Mortgage Renewals Brokers market share drops to 25% from 47%

Did you know where Calgary Mortgage Brokers Fail?   I was thinking about this and I don't think its intentional.   I think it has to do with the mentality that:

If its not broke, don't fix it. 

Currently Calgary mortgage brokers write 47% of all new mortgages.   This is because when it comes to shopping, we know the lay of the land, we know who is offering the best deal.   When it comes up for renewal we only write 25% of these deals.  

Did they get the lowest mortgage rates available?  They just don't know.

Have you ever bought a car?  Did you just go back to the same dealership when you wanted a new one?  More than likely if you are like me, you test drove a couple from a couple different places.  You had to battle the aggressive car sales people wanting to tell you what you want which you may have found annoying.  "This is what you are looking for it has a spoiler, it has to be sporty"  I shopped around every time I wanted a new car.  Sometimes I have stayed with the same dealership as I loved my contact there.  Do bank clients do the same shopping around for their mortgage rates at renewal? Sadly, many do not.

That renewal form that the bank sent out were not the lowest mortgage rates they could do. Why would they send you their best mortgage rates?
When you just indicate on the paper what rate you want, settling for the banks posted rates, you are also agreeing to any material changes made to the way the mortgage was structured in that term.  For example one company in recent years changed their payout calculators making it very expensive for clients.  When they went to move, seven years down the road, they were hit with a much higher than anticipated fee to transfer, and told me that is not what they signed up for.  To which when I finished digging, the reason was the way the company did the calculator changed and when they renewed they renewed into the new method.

  

All I am asking is for those people to double check to ensure they are not wasting thousands of dollars by locking into much higher rates, or renewing into a lemon of a car, when you could have been driving something that fits your new lifestyle so much better.   Just ask a Calgary mortgage broker, what is the lowest mortgage rates and best mortgage products available right now.   Worst thing is going to happen is that we say stay put, don't move that is perfect.

Best thing? A little extra time, money, and peace of mind.

CMLS Financial Enters Residential Mortgage Market!

Great news, another lender enters the Calgary Mortgage Broker lending market.  Since CIBC First Line left, there was concern the space was shrinking, now a well renowned player has entered the ring.   

CMLS started back in 1974 under the banner Penmore Investment Services, as a commercial Mortgage Intermediary.  In 2004 split into two companies which allows it to still focus on Commercial as Penmore Mortgage Capital Corporation, while the other Canadian Mortgage Loan Services is created to establish more diverse products to mortgage investors.

In 2011, Canadian Mortgage Loan Services changes its name to CMLS Financial Ltd.  In 2012, Penmore rejoins the company again under CMLS Financial LTd, and in 2013 Monday February 25th they launch their Residential Mortgage Division.  

Having existing mortgage assets over 8 billion already in existence and around since 1974 means they are not starting up, they know lending, they are successful at it, and have been doing it for longer than many Calgary Mortgage Brokers have been alive.

With over 100 employees they have the capacity and efficiency to assist Calgary mortgage brokers in this competitive marketplace with not just some great products, but some great mortgage rates as well.

Give me a call should you want to know more!  403-807-8779

Education, Expectations and Evaluating the Evidence.

 

More and more people are locking in their mortgage with a fixed rate. 

Are they right?

 
 
When I sold investments managing risk was the name of the game.  Keeping expectations in line with the potential fluctuations of the product they really wanted was paramount.   Now as a Calgary Mortgage broker, I am faced with offering some of the lowest mortgage rates in history and the question I often hear is "Should I lock in this low mortgage rate or go variable? "

The last stat I have read stated that 79% of all mortgages are going into fixed products.  I have found myself explaining that rates are very low right now, but on average if you keep it variable you save more in the long run. Most of my clients have weighing the pros and cons prefer the risk adverse method.  Knowing their payment is going to be the same for a period of time.  Then you have to ask would a slow gradual increase in payment be better or a big increase when you go to renew, if the rates are higher at that time?

Essentially with a fixed rate you are buying insurance that the rates wont go up with a fixed term. The issue is that expectations of what the rates are going to do is already placed within that rate.  The bank is already making their spread on their economic forecast and based upon the bond rates.

What would change fast with higher interest rates?   Less people increasing their payments, less people being able to afford the payments come renewal, less people increasing their payment frequency. The better leading ratios would be  income and salaries to the cost of homes within a city or province.

