Connect with us


5 questions to ask a mortgage broker before you hire them






Photos: James Bombales

For many years, the traditional route towards obtaining a residential mortgage was through a loan from one of the big six Canadian banks (TD, CIBC, BMO, National Bank of Canada, Scotiabank and RBC). These are referred to as “A lenders” or traditional lenders that usually cater to clients with good credit scores and steady income. However, with the introduction of new mortgage rules and stress tests introduced in January 2018, combined with rising home prices, it’s becoming more difficult for homebuyers to be approved for a traditional loan.

Samantha Brookes, CEO and founder of Mortgages of Canada, has seen a rise in Canadians who don’t qualify for a bank mortgage and instead are turning to “B lenders” and private lenders to achieve the dream of homeownership. As a mortgage broker, Brookes plays the important role of connecting homebuyers with a variety of lenders including banks, alternative lenders and private lenders.


Photo: Mortgages of Canada

While alternative and private lenders provide another option for homebuyers to enter the housing market with fewer restrictions, they do come with risks. Unlike banks and monoline lenders, alternative and private lenders are not federally regulated and don’t have to follow the rules set out by the Office of the Superintendent of Financial Institutions (OSFI). And while they do offer lower barriers to entry for those not eligible for a bank loan, they also come with higher interest rates and fees. Many who choose to go with an alternative or private lender often have lower credit scores or are already in precarious financial situations so it’s vital that they choose the right mortgage broker with their best interests in mind.

“A mortgage broker acts as a liaison between the homebuyer and the lender and negotiates on behalf of both parties to ensure that the conditions in order for the transaction to be completed are fulfilled,” says Brookes. “A home is likely the largest purchase you’re going to make in your life so it’s important to ask questions in order to find a reputable mortgage broker.”

Here she shares five questions every homebuyer should ask a potential mortgage broker before hiring them.


1. How many transactions have you closed in the last two years?

“This is really important because even in one year you can’t truly know the business,” says Brookes. “If somebody has two years experience doing mortgages and they’ve closed at least five to -ten transactions each year I would say that that person has enough experience and knowledge to get the deal done.”

A lower number of transactions could also mean the broker isn’t dealing with mortgages on a full-time basis. “If your mortgage broker is only working part time, it could be difficult to get timely responses.”

2. Are you licensed to trade and deliver mortgages in the province?

Mortgage brokers must be licensed with their respective provincial governing body to ensure that they meet the specific education and experience requirements to arrange the mortgage for your purchase. “In Ontario, the Financial Services Commission of Ontario (FSCO) is the government agency responsible for overseeing the mortgage brokering industry,” says Brookes. “To check if a mortgage broker is licensed, you can go to the FSCO website and type in their name and the city that they’re in.”


3. What types of transactions do you accommodate?

Prospective homebuyers should know if their mortgage broker can accommodate multiple levels of lending. This ensures that they will have a good understanding of your situation and provide the right solution for your needs without having to perform multiple checks on your credit report.

“If you deal with a broker who accommodates people with good and bad credit and who deals with banks, monolines, alternative lenders, private lenders — the whole spectrum of lending — then you know you have a good broker,” says Brookes. “There are a lot of brokers that only work with private lenders because it’s a much faster process to close transactions, even when a private lender may not be the best option for the client.”

4. How much do you charge for your fee?

Most mortgage brokers charge a fee of 1 to 5 per cent paid by the borrower or the lender depending on the whether the loan is through an alternative lender or a private lender. Others may charge more or even charge a flat rate so make sure that your mortgage broker discloses all the fees up front before an agreement is signed.

“When it comes to alternative lenders or private mortgages — we don’t get paid at all with private mortgages — its the mortgage broker’s responsibility to charge a fee,” says Brookes. “The way that we get paid is through the actual transaction so if, for instance, your house is worth $100k and you only need a $50k loan, we may bump up the amount of the mortgage to $55k to accomodate for the broker and legal fees. But this will be added to your mortgage amount so it doesn’t actually come out of your pocket.”


5. What is your down payment requirement based on my financial situation?

Some first-time buyers may not realize that there are various down payment options that allow homebuyers to put down less than the typical 20 per cent. After an initial consultation, a qualified mortgage broker should be able to paint an accurate picture of your down payment requirements based on your credit score, income and employment history. “If you fall on the A side, your minimum downpayment is 5 per cent, but if you’re on the alternative side, it’s 20 per cent,” says Brookes. “With that said, the less you put down, the more interest and fees you pay for your loan. That’s why it’s best to look at what down payment options work best for you and your financial situation.”


