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Does Your Bank Provide You with Alternative Choices?


Advantages of using a Mortgage Broker over the Bank

For first time home buyers and previous home owners alike, getting a mortgage is stressful. Not only are you thinking about the up-front cost of a new home, but prospective home buyers are also plagued with finding the best mortgage rate and the most attractive monthly payments. Wouldn’t it be nice to have someone that can do all of that for you? And better yet, you don’t pay until you’re happy with what they’ve found for you. A mortgage broker isn’t for everyone, but for home buyers that want to avoid the anxiety of finding the best rates and wading through lingo and paperwork that quickly becomes too much to handle, a mortgage broker is essential.

They Can Find the Best Fit for You, Not Everybody Else

Unlike popular mortgage and real estate websites, working through a mortgage broker is a very personalized experience. A mortgage broker can sit down with clients and look at all the factors that may affect the kind of mortgage you get and how much you pay every month. When using a broker, you can express any needs and concerns that would impact what you can afford and the type of mortgage you need. This allows them to find the best possible policy for you. And, the advantage of using a local mortgage broker over someone a thousand kilometers away is that he or she can empathize with your concerns. Cost of living, home repair and utility bills are every day worries, and someone familiar with your area would be better suited to addressing these needs. It helps to know that the person talking to you about money knows just how expensive milk and bread is at the local grocery.

A mortgage broker also doesn’t work for a bank. This is a huge benefit because he or she isn’t getting paid to sell you anything. Rather, they are getting paid simply to represent you to banks and financial institutions. While some banks may try to take advantage of you, a mortgage broker merely wants to find what works best for your budget and needs.

And, most mortgage brokers have the advantage of connections in the financial world. Some programs and loan offers may not be available to you on your own, but a mortgage broker would have access to them. With a mortgage broker, you’ve got the added addition of their experience along with having a representative out there finding you the best deal. Because their goal is to find the best deals, mortgage brokers know about a lot of companies and a lot more policies. Some of these are only available to brokers, so there are opportunities that may be available to you that you couldn’t have found on your own. Plus, in some cases a mortgage broker may beable to waive costly closing fees, saving you hundreds.

They Understand the Language and Can Help You With It

One of the biggest obstacles buyers face is language. A mortgage broker is not dissimilar from an attorney in this regard. Terminology like amortization, porting and shared-appreciation mortgage might require some explanation as these words crop up in a mortgage agreement. The average person doesn’t know a lot of legal terminology because put simply, you don’t have to. Professionals like mortgage brokers or attorneys have a thorough and complete understanding of this, and it is in your best interest to take advantage of that.

A mortgage broker can explain what will be required from you to satisfy the terms of your mortgage and can clearly explain what happens when payments are missed or if you are able to pay off your mortgage early. Most importantly, because of a mortgage broker’s understanding of this particular financial language, he or she can make certain that you aren’t taken advantage of by a bank or financial institution.

Another obstacle that can seem very daunting is paperwork. Some of it goes to the government, but quite a bit of it is returned to the lender. While the paperwork is designed to protect you from unlawful actions by the bank or financial institution that loaned you the money, a lot of it is also agreements and proof of income, credit, and other related material essential to home buying and ownership. With so many deadlines and so much legal talk’, it can be overwhelming to deal with. Mortgage brokers can help organize this tidal wave of information. If your mortgage broker is local, handling the paperwork is considerably easier because you have the benefit of meeting with them in person, going over exactly what you need to sign, and getting it taken care of without the hassle of return dates or lost paperwork. By using a mortgage broker, you can ensure that you get your paperwork in on time and complete in the way it needs to be so that you’ll be in your new home that much quicker.

You Can Establish a Relationship Now and For Later

Mortgage brokers can also help you with an existing loan. There are a lot of reasons why you may need to adjust your loan in the future, and it is important to know that now. By going with a mortgage broker for your first mortgage, you are establishing a relationship that will ultimately be beneficial for you as your family grows, your needs change, or even as you look into another property that can better meet your needs. Your broker will know your history and above all else, they’ll have helped you get a favorable first mortgage, essentially establishing a bond of trust between you and your broker.

When a mortgage broker searches for the best loan to fit your needs, a lot of shopping and browsing is involved, and the same thing occurs with refinancing. Your new mortgage will buy out your old one and a mortgage broker would be able to help find the best options available to you. In the event that you’d like to move but find the current terms of your mortgage so attractive that you don’t want to lose them, you should speak to a mortgage broker. This is called porting and is a good thing to consider if your mortgage rate is better than anything currently being offered. A mortgage broker can help you determine if this is what’s best for your financial future and also navigate any new terms or additions that need to be made to your existing mortgage.

Regardless of your needs, it’s good to have a professional in your corner who is looking after your best interests.

Some people prefer to do the leg work themselves in order to have a better understanding of the financial waters, so to speak. Others prefer a sense of responsibility. For most of us however, it is so much easier to work with a professional when it comes to our money and how it’s spent. And, it’s nice when they personally know your concerns and the beautiful, diverse city you are a part of. A mortgage broker can find you the best rates with the best policies not because they are trying to sell you their policy, but because they are trying to find the policy that benefits you the most. And, not only will they save you money in the years to come, but they can do it right now.

As you browse for a new home and look for how to pay it, ask yourself if a mortgage broker can help.

