Flaherty’s Mortgage Restrictions: PropertyWire Examines The Aftermath

A true measure of the impact of change is not to look at it from a scholarly level, but to examine the depth to which it manifests itself when it moves from theory into practice. And such is the case with Jim Flaherty’s most recent round of mortgage and HELOC restrictions that were announced in January of this year, and then rolled out in March and April. Two months later, as the market itself is hot (in some regions almost unbearably, unsustainably so), and the combustible combination of eroding affordability in the face of rising consumer and property prices alike faces mounting levels of consumer debt, the question remains- have these changes helped to lend stability or are consumers still biting off more than they can chew?

Canada is world-renowned for its’ stringent lending policies and many people attribute these to the fact that our economy was able to weather the recent global financial crisis fairly unscathed.

Flaherty’s changes this time around included reducing the maximum amortization on a mortgage from 35 years to 30 years in an effort to reduce interest payments for the average homeowner and to speed up the process of building up equity. He also reduced refinancing of mortgages from 90% to 85%, with the hopeful outcome of encouraging homeowners to save up for things, rather than lumping more money onto their mortgage. The final change was to withdraw government backing from HELOC’s- trying to transfer responsibility for this more consumer debt based product to the lending institution, rather than to the taxpayer.

“Canada’s well-regulated housing sector has been an important strength that allowed us to avoid the mistakes of other countries and helped protect us from the worst of the recent global recession,” said Minister Flaherty in a release. “The prudent measures announced today build on that advantage by encouraging hard-working Canadian families to save by investing in their homes and future.”

So, the best measure of what impact these changes have had is to go to the front lines- – to those who are qualifying people to borrow- and to those helping them put their financing to use, and to look at the system itself.

Sound system

Seemingly, there has not been huge impact, because of the already highly stringent lending policies in place. There seems to be an attitude of austerity and extreme responsibility, generally, when it comes to lending in Canada. This is in stark contrast with the complete economic collapse in the U.S., where the blame has fallen squarely at the feet of irresponsible, freewheeling lending, fuelled by greed rather than the principles of due diligence.

Brad Compton, Mortgage Agent, Invis Inc, says, “Canada has traditionally had quite strict rules when it comes to mortgages….at least when compared to our peers. I think our conservative view when it comes to mortgages is definitely why we fared the “economic meltdown” so well. Our recent changes to the mortgage rules has only strengthened mortgage/housing market.”

Rather, our lending system benefits from having a “worse case scenario” play itself out nearby- and where a market is still feeling the ill effects. A report released this week from the S&P Schiller Price Index, indicates that the US housing market has suffered another double dip in prices in the market- and have now experienced the most significant declines in price seen since the great depression. Despite aggressive and sustained measures, the US housing market cannot seem to get its’ feet back under it, and one can’t help but wonder what things would look like today, had more stringent lending practices been enforced from the get go.

Material impact

When it comes down to brass tacks, how much does Flaherty’s latest round of changes really factor into daily business and the attitude towards Canadian debt?

While some groups, like CREA, attribute falling home sales earlier this year  to the results of these new mortgage restrictions, “changes to mortgage regulations that took effect in April 2011 likely sidelined a number of first-time homebuyers,” said association chief economist Gregory Klump, many in the industry have not seen a huge impact in their day-to-day operations.

Compton feels that the changes are negligible, and suggests that the effects are felt more deeply in the investment community, rather than by the average consumer: “The biggest impact would be on real estate investors who now have to put down 20%. The average homebuyer is not really affected by the decrease in amortization from 35 to 30 years. It really only equates to about $85 on a $250,000 mortgage. The regulations were meant to eliminate those buyers and speculators on the fringes of affordability, which it has, but the average homebuyer is not affected.”

Given the underlying conservative attitude towards lending in this country, perhaps these changes were as much to remind about responsible lending, than to actually effect any change. Much of the lending practice in the country was already reflecting much of Flaherty’s intent by examining many different scenarios before qualifying people.

