bill comes with an extra fee. We’ve told you before: service providers are allowed to charge you more for having poor credit. It’s called “risk-based pricing”.
You’ll want to check your monthly bill, or even call your service provider, to see if you’re paying extra. Then, review your credit report (which you should do anyway) and see why your score is so low in the first place. If there are any errors, write the credit bureau a letter disputing them. If that doesn’t work, there’s not much you can do to get rid of this fee aside from improving your credit.
It’ll be Tough to Apply for a Mortgage
If your credit is really bad, you might have a hard time buying a house. It’s difficult, but not impossible. Some mortgage lenders are becoming more lenient about low scores, especially if applicants have proven a year of on-time payments. You can get a mortgage loan with a credit score as low as 580, assuming you have the cash for at least 10% of a down payment. In some cases, you might even be able to get a loan with a 500 credit score, but expect to put down even more up front.
However, even if you can get a mortgage loan, your interest rate will be a lot higher than someone with great credit.
Even half a percentage point can cost you more in the long run, so you might consider improving your credit before taking out a mortgage loan. Of course, mortgage rates are really low right now, so you also have to consider the market, but your credit score plays a big role, too.
You’ll Have Higher Interest on Other Loans
High interest rates aren’t just limited to your mortgage. If you take out an auto loan or a personal loan, you can expect higher than average rates, too.
If your credit is really bad, you’ll probably have to take out a subprime auto loan (if you have to take out a loan at all). A subprime loan is a special loan for borrowers with weakened credit histories—and according to Edmunds, your interest rate on a subprime loan could be as high as 18%.
You may want to try to getting a loan with a local credit union, which might be a little more lenient. Also shop loan terms, not just monthly payment. You want to consider what you’re paying in total over time:
Look for the cheapest money — the lowest APR over the shortest period. Don’t be distracted by promises of a lower monthly payment over a longer period of time. If the only way you can make the payments is to take out a long-term loan, you probably can’t afford the car.
Credit card interest rates have a pretty wide range. According to Investopedia, they can be anywhere from 7 to 36 percent. If your credit score is poor, you can probably expect a rate of 22 percent or more, Investopedia says.
Work on improving your score, and when you notice it’s a little higher, call your credit card company and follow this script for a better rate.
You May Have Trouble Renting an Apartment
Renting an apartment can be a huge hassle if your credit isn’t great. Again, you’re seen as a risk, and the landlord or rental company wants to make sure you can pay on time each month. Luckily, there are a few things you can do to improve your chances of getting the apartment you want. We’ve detailed these methods here, but a few options include:
Provide a brief explanation: Add a statement to your credit report explaining any negative items.
Ask for a recommendation: If you’ve been current on your payments, ask previous landlords to offer a letter of recommendation stating that.
Offer an incentive: Offer to move in immediately, put down a bigger security deposit, sign a shorter-term lease, or a direct deposit from your bank.
Of course, cosigning is also an option, but not one that should be taken lightly. You may also want to consider looking for smaller, independent owners who might be willing to work with you.
When it comes time to turn on your water or electricity, the utility company might ask you to pay a security deposit if you have bad credit. If so, make sure you’re clear on what happens to this money when you move. In most cases, you’ll simply get it back when you move, but you want to make sure this is the case.
Really, that’s what the solution to all of this comes down to: improving your credit. Get a free copy of your report, review it thoroughly, then implement a few strategies to boost your score. Either way, it helps to simply be aware of each of these drawbacks so you’re prepared when the issue comes up. While there are some workarounds to each of these hassles, fixing your score is the best long-term solution.
Original article by Kristin Wong, edited for Canada by Steven Porter
Posted by Steven Porter. Steven is a licensed Mortgage Agent with Mortgage Architects and a retired licensed, real estate broker with 30 years experience in residential real estate. He can be reached at 1-905-875-2582; steven.porter@mtgarc.ca or online at 1800Mortgages.ca
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