You then have to ask yourself what you think the rates are going to do.  One common viewpoint is that the "economy" of America was doing better as measured by the record profits of the corporations.  This economy was less to do with employment and inflation, but with where mindset is of these big companies.  Because they were doing better, and less risk adverse they were going to leave the bond markets where they were trying to hedge against losses and enter the equity market.  In conclusion of this viewpoint if money is leaving the bond markets, bond markets would have to increase their rates, to attract investors and if this happens then the spread would be thinner, therefor the lowest mortgage rates in history would be no more. 

As a Calgary mortgage Broker, its all about education, expectations, and evaluating the evidence.

Bank Vs. Broker In-depth look at pros and cons

 A Calgary Mortgage Broker Vs. The Banks

Real Estate Brokers, Insurance Brokers, Investments Brokers, and Calgary Mortgage Brokers all have one thing in common.  They are professional experts within their fields of expertise.  That is all they do all day.  They are not an Electrical Engineer, a Rig Hand, a Long Haul Driver, a Call Center Representative, and doing this on the side.  It’s their full time career.  It’s true; you can do anything a broker can do with training, knowledge, interest, courses, passion, and the appropriate license.  You don’t have to go to a grocery store either.  You can buy a farm, and grow your own wheat, raise your own cattle, and let your chickens lay you eggs.  In every industry of goods and services there is a middle person, making your life easier.  An easier life is why I am writing this, and there is still a debate in Canada as to which is better, the Bank or the Calgary Mortgage Broker.  I have been on both sides of this coin, so I am in a position to offer a unique perspective that many are unaware.

Here are a couple of the Pros and Cons on the debate.  At the end of the day you have to make a choice which channel you want to go, and which channel would like to support.  I did try to make this list all encompassing, and even searched for other lists, but most dated back considerable time and more than three years ago, and this environment is always changing.

Mortgage Broker Pros:

• Best mortgage rate and product selection on the marketplace
• Bank offer lower rates to Brokers, as they don’t have to pay them salary to sit behind the desk, just finder’s fees if it closes. Also this is achieved through volume discounts.
• A free service and no cost to you.
• Truly independent advice, as they work for you, not the bank.
• More selection equals better rates, and products.
• One stop shopping.
• Ongoing support, and a relationship.
• If your credit score is bruised, they can find a lender who do the deal, and work with you to get the credit repaired
• You don’t have to negotiate, they will do the negotiating for you
• Access to the big banks and monoline lenders (which specialize only in mortgages), or B lenders that the banks don’t have access to in case your credit is not perfect.
• In Alberta we are provincially legislated and tested, and accountable to legislators
• Wont cross sell you other products like Credit Cards, or RESP’s

Mortgage Broker Cons:

• Has the potential to not be in your town or city.
• If the best rate and mortgage is at a monoline lender, then your banking will not be all in one place.  Some people like all their eggs in one basket.
• This channel only makes up approximately 47% of the new mortgage deals in Canada, as once a broker places you are with a big bank, they do their best to keep you with multiple product lines, and fracture that relationship with the potential nuisance of switching when the time comes instead of just signing a renewal form.

Bank Lender Pros:

• They can give you perks within the bank like a free chequing account.
• They can compete to some degree as they use the line:  “Go shopping, and find the best rate, when you are done come back and see me last and I will see if I can beat it.”  Which can be a pro and a con, as they can negotiate, but why not just give you their best rate from the start?  Are they hoping you are going to be lazy?

Bank Lender Cons:

• You get a statement, not a phone call, or a person who will be there if you need anything else down the road.
• Branches have higher turnover, so you will have a harder time trying to connect with a single person there for any duration.
• Lack of professional unbiased market wide training
• The big con is that you have to be able to negotiate  or else you won’t get a good deal
• A bank can only offer you their product line, and their rates, and don’t know or care about if someone can do it cheaper, or better.
• You have to do the shopping around which can be time consuming, making appointments and going to all the branches to see their mortgage specialists.
• Their rates often aren’t as good as mortgage broker rates
• If your credit score or ratios are not within their guidelines they will show you the door.
• They don’t decide in branch, usually it’s all automated by head office. 
• Not governed by any provincial legislative body.  The watch dogs are not holding the Mortgage specialist accountable; rather the bank polices their staff themselves.

