What did I do today? Let me answer some of your burning questions. However, If you have more ask them!!!

My wife asked me, "What did I do today?"


She is often curious so I explained.   Today, I talked both a Realtor and a financial advisor about helping their clients get the best deal possible.  I tracked down some extra paperwork the bank had requested on my self-employed client.  Reviewed the mortgage rates and the product changes of three banks.  Then I had a meeting with a business development officer who wanted to tell me about why his products were better than his competition.  I have not even gone for lunch yet!

Since I get questions all the time I thought of a couple more that often come up.   I am thinking your next question might be: What do I do exactly as a Alberta mortgage brokers anyways, you ask?

We have to break it down somewhat to properly explain.   You see, normally there are two ways to get a mortgage--through one of the main big five banks or through a licensed mortgage broker.

I am sure you know about the banks.   You go in, you argued about rate for the afternoon.  They talk to the Branch manager because they have the rate discretion you are after.   The other side of the coin to be as simple as possible a mortgage broker is the middle man between the client and the bank/lender, whereby the mortgage broker submits the client's mortgage application to the most suitable lender.  This is usually the lender who offers the lowest rate.  Similar to that of how any broker works, a mortgage broker essentially matches sellers (lending institutions) with buyers (mortgage applicants), whose main objective is to get the best deal.  The best deal in terms of mortgages, again, that all comes down to the lowest mortgage interest rate, and privileges associated with that mortgage which some banks change their rates by the hour.

Mortgage Brokers are not employed by any of the banks or lenders; they are, rather, independent mortgage professionals who in Alberta are licensed and work for you.

How much do I as a mortgage brokers charge for my services?
NOTHING!  How does FREE sound?   With the small disclaimer being: unless I am brokering a commercial mortgage (i.e. a mortgage for a commercial/retail building), or if the lender of choice is a private lender, a person or private lending company who lends their capital at a premium because or badly bruised credit or a bankruptcy.  For a traditional borrower however with average to above average credit who are looking for a regular mortgage nothing at all.

How do I get paid as a Calgary mortgage broker?
I work solely on commission.  I get paid after the deal closes, and when I find you the perfect home.  I usually give my top three choices, and why they are the best for you and work out what you are most comfortable.

I hear claims all the time that Alberta mortgage brokers get lower rates than banks even if and when the client is a long-time customer of his/her bank?  How is that even possible!   

If Mortgage Brokers account for approximately $50 billion of mortgages in Canada each year, then this volume of mortgage business the mortgage brokers write are offered discounted rates from the banks/lenders.  Ever shopped at a wholesale store?   Buy in bulk and get a discount.  They don't pay me to sit in the branch like I used to.  They don't pay my salary, CPP, withholding taxes, or even have to worry about a Union.

What banks do you as a mortgage brokers deal with?

Being a Mortgage broker I have access to over 50 different lending institutions.  If you take into account all these different choices available for a mortgage applicant, would it not stand to reason that this puts them in a superior position to be confident and secure in the thought that they have the right type of mortgage based on their own unique personal situation.  Its like going to one car dealership and hoping that they have the perfect car for you.   I am sure they could sell you something on the lot, but does it fit seven, or can you plug it in to the wall to recharge?  Like cars, not all mortgages, or even mortgage brokers are created equal.

I have never recommended limiting yourself to just your bank because you feel loyal.  It’s not cheating if you want to have better service, better rates, and professional advice from a MortgageBroker like me!

Should you refinance your mortgage? The why and when explained.

Mortgage Refinance Basics

I have asked you to shop around for the lowest mortgage rates possible when your mortgage comes up for renewal through a Calgary mortgage broker.  I just want to make it clear that finding the best mortgage rates possible are not just for when it comes up for renewal.  A great Calgary Mortgage broker will email you when the rates have decreased, or a better product is available and at the very least review your product every year on your behalf to ensure the fit is still perfect as possible.  Still I feel that some more information should be given on this subject. 


Mortgage refinancing can be done at the time of renewal or any time throughout your term.  If you do decide to switch and not just renew your product it’s called refinancing.  All it really means is leaving your current deal or institution for something new.  You don’t always have to leave the bank you are at, but it all boils down to how much you are going to save on mortgage rates if you do.  There might be legal fees, and a penalty associated with the change, but I will tell you know why there are good reasons to do just that.   Is there a benefit that outweighs this cost is the underlying question in all the reason below.

• Take equity (capital) out of your home. 

You can borrow up to 85% of the value of your home after you deduct the amount of your current mortgage.  This money can be used to renovate your home, or even purchase a second property.  Many people to avoid refinancing all together will use a home equity line of credit to access up to 80% of the value. 

• Pay off debt more expensive debt

If you are carrying balances at almost 20% on your credit cards, you are spending a little more than you could if you paid these balances of their your equity of your home.  Paying less interest frees up money in your budget to pay down the mortgage faster, or save for your retirement or even towards some renovations.   

• Lock in your Mortgage 

Did you know that today’s best 10 year rate is within one percentage of the best 5 year rate?  If you are in a variable the cost associated with rate changes with alter your payment and could give you anxiety attacks when doing your budget.  Do you know what would happen to your payment if it goes up 2%?  How about 3%?   If this prospect is worrying you then you might consider refinancing your mortgage to lock into a fixed rate.    

• Benefit from the lowest mortgage rates available

If you current mortgage rate is much higher than today’s rates, than you could be saving each an every month.  Before you jump ship and think, my rate could be better lets refinance.  There is a catch that you have to figure out first.  What is the penalty?   If it’s a variable rate product, the penalty is just three months’ interest. If you have a fixed rate, you’ll pay the greater of three months’ interest or the interest rate differential, or in some cases its 3% of the value of the mortgage.  A couple of the mortgage products out there right now are giving penalties which offset the lowest rates on the market.  This is why you should not just shop a rate, but the products itself.  The fact remains that if the rates are lower that what you have now, just ask a Calgary mortgage broker to determine if it’s a wise move, or it’s better to stay where you are at for now.

• Shorten your amortization period

Some clients want debts paid off as fast as possible.  If you are no longer happy with the prepayment privileges of your mortgage and still want to pay it off sooner, you can reduced the amortization of your mortgage allowing you to make higher payments on a monthly basis and paying it off faster.  Amortization is not the term of the mortgage but the whole time frame of the mortgage like 25 or 30 years.

If you would like for a Calgary Mortgage broker to have a look and see if the lowest mortgage rates available on the market would save you money don't for a second hesitate to contact one today!

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.