Source link

قالب وردپرس

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *


What Is A Housing Bubble? And Are We In One?





What is a housing bubble? You’ve undoubtedly heard the term, but what does it actually mean, and is Canada experiencing one? Whether you already own a home, are considering buying one in the near future, or you’re waiting for the right time to sell, here we answer what is a housing bubble, what causes it, and how it may affect you.

What is a Housing Bubble?

A housing bubble happens when the price of homes rises quickly, at an unsustainable rate. Typically, a price-growth rate that’s in the high single-digits is considered to be healthy and sustainable. Under healthy conditions, homeowners continue to earn equity over time, sellers can make a profit on resale, and buyers can still afford to get into the market. This type of price growth can usually be explained by economic factors, such as an employment boom and favourable interest rates.

On the other hand, a housing bubble can happen as a result of non-organic growth. For example, if speculators were flooding the market, buying up homes to take advantage of rapid price growth, with the intention of selling in the near term for a hefty profit. When prices are deemed to have hit a high point, speculators list their properties for sale. This massive influx of listings, coupled with stagnating demand, causes prices to plummet and results in a “housing market crash.”

A housing bubble is a temporary event and prices eventually return to normal levels, when demand rises again and home-buying activity resumes.

What Happens When a Housing Bubble Bursts?

During a housing bubble, homes become overvalued. When the bubble bursts, prices fall. Homeowners who have no intention of selling are unlikely to feel the direct impacts of the bursting bubble. However, these market conditions often indirectly impact other aspects of the economy, so to call homeowners who aren’t selling “free and clear” would be misleading. The ripple effects of a bursting housing bubble would likely touch most of us, in one way or another.

Homebuyers who purchased a home during a housing bubble likely paid considerably more than it is worth. Properties bought by end-users as a residence, with no intention of being sold in the short-term, will eventually rebound closer to “normal” values and at some point, return to positive growth.

A housing bubble poses the biggest risk to home sellers. Those who purchased in the bubble, but now find themselves forced to sell their home, will come up short on resale. They bought the home at a price that exceeds what they can recoup, putting them in the red with no asset to show for it.

For example, someone purchased at peak market prices, but due to circumstances such as a job loss or the inability to carry the costs for any reason, now has no choice but to sell in a down market. The seller still owes money to their mortgage lender on a home that they no longer own.

Are We in a Housing Bubble?

The Canadian housing market took a surprising upward turn during the COVID-19 pandemic, after coming to a grinding halt in mid-March. The slow-down was short-lived, and what followed through the remainder of 2020 was a a spike in demand for homes met by a shortage of supply. With 2021 well underway, there appears to be no end in sight.

There are a number of factors that indicate we’re not experiencing a bubble caused my market speculators, contrary to some media reports.

A recent online survey of RE/MAX brokers and agents in Western Canada, Ontario and Atlantic Canada found that speculators are not a factor in the Canadian real estate market at this time. In fact, more than 96% of RE/MAX brokers and agents supported this finding, confirming that the majority of homebuyers are end-users. Speculators tend to wait out hot markets, buying when prices are down and selling when they’re up again. The short-term investment opportunities they’re generally looking for are hard to find under current market conditions. Bully offers and bidding wars are commonplace, and we continue to see demand outpacing supply with the release of the monthly housing market data. These factors are generally inhospitable to speculators and investors.

For a housing bubble to burst, there needs to be a steep incline in inventory and new listings, and a decline in demand – neither of which is likely to happen any time soon.

Housing Crash 2021? It’s Highly Unlikely.

The Canadian housing market is still feeling the impacts of the pent-up demand from 2017, when the government introduced the foreign buyer tax and the mortgage stress test as a means to cool the overheating market. These policies prompted many homebuyers to move to the sidelines, opting to wait and save, with plans to re-engage in the housing market in a few years.

Now fast-forward a few years to 2020. COVID-19 had a similar impact on the market, whereby many homebuyers delayed their purchase plans due to pandemic-related uncertainties. That pre-existing pent-up demand for homes continued to swell. With Canadians subject to stay-at-home orders with nowhere to go and spend their hard-earned money, they collectively saved historically high sums, which was injected back into the housing market once consumer confidence returned. The spending came in the form of record-high home sales and for those who were unwilling to face the competitive resale market conditions, renovations to existing dwellings. In fact, Canadian real estate was said to be the driving force behind the Canadian economy in 2020.

