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Mortgage-Matters

Brokers can save you money

Do you have a full understanding of the role of a mortgage broker?

A recent report indicated that three quarters (74 per cent) of the respondents admitted they had at best only a ‘partial’ understanding of the role of a mortgage broker.

Here are the top five reasons from the survey for potentially not using a mortgage broker and clarification of exactly how a mortgage broker can assist you.

I don’t want to pay for mortgage broker services

This is the primary misconception about using the services of a mortgage broker. Mortgage brokers are independent and work with many banks and direct mortgage lenders.

The lender pays mortgage brokers on terms agreed upon between the lender and mortgage broker. You are not charged a ‘direct fee’ for their services.

The mortgage broker works with the lender until the closing of your mortgage and then receives their fee from the lender. Occasionally a ‘broker fee’ might be charged in very difficult situations but these fees would always be fully disclosed in advance.

I would rather deal directly with the lender

There are many direct mortgage lenders in Canada that can only be accessed through a mortgage broker.

Your mortgage broker will analyze your financial situation which includes your credit and employment history and provide you with your mortgage options.

They will then present your application in the most favourable way to the lenders that the broker has determined will best fit your needs.

They will also clearly explain all of the terms and conditions including how pre-payment penalties are calculated so there are no misunderstandings should you need to exit your mortgage early.

The thought of using a mortgage broker didn’t cross my mind

That is totally understandable. Your first thought is to walk into your local bank to apply for a mortgage because this is your main financial resource.

Mortgage brokers are not transactional like your bank and will continue to be a source of information for the life of your mortgage.

Your local bank can offer you decent rates and you may be comfortable with them but financing your home is most likely the largest financial transaction you will ever undertake.

Getting the best possible mortgage can literally save you thousands of dollars so working with a mortgage broker who will explore ‘all’ of the available options for you is a prudent choice.

I don’t want to deal with a lender that I’m not familiar with

The monoline lenders (non-deposit taking lenders) that are only accessible through mortgage brokers are a very important part of the mortgage industry in Canada.

Their mortgage products and low pricing improve consumer choice and force our dominant banks to be more competitive.

Monoline lenders do not have store front locations so these costs are not passed along to the consumer and as a result they generally offer better interest rates and lower penalties should you decide to pay off your mortgage.

They source their business through mortgage brokers and can have more flexible lending programs than the major financial institutions.

I don’t understand what services mortgage brokers provide

Mortgage brokers provide you with more choice as they have access to a network of many lenders that offer different products and services providing you with objective recommendations for your financing options.

Mortgage brokers have access to the best rates and negotiate on your behalf to ensure you receive the best terms on your mortgage for now and into the future.

Mortgage brokers are professionals that have on-going educational requirements to ensure you are always receiving the best independent advice.

If you would like to learn more about how a mortgage broker can assist you with finding your best mortgage options, please give me a call at 1-888-561-2679 or email [email protected]



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Killing mortgage approval

We have worked hard together to get your mortgage approved and have been successful in securing great rates and terms for your mortgage financing.

There is going to be a period of time between receiving the final approval for your mortgage and the date that it will actually fund with the lender.

Things can go wrong within this time frame, so here is a brief list of things to never do between the approval and the final closing of your mortgage as most lenders are going to re-verify information before they fund your mortgage.

If anything has changed, it could kill your mortgage approval.

Change your job; quit your job; become self-employed

Do not change your employment status even if you are moving to a job that pays you more than you are currently making. Most employers have a probationary period that you must complete and the lender may no longer feel comfortable with granting you a mortgage because you are making a change in your employment status.

Quitting your job might seem like an obvious thing not to do, but losing the income might also disqualify you for the financing even if you are not the primary borrower.

Make a change to self-employment – wait until after your mortgage closes. The mortgage rules for the self-employed are different than if you are an employee.

Buy a new car or truck or van or motor home or new furniture

Most lenders are going to pull a new credit report right before they fund your mortgage. If they discover credit inquiries from car dealerships or a new car loan or any new debt now reporting on your credit report, the new payment could put your qualifying budget ratios out of line making it so you no longer qualify for the mortgage.

It might also be tempting to go shopping for furniture and dishes for your new home but you should wait until after you move into your new home. By increasing the amount that you owe to your creditors you are jeopardizing your mortgage approval because you didn’t owe those funds when your mortgage request was reviewed by the lender.

Another side effect of applying for new credit – it could pull down your credit score to a lower number that means you no longer qualify for your mortgage as there are minimum credit score requirements.

Don’t use those credit cards or close any accounts

As above, lenders are going to update your credit report before they fund your mortgage. Significantly increasing the balances outstanding on your credit cards could disqualify you for your mortgage financing.

The lender has also approved your mortgage based on your current financial situation. There are minimum requirements for open accounts by both lenders and mortgage insurers so conversely by closing accounts you may no longer meet those minimum requirements for open credit accounts.

Do not co-sign for someone else’s mortgage or loan

If a family member asks you to assist them by co-signing or being a guarantor on a mortgage or a loan, please don’t. You may have the best intentions to assist a family member but this could also jeopardize your approval.

Adding any extra debt could throw your borrowing ratios out of line as the new payments must be included in your debts even if you aren’t the one who is making the payments.

Don’t stop paying your bills

We may have approved you for a refinance of your mortgage to payout your debts but you need to continue making your payments until the mortgage has funded and the balances owing have been paid off.

Your credit score may be affected by not paying those bills and that could result in you no longer qualifying for the refinance.