Kristian Harris, Mortgage Agent with MonsterMortgage.ca, says that there have been high standards all along: “I don’t believe they have caused any slow down because lenders were already qualifying clients for high ratio variable rates and higher fixed rates. Our banks are very conservative and even prior to the new rules the banks made sure clients who were taking a variable rate would still have some “breathing room” based on rates increasing.”

“Any client who couldn’t afford rate increases most likely was not getting approved to begin with. As for HELOC products for high ratio mortgages…although the government may have approved this product, no lender actually offered it, so the impact was zero. Refinancing from 90% to 85% has stopped some Canadians from refinancing as they may not be able to pull out enough equity to justify the premium, but this is probably a good thing!”

Not all debt is equal

There has been an awful lot of press about debt lately- with concerns over affordability, and mounting debt levels in the country.

While mortgage debt is no question the most sizable debt that a person will take on, it is surrounded with legislation, insurance, due diligence and accountability. Furthermore, although prices vary region to region, there is generally a price appreciation across the country. Mortgages are secured debt- and most homeowners are not facing the prospects of negative equity to the same extent our neighbours to the south are.

Says Harris: “It is credit card and retail debt that hurts Canadians (not mortgages).Although mortgage debt has been discussed quite a bit recently, the reality is that mortgage rates have been low for years and will remain low, whereas interest on credit cards can be as high as 24% annualized.  And with a mortgage, you have a debt on an appreciating asset, that’s not a bad debt to have”

He suggests that “Maybe stop having credit card companies hand out cards at sporting events and college and university campuses like they are handing out free gum. I think he (Flaherty) needs to worry about credit card companies and other retail finance companies charging 25% to Canadians to buy furniture”

This begs the question- if there is , in fact, this degree of concern about rising debt levels,  perhaps legislative eyes should be focusing in other directions- namely towards costly and at times risky, consumer debt.  If the goal is to make sure that Canadians are not biting off more than they can chew, shouldn’t we be looking at their total financial plate?

Compton too thinks that the focus needs to be shifted elsewhere.” Other forms of personal debt such as credit cards could probably stand to be overhauled. Department store cards and high interest cards…are all quite easy to get. Most of the people I see who are in credit trouble might have one….maybe two pieces of credit from their bank and then 5-10 pieces of credit from these other providers. Low introductory rates and other promotions seem to encourage people to run up their debt, not thinking of the consequences when that rate resets at a normal 20%+ rate and they have no way to pay it off.”

“The credit card then has you trapped and destined to keep paying them interest for a very long time. The government could put in place rules to limit some of the marketing practices of these credit providers and possibly make it a bit more difficult for people to get debt.”

Majority Government and beyond

While it may be too soon to tell what lies in store exactly for with the new government, there are likely not too many surprises up their sleeve.  Although Harper has a majority now, many of the players are the same that have a direct impact on the Real Estate and Mortgage Industries, as is a prevailing attitude of financial austerity.

As Compton says, “It’s not really a new government. We have the same prime minister, finance minister and BOC head. It will most likely be business as usual.“

Although there is no question that Canadian debt is on the rise- a recent TransUnion study puts the average amount of non-mortgage, consumer debt at $25,597, a slight rise from this time last year.

There is indeed an appetite for debt amongst Canadians, and as has been suggested, perhaps the focus need to not only be on controlling access to this kind of debt- but in also giving Canadians the tools to manage debt appropriately.

Perhaps Flaherty’s changes were as much about sending a message about fiscal prudence and financial accountability, as they were about restricting lending.  And as we have seen, change is as much about context as it is about implementation.

This article was written by Heather Wright, thank you Heather. More great articles like this one can be found at www.propertywire.ca

http://propertywire.ca/features/features/market-intelligence/1135-flahertys-mortgage-restrictions-the-aftermath.html

Bank Sets Off Round of Falling Fixed Rates

It’s the kind of domino effect brokers like, with one lender moving to lower the rate on its five-year fixed followed by another and another and …

“I expect the lenders in the broker channel to follow suit as well,” said Gautam Jain, a mortgage agent with Argentum Mortgage and Finance as well as a certified financial planner. “It’s simple economics: once one lender moves, they all do.”