Savings, low interest rates and low inventory continue to put pressure on the housing market.

Now, consider the housing needs of the 1.2 million people who are expected to immigrate to Canada through 2023, per the government’s 2021-2023 Immigration Levels Plan.

Given all this, it’s highly unlikely that we’ll experience the influx of real estate listings needed for a housing market crash – and if we did see those listings suddenly come on stream, there should be plenty of buyers to absorb them.

Homebuyers and Sellers, Do Your Due Diligence

Challenging market conditions and a still-present global pandemic have added some personal risk on the part of homebuyers and sellers. It’s important to remember that conditions vary across Canada, and can be dramatically different between provinces, cities, and even from one neighbourhood to the next. Now more than ever, it’s important to work with a trusted, experienced professional Realtor who can guide you though the buying and selling process.

Continue Reading


CIBC poll shows majority of homeowners have no plans to sell amid a tight housing market and low rate environment





TORONTO, April 21, 2021 /CNW/ – As supply remains tight in key regions of the Canadian housing market, a recent CIBC survey finds that most homeowners say the pandemic has not changed their intentions of staying put, with many choosing to use their accumulated savings to renovate their current property rather than list it.

With only six per cent of homeowners polled saying they planned to sell pre-pandemic, the majority (77 per cent) say the pandemic has not impacted their housing plans. Most (63 per cent) agree that low interest rates haven’t motivated them to sell and upgrade to a bigger home either.

Many homeowners (34 per cent) have renovated their homes over the past year, while a similar number (31 per cent) say they plan to make upgrades in the next twelve months. Of those who have renovated, most (71 per cent) funded this with savings.

“As a potential homebuyer, these results suggest that supply won’t be improving in the near term, which makes it essential to understand what you can comfortably afford within your budget, and work with an advisor before you start looking at homes to have appropriate financing options in place,” says Carissa Lucreziano, Vice-President, CIBC Financial and Investment Advice.

“It’s a positive sign that many homeowners are using cash versus debt to fund renovations – we’re seeing prudent financial behaviour from this group. But whether you’re looking to sell or buy a home, or invest in renovations, these are big decisions that would benefit from the advice of a financial expert.”

Renters continue to be outpriced
For renters, the story has also been more of the same. Half (47 per cent) say they are still unable to own a home due to housing prices, with 34 per cent citing an inability to save for a down payment as the major hurdle. Many (66 per cent) say low interest rates due to COVID-19 have not motivated them to look at purchasing a home with the majority (91 per cent) saying the pandemic has not impacted their ability to pay rent.

Of those who co-habit with family or others, 46 per cent have no immediate plans of moving out, but close to a third (32 per cent) are saving for a down payment.

A lack of knowledge when it comes to purchasing a home may be contributing to the hesitancy of some potential homebuyers:  Four-in-ten (41 per cent) of all the respondents admit they need help understanding all of the costs associated with home purchasing, and a similar number (37 per cent) need guidance on  obtaining a mortgage in the current environment. A quarter of Canadians (27 per cent) say the fear of a recession/economic uncertainty is impacting their decision to buy or sell a home and 31 per cent claim they will only be able to afford a home with an inheritance or gift from their family.

“It appears for those looking to get into the housing market, financing and a lack of understanding remains an issue. With the help of an advisor, you can get an assessment of your financial capacity for a clear picture of what you can afford as a new homebuyer to achieve the ambition of homeownership,” added Ms. Lucreziano.

Continue Reading


The Rule Of 3 When Buying A Home (VIDEO)





When it comes to buying a home, there are many factors to consider and the decision is likely not going to be an easy one.

In this episode of All Things Money (ATM), host Nicole Victoria provides her advice for being successful with regards to purchasing a property.

One major component the Money Coach highlights is the importance of separating what is nice to have against what is a must-have.

In order to help navigate the tradeoffs, Victoria utilizes a rule-of-three system, using the factors of price, size and style, and location where “what the rule says is that you get to be sticky on two out of those three things.”

For more on this and other money-related tips and advice, check out the full ATM series here.

Continue Reading