The best course of action is to check with whomever approved your mortgage financing before making any changes to your financial situation. Making changes without the proper advice could actually cause your mortgage financing to be declined.

Unfortunately, these examples are from real-life situations. Give me a call at 1-888-561-2679 or email [email protected] and I will be happy to ensure that you don’t do anything to jeopardize your mortgage approval.



Reverse mortgage myths

A reverse mortgage is a way for homeowners 55 or older to turn up to 55 percent of the value of their home into tax-free cash.

It’s a loan secured against the value of the home, but unlike a traditional home equity line of credit or a conventional mortgage, it does not require monthly mortgage payments for as long as you live in your home.

What can you do with a reverse mortgage?

  • Pay off debts
  • Renovate or make your home more accessible
  • Handle unexpected expenses
  • Help your children or grandchildren
  • Improve your day-to-day standard of living
  • Make a special trip or purchase

Reverse mortgages have come a long way. They have evolved from a needs-based product to a solution that many financial planners recommend as an important component of a comprehensive retirement plan.

Unfortunately, there are still many misconceptions regarding reverse mortgages. Below, the myths are separated from the facts.

Myth: The bank owns the home.

Fact: You always maintain title ownership and control of your home, and you have the freedom to decide when and if you’d like to move or sell.

Myth: You will owe more than your home is worth.

Fact: Clients can qualify for up to 55 per cent of the appraised value of the home, 33 per cent on average. As the lender has conservative lending practices, you can be confident that there will be equity left in the home when the loan is repaid. In fact, more than 99 per cent of Reverse Mortgage clients have equity remaining in the home when the loan is repaid.

Myth: A reverse mortgage is a solution of last resort.

Fact: Many financial professionals recommend a reverse mortgage because it’s a great way to provide financial flexibility. Since it is tax-free money, it allows retirement savings to last longer.

Myth: You cannot get a reverse mortgage if you have an existing mortgage.

Fact: Many clients use a reverse mortgage to pay off their existing mortgage and other debts, freeing up cash flow for you to use as you wish. How great would it feel to be free of regular mortgage payments?

It is also important to know these two key points.

You will remain the owner of your home and will never be asked to move or sell your home provided you pay your property taxes and home insurance and keep your property well maintained.
A reverse mortgage will not affect any government benefits you may receive such as OAS, CPP or GIS.

A no obligation assessment is available to determine if a reverse mortgage is a suitable option for you. As a mortgage broker my advice is impartial and I will assist you to review all of the mortgage options available to you.

It only takes about 90 seconds for the assessment so please give me a call at 1-888-561-2679 or email [email protected].



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Debt consolidation options

If you are carrying high interest credit card debt, car loans or other personal loans you know that it can be challenging to pay off everything you owe.

You may have those post-holiday debts hanging over your head.

If you are a homeowner and there is sufficient equity in your property, consolidating all of your debt and including it in your mortgage payment might be the right solution for you.

There are many benefits to debt consolidation including the following:

  • A much lower monthly interest rate for all of your debts
  • Lower monthly payments
  • The comfort and convenience of making only one monthly payment instead of making multiple payments on your credit cards and other loans
  • Improving your credit score by reducing the amount you owe and now being able to make all of your payments on time

A debt consolidation mortgage is not a quick fix and a full financial review should be completed with your mortgage broker. There could be costs to break your current mortgage to include those higher interest debts with your mortgage payment.

You may be lowering your current monthly payments ,but now the debt is going to be repaid over a longer period of time.

Is that really going to be financially beneficial?

It all comes down to the math as the overall cost of borrowing could be higher or lower than what you are currently paying.

Crunching all the numbers is the only way to know for sure.

There is also another real danger to consider – are you disciplined enough to stick to a budget going forward and live within your current income or will you be tempted to use those credit cards again and end up in exactly the same situation in the near future?

It can become a vicious circle unless you learn to live within your budget. You don’t want to end up in the same place a year from now.

On the other hand, if you are disciplined and can live within a budget the benefits of the increased monthly cash flow could significantly improve your financial situation.

These extra funds might be used for investing in your retirement with RRSP contributions and having an emergency financial fund in place for life’s surprises.

There are several possible options to consider for a debt consolidation mortgage including breaking your current mortgage to include the debt owed, a second mortgage for the consolidation or a home equity line of credit.

A small unsecured personal loan may be sufficient. In an extreme situation it may be necessary to sell your home to clear off all debts.

You may have heard about ‘interest free’ debt consolidation programs where a company will negotiate on your behalf to reduce the debt and arrange a single monthly payment.

With very careful consideration this may be a last resort option but be aware that this type of solution will ruin your credit rating for a long time.

Get all of the facts before entering into this type of arrangement.

Now, all that’s left is to figure out precisely which solution is best for you to wipe out all those high interest payments.

If you would like a complete confidential assessment and discussion of all the possible options, please give me a call at 1-888-561-2679 or email [email protected]



More Mortgage Matters articles

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About the Author

April Dunn is the owner and a Mortgage Broker with The Red Door Mortgage Group – Mortgage Architects. She has been assisting clients to purchase, refinance or renew their mortgages for over 20 years.

April has experience as a Credit Union manager, a Residential Mortgage Manager with a large financial institution and as a licensed Mortgage Broker. By specializing in Strategic Mortgage Planning she has the tools available to build a customized mortgage plan, with the features and options that meet your needs.

April provides a full range of residential and commercial mortgage financing options for clients all over the province of British Columbia and across Canada through the Mortgage Architects network.

Contact e-mail address: [email protected] or by phone at: 888-561-2679.

Website:  www.reddoormortgage.com



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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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