The mortgage world is always changing as the government tries to heat up or cool down the markets by changing ratios, how people qualify, and who can get the mortgage insured. 

If you were flying to Rome tomorrow to go shopping would you want a trusted guide to show you where the deals were, or would you just like to walk around and find them yourself?

Or better yet, if you were charged with a crime and faced with a five year jail time, would you go to court and represent yourself?  Sure you could, but you rather have a professional that does it every day especially when it’s something as momentous as buying a home.  

If you have anything that you would like to add to my list, just let me know I would love to add it.   Likewise if you have any questions or requests from a Calgary Mortgage Broker who has lived both lives as is where he is for so many reasons.

The skinny on the state of Zero down.

I have heard some of my friends say that Zero Down Mortgages are gone. 

I replied, historically where there is a demand, there will be some supply.

Being the cultured Calgary Mortgage Broker I am I refrained from talking about this over dinner, but I thought I should put this out there for not just them, but for you too.   

Try as they may to put road blocks and put an end to Canadians buying homes with nothing down, homeowners are still getting into the real estate market without building up a nest egg first.

The First Road Block in 2008- Ottawa terminated mortgages that are insured with 100 per cent financing.

Home buyers found the work around by cash-back down payment mortgages. With the trade-off of a higher rate the lender will give you your 5 per cent needed for the down payment.

The latest Road Block in 2012- Ottawa terminated Banks from being able to offer cash back for down payments.

This has stopped some, but now there are ways potential home owners are finding to allow them to get this 5% needed so they can get into the market without building up that nest egg. Here are the ways that are being used to accomplish this goal.

Solutions:

• Government programs

For clients that can prove low income there are companies like Attainable Homes Calgary who provide down payment assistance.   You still need good credit.

• Getting a cash-back down payment mortgage

Lenders that are not federally legislated like credit unions for example can still offer cash-back down payment mortgages. You still have to cover closing costs though!  If you break early from these the lender can reclaim the cash that was given at the start.  The rates are higher, for these but the advantage of the cash upfront goes a long way to offset the increased cost. This is most definitely not the lowest mortgage rate available.

• Borrowing from other credit sources.

 

Clients are able to borrow the down payment from a line of credit, personal loan or even a credit card. That’s right; if the criteria is meet, raising the debt levels with use of a MasterCard or  VISA at 19.25%  We just have to make sure that the lender allows is and they are not a bank or federal trust company.   Just be mindful that the cost to borrow that down payment is far greater, and should be paid off quick and fast.

• Getting a gifted down payment- only to repay it.

I am unable to endorse this.  However it’s my duty to explain how it’s taking place. 

Numerous banks are still offering the flex down, which they pay out cash after the mortgage, has closed.  If a potential buyer has an immediate family member gift  the funds they can be paid back after the deal closes. We are talking a parent, grandparent or brother or sister, not a cousin here.   Or if the family member is ok with a little under the table loan, the GIFT gets paid back over the next year.  The lender does not have the resources to check your bank records for the next year to ensure that no payments went to who gifted it in the beginning.

• Home Buyers Plan (HBP RSP)

First-time buyers can use no more than $25,000 from their RRSP as a down payment.   Which means you are borrowing against yourself and paying yourself back over an extended time.

Before March 1^st is highest circumstance of the Investment loan tax rebate plan.  To which you get an Investment loan from a bank, purchase a RSP with it, claim in on your income tax, get a nice refund then apply against the loan of to the down payment, then when the 90 days deadline is up redeem RSP for your down payment.    Make sure that you are still within your ratios.

There are always negative and positives to every choice, if you choose to partake in any of the above plans don’t do so without ensuring you have planned it all out.   You don’t want to be left outside in the cold, when you could have been in warm by the new fireplace. Call A Calgary Mortgage Broker if you have any questions.   403-807-8779

I have seen both sides. Lets Stop and think for a second.

 My viewpoint on Banks, Vs. Calgary Mortgage Brokers 

Prior to my current role as a Calgary Mortgage Broker, I started my career in finance at a little bank branch in Banff.  Working my way up from a teller, I was running my own branch before I knew it.  When I moved to the city of Calgary I had to start again from the bottom learning what the big branches do differently.  I caught on quick, and soon was training others in the role of a bank lender. 

