Increasingly Canadians looking to buy a house are seeking more information from the professional helping to secure their mortgage. They look to their mortgage expert for good financial advice, guidance and some level of consultation on what most likely is the biggest investment of their lives.

The Role of Mortgage Professionals

A survey by Maritz Research Canada conducted for the Canadian Association of Accredited Mortgage Professionals (CAAMP), shows mortgage brokers in particular are expected to provide clients with options and support through the complicated mortgage process. There’s also an expectation clients will be offered competitive mortgage products, recommendations on product details and lenders, and in general a high level of customer service.

Mortgage experts are now on the front line when giving advice to new homeowners on how much they should borrow and at what rate. They’re committed to getting the best rate and product possible for the mortgage term a homeowner is seeking.

Here’s the Good News

Canadian home prices have held up surprisingly well despite the economic issues that have plagued the world in the last 3 years. The Canadian housing markets remains stronger compared to the U.S and appears to be a far better investment than the stock market. On top of this, Canadians have roughly 68 per cent equity in their home, compared with 43 per cent  in the U.S. an indication our housing market remains much stronger.

In the same survey Canadians admit they could handle a $200 a month increase on their mortgage payment if interest rates were to rise. If that’s the case then we should be putting more money towards our mortgage right now.  It will lower our principal and our loan will be much smaller when rates rise. Don’t borrow money in anticipation of making higher payments in the future. Ask your mortgage professional how bigger payments will reduce your amortization. You will be pleasantly surprised.

This is My Concern

Interest rates still remain historically low, making it easier and more comfortable for Canadians to borrow more money then they should. Canada’s rules are not as lax as the U.S. when it comes to lending, especially after new stricter guidelines were brought in by Finance Minister Jim Flaherty in 2010.  But that doesn’t mean homeowners aren’t full of false confidence they can borrow more than they can manage.

Before you meet with your mortgage broker or the mortgage specialist at the bank understand based on your financial situation how much you want to borrow. Remember when you borrow money you’re buying the right to pay that money back in a per-determined amount of time.  Don’t get pushed out of your comfort zone when it comes to your mortgage.

We’re quickly moving into the busiest time for mortgages in Canada. Springtime is when real estate sales ramp up as homeowners try to buy a home they can move into during the easy summer months.

It is easy to convince yourself to borrow more to get into a “dream home.” This is especially true for buyers who previously lost out on a home because they were out bid by another buyer. Remember if that dream home is out of your budget it can quickly becoming a nightmare if house prices fall even slightly and when interest rates start to rise.

Do Your Own Research First

My advice is to decide how much you can afford to borrow before you meet with your mortgage professional. Remember nobody cares about your money as much as you do.  Getting better service and good advice is imperative, but do your own research to make sure the mortgage amount is best for you.

Mortgage professionals are there to guide you through this complicated process and give you the best advice they can, but ultimately the decision about how much you want to borrow (after you know the amount you can qualify for) is up to you.

Only the most naïve customer would pay the “posted” rate for their mortgage.

(You didn’t pay the posted rate…did you?!?).

Whether you use a third-party mortgage broker, or simply walked into your nearest bank branch and spoke with their mortgage specialist, you almost certainly were offered a discount off the posted rate.

So why do financial institutions bother having these rates? Well, aside from being a benchmark to start the negotiations from, the posted rates do serve a few purposes.

Why Posted Mortgage Rates?

More money (period)

When it comes to making money, bankers are pretty smart. (You don’t make quarterly – as in “every three months” – billion-dollar-plus profits by accident.) They also know that most Canadians aren’t as financially savvy as they should be. So when that mortgage renewal letter comes in the mail, many of us simply sign on the dotted line. The extra money made on each of these mortgages adds up to a decent chunk of those profits.

Banks also seem to equate loyalty with gullibility. If, along with your mortgage, you also have your chequing, savings, RSP, and line of credit accounts with the same institution, they’re going to assume – probably rightly – that you’ll be reluctant to go through the hassle of switching everything to another bank.

As a result, when you go in to sit down with the friendly mortgage specialist at your local branch, you may be offered a half-percent off the posted rate. If they really like you, you may even get a little more off. Either way, you’ll walk out thinking about what a great deal you got for being a loyal customer.