The country’s largest bank, RBC, moved Tuesday afternoon to drop the posted rate for its residential five-year fixed mortgage by 10 basis points to 5.59 per cent. It did the same for its special five-year closed, which fell to 4.44 per cent

   Another major player in the mortgage space, TD rushed to duplicate the adjustment, dropping it five-year closed and special five-year closed by the same 10 basis points, to 5.59 per cent and 4.34 per cent, respectively. Scotiabank did the same, bringing its own five-year closed in line with RBC and TD. It also dropped its discounted five-year to 4.39. National Bank and Laurentina Bank also lowered their five-year closed fixed-rates to 5.59 per cent, effective May 20.

   Other competitors, both the commercial banks and monocline lenders focused on prime, insured loans, are expected to follow in the next 24 to 48 hours. The same herd mentality was evident in the last collective move by lenders to raise rates on their fixed mortgages last month, by 20 to 35 basis points. As it was in April, shrinking bond yields likely precipitated the move.

“Five-year GICs have come down,” said Jain, “so the lenders are passing on the saving to the consumer and also want to encourage more buyers to enter the market, which has been slow in some areas. It hopefully should encourage some people sitting on the fence to buy now.”

Lenders are likely hoping for the same result, although any delay in adopting the lower rates may cost them as brokers and consumers migrate to institutions offering the lowest rates in addition to broker discounts.

The rate drop actually run counter to what most analysts had predicted for fixed mortgages in the near-term. As late as last month, Canadian banks were forecasting as much as a 100-basis point increase in 5-year bond yields over the next two years, making for a corresponding hike in fixed-rates mortgages.

That could still happen, with brokers across the country readying to contact clients ambivalent about whether to convert variable-rate mortgages to fixed, effectively giving them a heads-up.

Another great article found at www.mortgagebrokernews.ca

U.S. Economy & Canadian Mortgage Rates

With Canada so married to the U.S. economy, Canadian rate speculators are perpetually glued to U.S. Fed announcements.

Today we had a unique opportunity to watch U.S. Fedchief, Ben Bernanke, hold a scheduled press conference (Fed chairmen never do that). He said he wanted to “add transparency” to the Fed’s plans for future monetary policy.

Bernanke made several points of note for Canadian rate watchers. He said:

• “Exceptionally low” U.S. interest rates will last for an “extended period.” The Fed has used that “extended period” phrase since March 2009.
• U.S. inflation is picking up but “longer term inflation expectations have remained stable and measures of underlying inflation are still subdued.”
• 2011 U.S. growth expectations have been cut to 3.1% (from 3.3%)
• The U.S. labour market is in a “very, very deep hole”
• Long-term U.S. unemployment is the “worst” it’s been since WWII
• Rising oil prices are “bad for the recovery.”

All the Fedspeak of late continues to point to a slow and measured increase in U.S. rates, starting no earlier than late this year or early 2012.

A cautious Fed means the Bank of Canada will continue to be under less pressure to lift rates here. Mind you, analysts still expect the BoC to operate somewhat independently of the Fed thanks to Canada’s firmer economic footing.

The Fed aside, most economists are still predicting the next Canadian rate increase will fall on July 19…for what that’s worth.

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Sidebar:  Bernanke said today that the reason he makes vague projections is because “we don’t know with certainty” how the economy will evolve.

That’s a good reminder of how imperfect economic forecasting is…because if the Fed doesn’t know, no one knows.

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I found this article on the Canadian Mortgage Trends websit @ www.canadianmortgagetrends.com

Written by Rob McLister, CMT

Vancouver Buyers, Canada’s Most Conventional?

Bless their hearts. In the face of soaring home prices, British Columbians are more inclined than other Canadians to come up with a 20-per cent down payment – if not more – according to a new survey.

In fact, of those B.C. homeowners answering an ING Direct poll in March, some 52 per cent said they’d placed a down payment of more than 20 per cent on their homes. Of homeowners in Ontario, only 41 per cent opted for conventional mortgages. In Alberta, that figure falls another 10 per cent to 31, with Quebecers following at 27 per cent.

The survey results may challenge what mortgage brokers think they know about their respective markets. They also illustrate the demographic challenges facing brokers who focus on servicing first-time homebuyers in Ontario and other eastern markets where the number of young people hasn’t kept pace with aging baby boomers.