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Mortgage Policies of 2013, and What to Expect in 2014


Over the past several years, Canadians have seen sweeping reforms in mortgage policies. While some may consider them more restrictive, others would argue that Canada’s past reforms and continued reform is helping stabilize and control the Canadian economy. Regardless of your perspective, the Canadian home-buying and property investment landscape has changed considerably in the last five years. As 2014 comes upon us and many Canadians expect more policy changes and restrictions, it is important to know what they may be and how that impacts your home purchases or investment property portfolio, as well as to know current CMHC and Department of Finance policies regarding lending.

Mortgage Regulations in 2013

After the financial crisis of 2008, and the great recession that followed, many governments began re-evaluating policies regarding the lending habits of banking institutions. For those who are unfamiliar with Canadian mortgage lending practices, the Canadian Mortgage and Housing Corporation, CMHC, is responsible for providing mortgage default insurance to lenders. In the event that you are unable to pay off your home, this is for your lender’s protection. While the CMHC provides insurance to lenders, ultimately it is the Department of Finance that makes important changes to the rules and policies regarding lending. Over the last five years, the Department of Finance has gradually required shorter amortization periods (the lifespan of a mortgage), a better credit score and in some cases, for buyers to make larger down payments than ever before.

Before our latest depression and preceding financial crises, amortization (the lifespan of a mortgage) could be as long as 40 years. By 2013, this span had been reduced to 25 years for homes with less than 20% equity. And, mortgage holders saw an increase in carrying costs for their mortgage. Homebuyers had a shorter amount of time to repay their mortgage, ultimately buyers will pay less interest due to it. While monthly payments went up in 2013, a much larger portion of the amount paid went to the principle amount, not interest.

Prior to sweeping changes that began in 2008, some buyers may have been able to get a home with favorable mortgage rates, low monthly payments and 0% down. By 2013 however, the government has enacted new policies, requiring at least 5% down for all new purchases. For homes priced at over 1 million dollars, 20% of the value is required as a down payment. Though, these homes and investments have the benefit of no longer adhering to the same rules and requirements of homes with a smaller price and less equity.

The CHMC is a form of insurance for banks, but it does have limitations. While the CHMC raised its annual cap for lenders to $85 billion in 2013, a mandate was also put in place later in 2013 stating that lenders could only use $350 million of that per month. This was to discourage what Finance Minister Jim Flaherty considered reckless lending by banks, who would offer very low mortgage rates in an effort to draw in more homebuyers.

While the affect mandate had on consumers isn’t direct, the cost is passed down to potential home buyers through a slight bump of 0.2 to 0.65 in mortgage rates. This may seem significant considering the overall price of a mortgage but historically speaking, it is a small advancement and mortgage rates, generally, are still considered low even as we enter 2014.

What to Expect in 2014

As 2014 approaches, many analysts have looked to Ottawa and Finance Minister Jim Flaherty for hints at what changes the Department of Finance will have in store for lenders, homeowners and future borrowers alike. While policy changes are difficult to understand, it is important to understand upcoming restrictions, especially if you’ll be interested in purchasing a home or refinancing an existing mortgage.

Another aspect of lending is mortgage-backed securities, or MBS. While mainly a concern for investors rather than home buyers, the government is considering creating a bid system for the MBS market. A bidding system would allow lenders to pay for the guarantee of a government backed security and in turn, they could issue more mortgages. This translates into a bonus for investors as it means there are opportunities for purchasing. This bidding system, while it seems to be advantageous at first, could easily make it so that only the bigger banks can get these securities, effectively squeezing smaller banks and lenders out of the competitive market. When fewer lenders can offer mortgages and mortgage rates, there is less competition and drive to make these appealing to potential investors.

The government is also considering term limits on certain insurance. CMHC is responsible for providing mortgage insurance and 2014 could bring yet another change in these policies. If the CMHC puts a term limit on bulk insurance, which is insurance for mortgages with 20% or more equity, this could translate into higher rates for the borrower. As term limits are reached, lenders must renew this insurance at a repurchasing cost. This cost would be passed on to the borrower, mainly as higher mortgage rates.

In an effort to continue to stabilize the housing economy, the OSFI (Office of the Superintendent of Financial Institutions) is looking into the feasibility of lowering the amortizations of low-ratio mortgages. Low ratio mortgages are those with 20% equity or more, and the current amortization rate for these mortgage types is up to 35 years. The OSFI is conducting research into how it may benefit, or harm, the housing market if this number is lowered to 25 years.

These changes may occur in an effort to ‘cool down’ the housing market. Finance Minister Jim Flaherty has made it clear that the Department of Finance is interested in making home buying more difficult, both to help the housing market and curve the debt of Canadian families, investors and home buyers. Finance Minister Flaherty has been quoted as saying that his goal is to slow down the market to prevent a crash later. Whether it will prevent a crash later is yet to be seen, but the effect is felt now as home sales are showing a decline, especially in urban areas.

The last several years have seen a lot of changes for lenders and borrowers alike. Before the recession of the late 2000’s and the depression that followed, getting a mortgage in Canada was considerably easier. After witnessing the real estate crash in the United States though, and experiencing the global depression, the Canadian government has enacted new policies that will hopefully safeguard the Canadian economy. These changes make it more difficult to purchase a home however, they also attempt to make certain that when a new home is purchased, the borrower will be able to pay it off. Regardless of upcoming changes for 2014, the message that the Department of Finances has been sending is clear: buying a home is not easy right now, nor will it be in the near future.

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