Meanwhile, your neighbour who’s letting a mortgage broker do the shopping around, may end up going with the same institution, but at a rate a full percent or more off the bank’s posted rate.

In short, the posted rates are in part to catch a few suckers. But there’s a bit more to it than that.

Breaking up isn’t cheap

Even if you’ve been smart enough to shop around, the banks use their posted rates for another profit-generator: calculating the Interest Rate Differential (IRD) if you break a mortgage before the term is up. The bank will charge you a penalty for this which will be the higher of either three-month’s interest or the IRD. And more often than not they calculate the IRD using the higher posted rate, not the discounted rates they offer customers who’ve done their homework.

Check out this Mortgage Penalty Calculator tool or this interesting article for more info of IRDs.

It’s worth noting that some bank, like ING Direct Canada, have only one set of rates. Which means that if you do choose or need to break a mortgage held with them, the penalty will be calculated on the competitive rate they’re offering customers at the time.

The posted rate can also rear its head if you opt to switch your variable rate mortgage to a fixed rate mortgage. Some lenders will only let you switch to the posted fixed rate or offer you a measly discount to the posted rate.

So, while you’re shopping around for rates, you should also consider how nervous rising interest rates will make you feel before you sign up for a variable mortgage. If you anticipate moving to fixed at the first sign of hikes, you may be better off locking in from the start.

This week is all about cracking the most common mortgage secrets.  And for many, there’s nothing more mystifying than the role of a mortgage broker… or is that just my opinion?

My search for the perfect mortgage

I’m skeptical by nature. If something seems too good to be true, I think it probably is. I’ve learned, though, not to judge until I’ve asked the right questions. I’m glad that I applied this good sense in my quest for the perfect mortgage package.

I’ve been with the same bank since I opened my first account and deposited a whopping $1.25. As part of my job as a financial writer, I research banks and credit lenders, and I’m happy to say that I know I made the right choice. The financial institution that I choose is without a doubt the best option for me. So when it came time to research mortgages, I just assumed that I’d end up going with whatever my bank offered.

In the weeks before my visit to the bank, I had asked friends and family about their mortgages. Who was their lender? What kinds of mortgage rates did they have? I learned that there were a wide variety of options out there and that interest rates varied wildly, depending on the institution and term.

False assumptions…

I assumed that my bank would give me the best rate, because – well, because I’m me!  And because I’ve deposited every penny I’ve ever made into their account. I assumed that counted for something. I went in optimistic, certain that I would get the best rate on a term that perfectly fit my needs. After all, I deserve it, right?

Unfortunately, my trip to the bank was a sad disappointment. My bank’s mortgage specialist offered me rates that were nowhere near as nice as some of my friend’s had received.

Was there something wrong with my credit score? Did I not make enough money? How was this possible?

I called my friends and asked them, embarrassed, how their rates were so low? The answer: they’d gone with a mortgage broker.

But, how then, had the mortgage broker gotten such good rates?

How can mortgage brokers offer better rates?

Mortgage brokers work for you, but get paid by the lender. Their job is to find you the lowest rate for any given mortgage term while finding the lender the perfect mortgage candidates.

When you go to your bank for a mortgage, the specialist there can only offer you a rate from one lender – the bank. Furthermore, your bank’s mortgage specialist is paid to sell their products. Therefore, it’s unlikely that they’ll send you to the bank across the street to find a better rate.

A mortgage broker, on the other hand, has access to a wide variety of mortgage packages. They are not limited to one institution’s offerings. In fact, since mortgage brokers are doing most of the legwork for the bank, the bank offers them lower rates and pays them a finder’s fee. As a result, a mortgage broker can offer you a number of different products from a variety of financial institutions, including private lenders and you don’t have to pay them a cent to do so.

And that’s what happened to me. When my bank’s mortgage specialist couldn’t offer me anything of interest, I went to a mortgage broker and they could. My broker was able to meet all of my expectations; she obtained a term and rate that perfectly met my needs from my own institution…. funny that.

Lesson: Don’t be skeptical. Ask questions. And explore all of your options. You might just get everything you wished for… and more.

