It was actually 11 years ago now that my husband and I bought our first home. Wait, he wasn’t even my husband when we bought it — that’s how green we were! Looking back, we were lucky in so many ways with our little row house. But we also made some mistakes. Not big ones, but certainly errors that if avoided could have saved us thousands of dollars over the last decade.

1.     Not getting a pre-approved mortgage. I know, how dumb can you get?! In our defense, we only looked for a house for one day. We ambled into an open house, got the card of an agent, and he took us out one Friday afternoon. We found our house that day after seeing just four others. We went back over the weekend, and knew it was the right place. It was an estate sale, they were taking offers on the Tuesday and before we had time to even give our bank a call, we’d bought the thing.

Getting a pre-approval is just common sense. You visit your bank or speak to a mortgage broker and find out how much you qualify for, what the mortgage rate would be and what your monthly payments would look like. You get the approval so you can make a quick offer and get the house of your dreams without worrying about the money until later (which we had to do). It helps you stay on budget when you’re bidding and also lets you start budgeting for mortgage payments while you’re still renting.

2.     Thinking we were lucky to get a mortgage. Yes, it’s a privilege to be loaned a large chunk of money by a financial institution. But banks make most of their huge profits on mortgages. These are very safe loans for them. If you don’t pay, the bank will simply take your house — they know where you live. And you pay hundreds of thousands in interest over the life of your mortgage, money they pocket. So, when I negotiated that very first mortgage, I should have realized that I was not the fortunate one to get this loan, but the bank was lucky to have me. I had a great credit rating and a long history with my bank, and instead of being so darn grateful, I should have negotiated from day one for the best mortgage rate.

3.     Understanding frequency of payments. The day we signed our mortgage, I recall our bank representative suggesting we make bi-weekly payments. We freaked. As freelancers, we were terrified we’d never make our monthly mortgage payments, let alone a chunk every two weeks. She let it go, and we paid the lowest amount possible for the entire first term of our mortgage. If I’d known then what I know now, I would have still gone for that monthly schedule: it really did make sense at the time. But I should have asked about other payment options, such as double up and anniversary payments. It wasn’t until many years later that I realized I could slip an extra hundred or even thousand on the mortgage pretty much whenever I wanted, without penalty. With our sporadic incomes, this has been a great way for us to pay down our principal safely. Anyone who starts out with their first home should keep their commitment basic, but be aware of extra payment options and use them the very minute they’re able.

4.     Mailing back the renewal. When our first mortgage came due three years later, we made another key financial mistake. I filled out the form, mailed the thing back and we rolled into a five year mortgage at the rate offered on that piece of paper. Duh!! A phone call to my bank or to a mortgage broker would probably have lowered that rate. Comparing mortgage rates at other banks and looking at different options such as a variable rate mortgage or a shorter term would have been smart as well. Simply speaking to a mortgage professional would have shown us several more choices. And as soon as our bank found out we were shopping around for the best rate and asking questions, that would likely have pushed our rate down yet again.

5.     Knowing nothing. Why didn’t I educate myself on mortgage rates and payment terms and the like? Why didn’t I talk with friends and family about how their own mortgages worked? It took me a decade to realize that bankers and brokers don’t really have the best advice for me: it’s friends and my own personal research that have helped me better understand the biggest investment of my life.

Not that it’s been all folly! We sold our first home last year for a big profit — we were lucky because the market went way up. We’ve done lots of renovating and were able to buy our two homes at great prices because they’ve needed work. We bought in a great neighbourhood that has a great school and everything is so close we walk and bike everywhere. That, in the end, makes up for all the blips. A house can be a good investment, for sure, but the real purpose is to make a home you love.

Diane
Writer for RateSupermarket.ca

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Go Compare mortgage rates to see how these new rates stack up against the other top lenders and brokers in Canada.

Mortgage broker’s are able to get the best rates for homebuyers and their rates are typically discounted when compared to the big bank’s posted rates because they arrange so much volume for the lenders (almost $50B last year). As a result, many times the banks and other lenders compete amongst themselves to offer the broker the best rate in order to secure their business. Many deal with over 65 lenders, and this is the reason why they can get the best rate for almost any person’s situation.

The residential mortgage market is extremely lucrative and competitive, as there were $191B worth of mortgages approved last year by 80+ lenders. As a result, mortgage brokers are becoming more popular as more people are turning to them to find the lowest mortgages, representing an estimated 25-30% of mortgages being arranged according to Jim Murphy, president of the Canadian Association of Accredited Mortgage Professionals (CAAMP).

Many people aren’t sure where brokers actually source the mortgages from. A recent report from Filogix, showed that mortgage brokers secured home loans through the following channels through their network in April 2008:

• Banks: 50.68%
• Mortgage Banks: 41.92%
• Sub Prime: 4.25%
• Credit Unions: 3.14%

The actual mortgage rate arranged by the broker, could be influenced by many factors, some of which are:

• What type of mortgage (open or closed) are you looking for?
• Is it a fixed rate mortgage or variable rate mortgage (adjustable rate mortgage ARM)
• Is this a single home mortgage loan?
• Or do second or third loans exist?
• How long do you want the mortgage amortized over?
• Is this is a refinanced mortgage?

As is the case with brokers in other industries such as insurance, mortgage brokers are generally former employees of the lenders such as banks. As a result, they know the ins and outs of the industry, who to contact and where to find the rates across Canada. If you’re looking for help arranging your next mortgage, a mortgage broker, may just be a sound option.

Kelvin Mangaroo is the founder of RateSupermarket.ca which enables Canadians to find mortgage brokers in Canada and compare mortgage rates.

Kelvin Mangaroo, the entrepreneur behind RateSupermarket.ca, had been itching to start a business that would alleviate the pain homebuyers felt when looking to purchase or re-mortgage properties. Kelvin knew that the service had to be extremely quick, intuitive and easy to use.

Kelvin says, “I wanted to create a simple, unique way for Canadians to compare mortgage rates online. Currently, there is nobody like us in the Canadian market. We have over fifty lenders and brokers listed. We compare over 500 mortgage rates and we’re adding more rates every single day!”.

The site ( http://www.ratesupermarket.ca ) has a “Connect for Free” service that allows mortgage shoppers to speak directly to a lender or broker about their options, instantly by phone, with the call connected by the web site. And you can’t beat the price, it’s free. This service has proven very useful giving visitors instant access to information that can help them make informed decisions. The web site’s side-by-side comparison also enables users to compare more detail than just rates such as payment holidays and rate guarantees.

Kelvin says they have features in the works that are sure to shake the entire industry and really change the way things are done. With the web site already helping thousands of Canadians to compare mortgage rates with the click of a button, we can only imagine the impact that RateSupermarket.ca is going to have.

About The Company
RateSupermarket.ca is a free consumer web site enabling Canadians to easily compare mortgage rates. http://www.ratesupermarket.ca