That’s not the case in Alberta, where only a third of the survey’s respondents took out a conventional mortgage. The level of high-ratio mortgages, said one Calgary broker, isn’t necessarily a bad thing.

“The big thing in Alberta is that there is a lot of young people here, a younger workforce, and it would take them quite a long time to save up 20 per cent of the average home price,” said Tom Lam, president of Urban Mortgage, a brokerage with associates across Alberta. “As a result, we have a lot of first-time homebuyers getting into the market, and high-ratio mortgages are very important, because first-time homebuyers are helping to drive the economy.”

Lam argues that the income of those workers and the growing global demand for Alberta oil means young homeowners should be able to absorb the kind of rate increases expected later this year. That’s even if the market suffers the kind of value slides it did in 2010.

But economists aren’t predicting a cooling in Vancouver, where the average home price hit the $1 million mark in January. That growth has led to some of the highest home-price-to-income ratios in Canada. Still, the popularity of conventional mortgages among British Columbians isn’t surprising, said one Vancouver broker.

“In Vancouver, we have a lot of foreign investors who have interest in our local housing market,” Ajit Hundal, a broker with TMG The Mortgage Group, told MortgageBrokerNews.ca. “Foreign investors and new immigrants generally may not qualify for high ratio mortgage insurance due to lack of credit or income in Canada and therefore have to go the conventional route when purchasing real estate in BC.  Another possible reason would be for the self-employed or commissioned individuals who are unable to provide income verification when applying for mortgages, after the Alt-A and ‘Stated’ Income programs were discontinued a couple of years back, most self-employed folks today often put down a larger down payment to qualify for mortgage financing if they are newly self-employed or simply unable to provide enough proof of income.”

Those new immigrant and foreign investors aren’t likely reflected in the ING Direct online survey of 1,062 people. All were Angus Reid Forum panelists and all were Canadian. Still, the findings suggest homeowners across the country are more conventional than the current crop of buyers. While a third (36 per cent) of those Canadians now carrying a mortgage have a conventional one, only 21 per cent of those looking to take the plunge in the next six months plan to follow suit.

More great articles like this at www.mortgagebrokernews.ca. Thanks Mortgagebrokernews!

Any question? Email me at simon.every@verico.ca or visit www.semortgages.com! Thanks!

Variable Rate Increase Expected

 

With or without a Central Bank move, brokers are bracing for an increase in adjustable rates offered through the broker channel after FirstLine Mortgages raised its floor by 25 basis points.“We got notice that FirstLine had changed its five-year closed from (prime minus 0.65) to prime minus 0.40 effective Tuesday,” Michael Di Stefano, agent and co-owner of Dominion Lending Centres BTB Mortgage Solutions in Niagara Falls, told MortgageBrokerNews.ca. “We’re now expecting the other lenders to follow suit over the next week. Basically the spreads are too thin and there just isn’t enough profitability for lenders is what I’ve been told.”

 Brokerages across the country are now anticipating that collective move following on the heels of FirstLine, which effectively lowered the maximum discount off of prime now available to brokers and their clients. Other lenders are now sending out emails to their status brokers warning them to get their clients in before their own hammers drop. Still, any mass buyer response may be slowed by the Central Bank decision earlier this month to hold the overnight rate steady. It means many prospective homebuyers simply weren’t anticipating any change in adjustable rates this season.

On April 12, the Bank of Canada pointed to global economic challenges, spiking oil prices and a soaring Loonie as chief reasons to hold off on a rate hike. What’s more, there was very little reason for lenders in and outside the broker channel to expect the bank to adjust the overnight before the fall. That inaction may have forced lenders to take matters into their own hands by independently adjusting their discounts in order to widen profit margins hemmed in by rock-bottom interest rates. The associated bump-up in rates may actually accrue to the benefit of brokers, said Darick Battaglia, head of Dominion Lending Centres Bankfighter. Although FirstLine may lose out in the short term until its competitors slash their own discounts, now running at 65 to 50 basis points below prime. “Any change in rates or products has historically encouraged those sitting on the fence to jump off into the market,” Battaglia told MortgageBrokerNews.ca.