So if you’re planning on moving you’ll need to review your current mortgage or look into getting a new one.  When you’re shopping around, you want the best mortgage rate. That’s obvious. Shaving even a fraction of a percentage point off your mortgage rate will save you thousands over the term of the mortgage, so it’s worth shopping around and haggling.

But there’s more to a mortgage than just the number. There are other services — many of them buried in the fine print of your mortgage documents — that can have an impact on your experience over the years.

Yup, years. Most people sign on for five-year mortgages. The institution you sign with will be close at hand for five years, maybe more, so you have to look at every aspect of the mortgage and the lender before you sign. Here are some things to look at:

Customer service

Make sure you’re signing with a lender who has a great support network that you can all on just about any time. That means a 1-800 that is answered in a timely manner, and customer service representatives who can actually help you. Test this out. When I was going through my last mortgage renewal I discovered, not pleasantly, that my lender had a horrible approach to customer service and it made me realize just how important it was to have a helpful team to call on when things go wrong, you want to make changes or you have real questions.

Rate hold

This is so important when you first sign. Say you go in to negotiate a mortgage on a Monday, your house is closing on Friday and in the interim rates change. You want to be with a company that will hold your rate so you can get the best deal no matter what happens before the final paperwork is done. (Most decent organizations will let you take the better rate if they increase in the interim; but check that too.)

Extra payment options

Before you sign, also review your options for paying down your mortgage faster. Most mortgages allow you to make as much as double a payment every month, and also have a certain amount you can pay down on the anniversary. Review these details and make sure they’re flexible enough to let you pay down extra without penalties. If the allowances seem too skimpy, see if you can negotiate for more extra payment room (you might think the likelihood of paying off MORE on your mortgage is laughable, but your finances can change a lot over a few years).

Penalties

There are always penalties for breaking a closed mortgage. Especially if you’re planning to move, or you want to ditch your current mortgage for another one at a lower rate.  Most mortgage penalties are the higher of three month’s interest, or an interest rate differential. Critics argue that in today’s low rate climate, many lenders are using differentials and are not being transparent about how it’s calculated. Ask your lender for the information straight up and have it clarified in your contract.

Web access

As far as I’m concerned, the most important part of my mortgage is my access to information on it, and paying it down. Check out your lender’s web portal and be sure it’s easy to use, reliable, has easy access to things like extra payments, payment history and statements. When you can easily do things like grab a tax receipt quickly off the web, or change your payment frequency to save money, you’re truly in control of your money and your mortgage.

Property tax

Note that some lenders will pay your property tax as part of your mortgage payments, and some will not. Ask this question right up front, as putting your property tax together with your mortgage can be more convenient.

In the end, many people choose a mortgage not based entirely on the lowest rates. They pick some of these other conveniences. Or they might just take the advice of a lender or mortgage brokers they know well and trust. As long as you’re looking ahead to a relationship that will last many years, go ahead and choose a bit with your heart, and with your head too.

There’s a lot of talk out there these days about changing up the way we buy homes. There’s a renewed sense that the real estate agent is out and buying a home on your own, or with limited help, is the way to go.

Is it really? Isn’t a real estate agent an expert in the field? Is it really enough to rely on an internet-based do-it-yourself company or just a lawyer to buy a home?

The answer is not simple. I think there’s actually a lot of great people out there working in real estate who are trying to help. Yes, they’re trying to make money for themselves too. I think the best way to approach buying a home is to get a good team together and make your choices based on their suggestions along with your own experience and research.

And if you have no experience? Do even more research. Talk to your friends and family who have bought homes over the years. Balance out what your dad says about buying a house 20 years ago in a small town with what your work colleagues tell you about buying in a similar neighbourhood to you five years ago.

Here are some of the players involved in the average real estate transaction and what they can offer you, and what to watch for:

Real estate agent. This person spends their entire professional life devoted to buying and selling homes. He or she will know how to stage and market your house and set up an open house. Most agents work for a larger agency that will advertise your home on a web site and through social media. Agents take a commission of about 5 per cent, and you pay only when you sell. That commission is split evenly between the buying and selling agent. It’s a big chunk of change! But the agent also has to give some of that money to the agency itself to cover overhead costs like the secretary and the web site.