Was there an official course?  To some degree yes there was. We spent a week in a little room learning how to use the program, how to input data into the system, how to spot money laundering, and the red flags of fraud. 

There was an open book test that we had to write a test that seemed all too easy.  I did not get a licence, a certificate, nor information about any of my competitors mortgages.   Just a handful of mortgages lines and products and the push was to maximize the products to ensure they stay with the bank long term. 

To whom was I loyal?  It was designed so that my allegiance was just to the one bank, 100% to them.   They paid me, the incentivized the cross selling, it was my job to push credit to the top of the ratios.  “Would you like a pre-approved credit card with that?”  This was my all too common phrase.

Down the road I dabbled in Financial Planning, Insurance, and Investments.  For these I had to buckle down and read a book, as I actually failed the test for Securities the first time even though I studied three times as much as I did for by Bank test for lending mortgages.  After I concluded it not at all like the banks investment course, I hit the books so much harder and passed.  However I did get so many more pieces of the puzzle. 

How hard would you make the tests and course if you were trying to sell your products?  How hard would you train someone to do a job that you try to automate as much as possible through a lending program, or investment renewals?  Would that be in your best interests to train them on all the products out there?  When I was there, It was my job to sell the highest rate I could to maximize the bank profits.

If you worked for the Alberta Securities Commission and you want to make sure that people are accountable, compliance is in place would you let the banks teach and test for this?  Or would you do it yourself?  You have the world of investments out there, so you better make sure that they know what is going on.

For a mortgage, for many this debt exceeds their savings as is one of the biggest financial decisions of their life.  Who governs this if you are not with a bank?   For a Calgary Mortgage Broker, the Real Estate Council of Alberta governs all Independent mortgage brokers with a strict set of guidelines, testing procedures, and annual continuing education requirements.   This education course was in comparison nine times the information you learned for the bank.  It was in depth and all encompassing.  It did not just worry about one bank, but all the bank products, including B lenders, Mortgage investment Corporations, and Private lenders.

Before you go back an renew at your bank, or let your teller offer you their lowest mortgage rates and their best mortgage product,  why not figure out what the lowest mortgage rates in Calgary or Alberta?   Who knows what all the competition is offering?  You guessed it, a Calgary Mortgage Broker, who is Independent as that is their only job.  

The evolution of the Independant Mortgage Broker in Alberta

 Independent Calgary Mortgage Broker

Back in the 1990s, Calgary Mortgage Brokers could be counted on your fingers and toes.  These mortgage brokers were the last stop for borrowers unable to obtain a mortgage directly from a bank or credit union. Back then a borrower had limited choice when it came to options.  The banks did not think that meeting with consumers in their homes outside “bankers hours” was worthy of their time. 

The role of the internet in retail banking was still a puppy back then, and over those twenty years that puppy has become a full grown Alaskan Malamute.  The full grown entity is independent and capable of withstanding the Canadian cold, which really has only increased the number of viable options for borrowers.   Independent brokers, who are versed in all the banks products, are able to offer not just a product line from one bank, but many.  Independent brokers, conduct their own research online, find the lowest mortgage rates, find the best mortgage products and have access to the lending models and broker kits to ensure it’s the best fit for client and lender.  They do not just use the big banks, but from Monoline Lenders, Mortgage Investment Corporations, and Private Lenders. In this ever changing and information abundant environment, the mortgage brokerage channel has emerged as a legitimate competitor. This is evidenced by the share of origination transactions increasing from 26% in 2003 to 38% in 2009 to 47% in 2012.  (CAAMP ACCHA- Annual State of Residential Mortgage Market in Canada)

Overall, this option has evolved from a disjointed “lender of last resort” network to a genuine option for all clients.  Important to consider is in 2012 new rules were implemented to cool the Canadian housing market, these forced many clients out of the Big 5 Banks and into the world where only Independent Mortgage Brokers have access thus in 2013 we should see this number rise even more. In most cases the Alberta Mortgage Broker does not even charge a fee.

The Calgary Mortgage Broker is able to shop the big banks for the lowest mortgage rates, the best mortgage product at the time of placement, and ensure that the fit is just right.  

Contact Calgary Mortgage Brokers