This Article was provided by MortgageBrokerNews.ca. Visit www.MortgageBrokerNews.ca for more great articles and lot’s of useful information.

Canadians Value Location Over Other Factors – BMO

Location, location, location.  That’s what Canadians are saying who are looking for properties, according to a new survey released by BMO.

The findings of the survey indicate that Canadians are choosing properties based on location and price, instead of things like resale value.

The survey indicates that “the majority of Canadians planning to buy a home in the next two years value the price and location of the property (92 per cent and 91 per cent respectively) over resale value (60 per cent). The report also revealed that intuition plays a key role, with 67 per cent claiming a ‘good feeling’ towards the home is an important factor in the decision-making process.“

“There are a number of factors to be considered when deciding to buy a home. However, it’s critical that Canadians balance their desire for a dream home against what they can realistically afford,” said Katie Archdekin, Head of Mortgage Products, BMO Bank of Montreal. “It’s easy to become attached to that perfect house in the ideal location, but in today’s market, it’s important to take a practical approach and carefully examine the emotional aspects of the purchase.”

Interestingly, the survey also indicated that women are far more likely then men to make a purchase decision based on resale value (63 per cent vs. 57 per cent). Also a significant number indicate that the age of the home is a factor (81 per cent).

Looking at regions, urban homebuyers say that price factors into a home purchase more than those living in rural areas (93 per cent vs. 87 per cent). Also, married people consider price more important than single people (93 per cent vs. 88 percent).

Clearly then, according to the findings of this survey, Canadians are looking at ways to maintain affordability, while still getting maximum value out their investment,  by choosing to buy strategically.

This Article is from the writers at Propertywire.ca. This article and others great articles like it can be found at the link below check it out! 

http://propertywire.ca/news/national-news/1003-canadians-value-location-and-price-bmo.html

HOME OWNERSHIP HAS IT’S TAX BREAKS

With spring comes the official launch of house hunting season. So, what better time to ensure that you are maximizing the tax benefits associated with home ownership, especially since the 2010 tax return filing deadline is fast approaching.

If you purchased a new home in 2010, don’t forget to claim the relatively new Home Buyers’ Tax Credit. Introduced in 2009, this non-refundable tax credit is based on a $5,000 amount for first-time homebuyers which, at the 15% federal credit rate, is worth $750.

Interestingly, you are considered a first-time homebuyer if neither you nor your spouse or partner owned and lived in another home in the calendar year of purchase or any of the four preceding calendar years. In other words, you could have owned a home previously, but if you sold it and then perhaps rented for four years or so, you still may qualify as a first-time homebuyer for the purpose of claiming the credit if you bought a home in 2010.

Did you use the Home Buyers’ Plan when purchasing your home? Under the HBP, a first-time homebuyer can withdraw up to $25,000 from her RRSP to purchase a home without having to pay tax on that withdrawal. Any funds withdrawn must be repaid over a maximum of 15 years or the amount not repaid in a year is added to the participant’s income for that year.

If you participated in the HBP previously and were required to make a repayment for 2010, be sure to designate a portion of your RRSP contributions as a HBP repayment on Schedule 7 of your personal tax return, under “PART B – Repayments under the HBP…”

You may also be able to get some tax relief from your property taxes, depending on your province of residence. Quebec provides a refund for property tax paid during the year, while both Ontario and Manitoba provide a tax credit for property tax or rent paid during the year.

Still have a mortgage? If so, have you considered whether you could restructure your financial affairs to make your mortgage interest effectively tax deductible?

If you have non-registered investments, consider selling them to pay off your mortgage (non-deductible debt) and then borrowing back the funds for investment purposes (tax-deductible debt). This allows you to effectively write off what otherwise would have been non-deductible personal mortgage interest.

This strategy has often be referred to as the “Singleton Shuffle,” because it was named after Vancouver lawyer John Singleton’s 2001 Supreme Court victory, which upheld the notion that you can rearrange your financial affairs in a tax-efficient manner so as to make your interest on investment loans tax-deductible.