A good agent will have been around the block a few times, literally, and know your neighbourhood, your income bracket and what your family needs. He or she should know who might buy your home in a sale, and when to spot a rip off or a bad reno job when you buy. Look for an agent with relevant experience and not someone who does it “on the side” or doesn’t know your neighbourhood.

Do-it-yourself company. Companies like ForSaleByOwner and PropertyGuys will offer you the information and tools to sell your home on your own. They’ll offer you signs, packages on how to set up an open house and the like so you can save on real estate agent fees.

Look for a company that has had some real success in your area. Talk to another buyer or seller who has relied on such a company and get their story personally. Make sure you have the time and the risk tolerance to deal with doing it on your own (especially when you’re selling).

Real estate lawyer. This trained professional deals with the paperwork and the money when your deal goes down. Most charge a flat fee and do all sorts of confusing things like title searches. You don’t see your lawyer a whole lot during a buy and sell, but you’ll have meetings to sign tons of papers, pick up and drop off cheques and transfer keys. Your lawyer is the one who might discover things like mortgage fraud, problems with land surveys and money glitches.

Look for a lawyer who’s close by, as you’ll have to make a few visits if you’re both buying and selling. Many have relationships with banks and it’s nice when your lawyer knows the people at the branch by name. Make sure your lawyer is easy to get a hold of, has been used by others you know, and will do more than just move papers around, but look for quirks and problems in your deal.

Mortgage broker. If you want to shop around hard core for the best mortgage rates to save the most money, get a broker.   This person will walk you through all the different options (floating, fixed, three-year, five-year) and have you sign the paperwork. This person will also help you determine your monthly (or weekly or biweekly) payments.  He or she hunts around on your behalf for rates, signs you up with the lender offering the best deal and will help you with all of the paperwork.  The broker deals with the bank on our behalf and gets a commission, but the lender pays it, not you.

Make sure you shop around for a good mortgage broker.  A broker will offer you about five different suggestions every time you talk, so be prepared for info overload. Make sure this person understands you don’t just want a deal, but a fair monthly payment and a lender that has good customer service for later on.

Banker. The person you deal with at your bank may be able to give you a mortgage, but in all likelihood, he or she will refer you to a mortgage specialist to do the deal.  Look for someone who understands your financial situation and neither has you paying too much every month, or gets you on such a minimal mortgage payment plan you’ll never pay the thing off. Be sure you are in touch with several lenders and your rep knows this so you’re sure to get the best deal. If there’s a gap between the time you work out your mortgage details and the deal closes, make sure you get a rate hold, in case the rates rise in the interim, you still want that great deal.

And who should you trust in all this lot? No one entirely, but everyone a little bit. Most people are just like you: trying to make their way in the world and doing the best job they can. Bankers are trying to get your mortgage, which will make a lot of money for the bank itself. But these are also people with homes of their own who don’t want to see you get in over your head. Real estate agents know a juicy commission is coming their way, but they also want to see you in a good home and get a referral to get more clients.

The only way you can stay safe in the real estate market is by educating yourself. Don’t just rely on intuition, but your knowledge of what’s fair in terms of a house price, mortgage rate, payment terms and legal document. Ask a lot of questions of everyone helping you make your sale or purchase. Never sign anything or make a decision without seeking out all sides and all possible scenarios. And trust that the experts and your own good judgment will serve you well.

Diane
Writer for RateSupermarket.ca

Bank or Broker?

Shopping for a new home is no doubt an exciting time, but as most homeowners will attest, it comes with its fair share of stress, worry and questions. Of those questions, many of them revolve around the mortgage. Since your home is likely the most costly investment you’ll ever make, you want to make sure that it’s affordable and as stress-free as possible. This week, we’ll be answering the most commonly asked mortgage related questions. You asked them, so we’re answering them.

What is a Mortgage Broker?

A mortgage broker is an independent, trained professional, licensed to provide you with advice about your mortgage needs. A mortgage broker works with a wide range of institutions to find you the best mortgage to fit your needs. The advice they provide is impartial and based solely on the interests and goals of their clients.

Bank or broker? What’s the difference?

