I had the opportunity to sit down with a mortgage broker today, to get an update on how they are helping people buy their homes. Here is what I found out:
Mortgage brokers see a lot of clients who find themselves in a panic to arrange financing for a home purchase. Perhaps they thought they had their financing lined up. Perhaps they did have their financing lined up, when the lender suddenly backed-out. Financing is not a sure thing until you actually have the money!
Dealing directly with one of the major banks tends not to work well for people. Unusual personal circumstances that take you outside of the basic simple application becomes a problem for the banks. Bank staff may turn you down rather than take the time to find out more details about your situation. Further, banks are known for not offering anything close to their best rates, at least not at first. Playing one lender off against another will help to improve your situation. Having a mortgage broker who understands your personal situation in greater depth and then having them shop around on your behalf can be helpful too!
But the challenge of really getting the financing that you appear to qualify for is where things get interesting. Arranging a mortgage for someone new to Canada, someone with no-downpayment, a self-employed person, the waitress with a $20,000 income plus another $60,000 in un-reported cash tips, the person with $10,000 of outstanding credit card debt, the person that has problems in their credit report, the person who earns a low salary with a big bonus and so on. Mortgage brokers are willing to take the time to work with and counsel these people and help them gather the right documents or to get their financial affairs structured properly. Then the mortgage broker will present them to a lender in a way that will tend to be approved more often.
Then there is a lot of work that needs to go into selecting the right terms of the mortgage. Fixed term vs. Variable-rate, 1-year, 2-year, 5-year terms, accelerated payment options, exit penalties and more. What the right choices are will depend on the consumer’s plans for the future, risk tolerance and market conditions. Variable rate mortgages have been quite popular over the past few years, however with interest rates as low as they are right now, locking-in to a fixed rate at these levels has become increasingly attractive.
Working with a mortgage broker doesn’t cost anything at all! Well, they don’t work for free – they get paid by the lender that ultimately provides you with the mortgage.
If you are looking to renew your mortgage or are in need of new mortgage financing for a home, ask Ralph Evans for a referral to the right mortgage broker to fit your needs.