Before doing so, be sure to consider any tax consequences of selling your non-registered investments along with any prepayment fees associated with paying off your mortgage early.

Finally, if you sold your home in 2010, the good news is that the gain is likely tax-free, provided you didn’t also own a second home.

The principal residence exemption (“PRE”), if available, can shelter the gain on a principal residence from capital gains tax. A principal residence can include either your main home or a vacation property, even if it’s not where you primarily live during the year as long as you “ordinarily inhabit” it at some point during the year.

The CRA assumes that if no gain is reported on your return for the year of sale, the PRE has been used to eliminate the gain and therefore, no other property (such as the vacation property) can be designated for the years in which the PRE was presumed to be claimed on the sold property.

As a result, a conscious decision should be made as to whether the gain should be reported, as failure to report jeopardizes claiming the PRE in the future on the sale of your other property for the years in which you owned both properties.

Financial Post

Jamie.Golombek@cibc.com

Jamie Golombek, CA, CPA, CFP, CLU, TEP, is the managing director, Tax & Estate Planning with CIBC Private Wealth Management in Toronto.

ARM YOURSELF WITH MORTGAGE QUESTIONS

So it’s time to meet with your bank or Mortgage Broker, great idea. Go in give them some info, take the offer with the best rate and call it a day…. right? Honestly, not necessarily a huge mistake. With so much competition between lenders these days you might come out alright but… you probably want to go in armed with some questions.

Did you ever use to argue with an older sibling or friend at school? You know the one who was always quick with a response and left you speechless and feeling foolish, then later on you think of like 10 different things you could have said! Man that would have showed them! I wish had I said that! Well my advice is don’t leave the bank feeling this way. It’s easy to go into a meeting where you are unfamiliar, and even though there are a million questions you wanted to ask…. you draw a blank. So why not write some down? Here are some questions you can take into your meeting with you:

1. What are the terms of this mortgage?

It is important to know the exact terms of the mortgage:

-rate – important to get a good rate but not the only important factor in a mortgage

-amortization – how long do you want to take to pay this mortgage off, is it more important to you to have lower payments or pay the loan off quicker?

-frequency of payments – monthly/weekly/bi-weekly etc. pick which option is best for you

-how long of a term  - are you going to be owning this place for long term or do you think you might have to sell before long? Pick a longer or shorter term depending on your needs.

1. What are the pre-payment penalties?

 

You need to know what the penalties will be if you need to sell or choose to sell before your term is up. Some mortgages are designed to make it very expensive for you to get out of them early, this is why the best rate isn’t always the best mortgage!

1. What are my pre-payment privileges?

Are you a good saver? Maybe you save up a couple extra payments a year and would like to try and pay your mortgage down quicker. This is a very smart idea but you have to make sure you have this option, different mortgage products will have different pre-payment privileges.

1. What other costs can I expect?

Lenders usually like to see closing costs in your account up to 1.5% of the purchase price of your home (ie. $3000 on a $200 000 house). This amount is above the down payment you are already making. It will cover legal fee’s property transfer tax, appraisals etc. It is important to know that this is just an estimate and could be higher. Ask whoever is doing your mortgage for a price list of these costs, while you’re at it why not ask if they will help pick up some of the cost? You never know, maybe you can get your appraisal paid for (you didn’t hear this from me!).

1. Is this the right mortgage for me?

There are many different types of mortgages with many different options to meet your needs. Know your needs and explain them to your mortgage broker so they can help you get the mortgage that works best for you.

1. Is this the best rate you can offer?

Ask my girlfriend, I am a strong believer in “there’s no harm in asking”. Actually ask any sales person in any retail store in Langley or Vancouver for that matter, because chances are, I have probably asked them for a deal (I once asked for staff discount on a shirt at a Canucks game – and it worked!).  You could also ask if there is anything you can do to qualify for a better rate. Maybe waiting six months for your credit score to improve might help you get a slightly better rate.

A good Mortgage Broker will be able and willing to answer all these questions. In fact, with  a good Mortgage Broker you shouldn’t have to ask all of these questions, the broker should take the time to get to know you, and what your needs are. They should have as many questions for you at the beginning of the meeting as they have answers at the end, after all how do they know what mortgage is best for you if they don’t know anything about you.