When dealing with your bank you only deal with one lender – the bank. Your bank’s loan officers are paid by that institution to sell you their products. Therefore, they are not going to point out a better deal available through a bank across the street. In fact, they don’t want you to know about that deal at all. So, they’ll make theirs sound as appealing as possible in the hopes that you’ll choose it. Even though they may offer you a wide variety of loan types, they’re still limited to those within their portfolio.

A mortgage broker, on the other hand, has access to a wide variety of loans from a selection of lenders. They are not an employee of a single institution, but a freelance agent, working for you. Here are some of the advantages of using a mortgage broker:

• They are skilled at crafting loan applications, making the application more attractive to lenders
• They will help you calculate how much you need to borrow
• They receive daily updates on nationwide rates
• They have specialized knowledge on the different mortgage types
• They work for you, not the lender
• They offer impartial advice
• They have the ability to offer you mortgage products from a number of financial institutions, including private lenders
• Unlike bank specialists, mortgage brokers are licensed specialists with formal (and ongoing) training
• They’re available outside of regular banking hours
• Their services are free of charge

When looking for a mortgage broker, make sure you’re asking the right questions, so you can find someone who understands your needs.

Who pays the mortgage broker?

Even though the mortgage broker works for you, not the financial institution, they get paid by the financial institution, not you. Their services are provided at no cost to you. The lender pays the broker a “finder’s fee,’ in exchange for finding them creditworthy clients. For the homebuyer, it’s a win-win situation. You get both the advice you need and the rate you want – for free.

Check out this past article for more of an overview of Canadian Mortgage Broker Commissions.

In conclusion

Using a mortgage broker is really win-win situation for homebuyers. You have access to an educated, specially trained and licensed individual. That individual offers the best possible rates, tailored specifically to your needs, at the lowest possible price – nothing. They’ll educate you, help you through the application process, and work at hours that fit your schedule. It almost seems too good to be true.   Isn’t it time to stop working around your mortgage? Call a mortgage broker and have your mortgage work around you.

Melanie
Writer for RateSupermarket.ca

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

Your home will likely be the single largest purchase you make and mortgage payments will be a part of your life for the next 25 to 30 years. Decisions you make now could affect you for years to come, which is why it is imperative that you know what to look for in a mortgage broker. The research you do now will lead you to a handful of potential candidates. Once you’ve narrowed the list down, don’t be afraid to ask questions. The more you get to know your mortgage broker beforehand, the better.

Ask your friends and family for recommendations. If they own a home, your friends and family members have been through the very same process. Make sure you ask the opinion of someone you consider a reliable source.

Do your own research over the Internet and by phone. Don’t just trust the recommendations of your family and friends. Ask questions about deals and conditions, and don’t be afraid to compare mortgages rates offered by different providers. Do your homework.

Ask about special conditions when offered a deal. A super low mortgage rate may be attached to a ‘no-frills’ product.  This type of mortgage product can typically save you money in the short term, but will cost you substantially more in the long run.  Be aware of hidden costs or undesirable conditions attached.

Take notes. The notes you take will come in handy when making your final decision. Take notes that include names, dates, and offer details.

Go with your gut. It’s always good practice to be skeptical and do your homework. If your gut says something isn’t right, it probably isn’t.

Questions to ask your mortgage broker

How long have you been in business? Although there’s nothing wrong with working with someone who’s new to the business, you will probably want to work with someone who has some experience under the belt. Does this broker have an office? Is it buzzing with business, or is it quiet and conservative?

What kind of education or licensing do you have? All mortgage brokers in Canada require a license in order to practice. Some are members of associations, while others work from private practices. You should verify that your mortgage broker is indeed licensed by going to Canadian Association of Accredited Mortgage Professionals website.

On what do you base your recommendations? Remember that your mortgage broker works for the lender. It is their responsibility to deliver good, credit-worthy borrowers, like you, and they get paid handsomely for it. Don’t be afraid to ask them to disclose their fees and commissions up front. You want to be sure that they’re making recommendations for the right reasons and that the number they quote you is reasonable.

What fees and/or costs are associated with the interest rate you’ve quoted me? Sometimes mortgage brokers will quote really low rates just to get you in the door. Once they’ve got you there, they can tack on all kinds of extra fees. Some of these fees include a credit report charge, an appraisal, title insurance, deed-recording and overnight deliveries.

Can I please see the lender’s letter of commitment? If your mortgage broker has promised you a specific rate, ask for a letter from the lender proving that the discussed rate is indeed locked in.

What is your area of specialty? Even though a broker may state that they are “full service,” they quite often facilitate more loans of one type than another. Ask what percentage of their total volume comes from residential loans. If you are interested in commercial property, make sure you ask your broker if they have closed commercial loans before.

Are you affiliated with any mortgage associations? Membership to some mortgage associations can sometimes be indicative of the broker’s oath to offer the best loan options available, regardless of commission. Membership to some associations requires additional education and examinations. Also, those mortgage brokers who do belong to professional organizations may also be listed in a directory. This gives you the opportunity to view any customer complaints, should they exist.

Can you provide me with references? Even though your mortgage broker will most likely come armed with testimonials from past clients, there is no way of determining how old those testimonials are. Instead ask them for the names of Realtors with whom they’ve worked.

How often will we be in contact? Although this might seem like an unimportant question, it could be the difference between a painful experience and a smooth transaction.

The combination of thorough research and proper inquiry should help you narrow down your pool of potential loan providers. Trust your gut and only make your selection if you are fully comfortable with it.

Good luck on your quest for the perfect mortgage rate.

 
Melanie
Writer for RateSupermarket.ca

• They work for you, not the lender
• They have access to many lenders including many major banks, specialty and mortgage-specific lenders, enabling them to find the best product for you, versus a single lender
• Can help with strategic financial planning – Are you going to want additional cash for home renovations? Are there other debts you can consolidate?
• Offer their services for free

The reason they can offer their services for free is that mortgage brokers are paid commission by the lenders once they close a deal, and work on 100% commission only (some charge for special, difficult situations or when organizing for private lending), but most only work on commission, so be wary if they want to charge you. The compensation is based on a percentage of the mortgage amount and varies for different mortgage rates, products, rate terms (i.e. a 1 year fixed versus a 10 year fixed), and even for different brokers. There are different options available on how broker’s can take their commission, such as up front or over the term of the mortgage, but we won’t get into that for now.

A few rules of thumb are:

• Fixed terms typically pay more commission then variable terms
• The longer the fixed term the more commission (ie. a 10 year fixed would pay more than a 1 year – which makes sense as the lender can predict their revenue stream for a longer period)
• Commissions can vary among brokers as larger ones receive additional bonuses based because of higher volumes
• No frills products which are “stripped down” with some features removed to provide a better rate typically offer lower commissions
• Speaking to many brokers they make an average of 0.75%
• A no frills, quick close product could offer 0.50%, while a full featured 5 year product could provide 1%

Brokers that do a lot of business, such as sourcing over $100M in mortgages annually (to put this in perspective CAAMP reports that there was $952B of residential mortgage credit outstanding October 2009), typically get better deals from lenders based on the volumes they provide and that’s how some can offer lower rates than other brokers. Additionally, if a lender has funds that become available or needs to hit their quarter/annual targets they can make a lower rate product available to a large broker and this sometimes results in special offers and deals in the market that no else has access to.

So all brokers don’t always offer the same rates or products and that’s why, as we try and provide the most comprehensive mortgage rate market comparison in Canada, we compare different brokers as well as the banks, credit unions and other lenders.

Surprisingly, mortgage broker market share is estimated at between 25-30% in Canada versus other markets such as the UK and US (before the economic collapse) where they are over 60%. Therefore there is a lot of growth available to brokers in Canada, and they offer a great service and we hope many more Canadians will consider talking to one before they take out their next mortgage. If your current bank or lender offers you a better deal, that’s great news. You can now sleep easy as you know that you’ve compared the market and increased the likelihood of getting a better deal after speaking to a broker.

RateSupermarket.ca is pleased to announce that mortgage agent Cathy Roddy with the mortgage broker Dominion Lending Centres has made her services available and has listed her rates on RateSupermarket.ca.

Cathy and her team specialize in mortgages in the Kingston/Belleville area and you can find contact details of Cathy and her team as well as they’re latest mortgage rates here: Dominion Lending Centres Eastern Ontario.

Welcome on board to Cathy and her team.