These are just a few suggestions to get you started, if you think of any I missed why not ask me? Good luck and happy hunting!

Simon Every

What Mortgage Is Best For Me?

What mortgage is best for me? What is CMHC Insurance? Should I go variable or fixed? All these questions have different answers depending on who you are and why you are purchasing your mortgage. There are so many uncertainties when purchasing a new home, especially for first time home buyers. I remember my experience buying my first place, I was at my bank trying to make my Mortgage Specialist think I understood what she was talking about. Afraid of asking questions because I didn’t want to seem dumb, signing each page as she went through them far too quickly for anyone other than her to keep up with because she has seen these pages a thousand times. So here is my first piece of advice (literally, this is my first ever blog which makes this is my first piece of advice)

ASK QUESTIONS! ASK FOR MORE TIME, ASK FOR HELP UNDERSTANDING! 

There are no stupid questions when it comes to one of the biggest decisions you will make in your life. Yes chances are, there will be bigger ones to come, but so far this is probably the biggest. Remember, you are the client, you are calling the shots. True, the bank doesn’t have to give you any money but the truth is, if the numbers add up, they are going to want to. So educate yourself before you talk to your Bank or Mortgage Broker, talk to your parents or friends who already have mortgages. Take some time and search the internet for advice (try say….. this blog for example when looking for Mortgage advice. My next post will be a list of questions you should arm yourself with when you go to buy your next home) and then go with confidence to a meeting that could affect you for years to come. If you don’t get the answers you are looking for or the service you deserve then move on, explore your options. There are literally 10o0′s of Mortgage Brokers  and Financial Institutions for you to choose from, all of which would like to sell you a mortgage. So make sure to find someone you trust to help you get the right mortgage, not just help themselves sell one. 

SHOULD I USE A BANK OR A MORTGAGE BROKER?

Well I’m a Mortgage Broker so you can probably guess my answer….. But again it boils down to what or who you are comfortable with. If you have a long-standing relationship with your bank then you would be smart to at least go talk to your representative at your local branch. But we are bargain shopping here people, personally I have a hard time buying socks without shopping around and comparing prices! So once you talk to your bank and get an offer from them, just like any other major purchase, you want to get a couple other offers to compare it to. 

Now since you did some homework beforehand and got advice from friends and family, you know that when comparing your different mortgages, you aren’t just looking for the best rate. You of course want a great rate but you also want to consider the rest of the terms of the ,mortgage. Things like prepayment privileges so you can make extra payments on your mortgage if you want to pay it off faster. And prepayment penalties incase you want to sell before your term is up. A lot can happen over the life of your term (usually 3 to 5 years), you will want the option of selling with minimum penalties. You may wish to sell and upgrade to a bigger place because your family is growing or maybe you have to move because you got transferred to a different region within your company, you never know.

That’s where Mortgage Brokers come in handy. While you can make appointments at different banks and compare 3 or 4 different offers probably over 3 or 4 days. A Mortgage Broker has access to many different financial institutions (often over 50) who are constantly informing him/her of their new products and new low rates allowing the broker to simplify the process of shopping around, saving you time and money. A Broker can also clarify the different terms with unbiased advice because she/he works for you not the banks. Wow I’m starting to sound like a true broker now  aren’t I? But I do have to clarify one more thing. The Mortgage Broker is paid by the Financial Institution, not you! It’s true, I promise! Brokers can choose to charge a fee above what the bank is already paying them but they must disclose this information to the client (you) and if you are anything like me, that would be a deal breaker so it just doesn’t happen.

Anyways, that is the end of the first ever SimonSaysMortgages blog. I hope you found it helpful and I also hope you have questions for me. My hope is for this blog to be used by you to find useful information about the mortgage industry and also as somewhere where you can come to post questions which I will answer personally and quickly. The goal that if you know anybody who has any question mortgage related just tell them to “Ask Simon”. If you want more info about me, feel free to check out my website @ www.semortgages.com. Twitter and Facebook coming soon!

Thanks for reading, next post will be titled “Arm Yourself With Questions”.

Simon Every