Tuesday, March 31, 2009
Derek Sankey, Canwest News Service Published: Monday, March 30, 2009
More than a decade ago, Bob Alexander was working as a professional accountant when he walked into a bank to get a mortgage. When he got turned down, he was completely baffled.
"My friend told me I should go see a broker," Mr. Alexander says. It was a perception that was prevalent at the time: Mortgage brokers were seen as the place you went when the banks turned you down.
Mr. Alexander went to see a broker, secured a mortgage and bought a home. He was so intrigued by this often-misunderstood field that he decided to switch careers and become a broker himself.
"Ten or 15 years ago, mortgage brokers used to be the lenders of last resort," says Jim Murphy, president and chief executive of the Canadian Association of Accredited Mortgage Professionals (CAAMP), the organization that certifies the AMP designation.
"The mortgage broker channel has grown enormously," Mr. Murphy says. "I think the consumer sees it in a much more positive light."
In fact, about 30% of all mortgages in Canada today are secured through mortgage brokers, according to a study from CAAMP. There are 3,800 certified professionals with the AMP designation working across Canada.
When CAAMP introduced the certification four years ago, Mr. Alexander-- whose been a broker for eight years now -- decided to earn his designation.Banks used to compete directly with brokers, using their own sales forces to go out and source new leads. The brokers, meanwhile, would charge their own clients a fee to find them a mortgage.
Now, most banks have chopped those sales forces and instead enjoy a more mutually beneficial deal with brokers, who no longer charge the client a fee.
Mr. Alexander, like other AMP brokers, provides his services free to the client. The lending institution pays him a finder's fee based on the size and type of the mortgage he secures for his clients."Lenders out there realize it was actually more efficient to get rid of their in-house sales force and use an independent person like myself to source their leads," says Mr. Alexander, who works for Canada Mortgage Direct in Calgary. "The finder's fee I'm paid is roughly the same across all lenders, so I'm not incented to take you to Lender A over Lender B."No longer are brokers seen as the last resort, but just another player in the market working to find you a competitive mortgage.
It's important for clients to know they're dealing with someone qualified and experienced.The AMP designation requires two years of industry experience, an entry-level certification course plus 10 hours of continuing education every 12-month cycle to remain current."It's really important because a mortgage is the biggest financial investment most people will make in their lives, so they want to make sure the [broker] is knowledgeable, trained, knows the issues and the market and is able to give the consumer good advice," Mr. Murphy says.
Since brokers such as Mr. Alexander have access to 40 lenders offering upward of 400 different products, the field has evolved in recent years to become a viable option for anybody seeking a competitive mortgage.
While he works with the big five banks in Canada, he also taps into other lending institutions such as First National Financial LP and Australian based lending giant Macquarie Financial (Canada) Ltd.When anybody walks into Mr. Alexander's office, his job is to match your credit level -- A, B, C, or D-- with an appropriate lender that caters to the same type or types of customers.
What has changed in recent months, due to the economic recession, is there are fewer D level lenders around, especially the U. S. banks that ventured north prior to the subprime market collapse last year."As a result of the U. S. subprime fallout, a lot of the Dlevel lenders have vanished," Mr. Alexander says. "A lot of fringe clients are finding it much more difficult to get a mortgage than [it was] two years ago."Even some of the A-level lenders now require more documentation and verification than previously. "We've seen a general tightening [of credit] right across the board," he says.
Mr. Murphy says in any kind of economy, it's important for potential homebuyers to realize -- and utilize -- the new brand of mortgage professional.Mr. Alexander agrees, but cautions people to do a little research, make sure they're comfortable with the person across the table and ask questions.
Monday, March 30, 2009
This is a really unfortunate situation for everyone involved. According to the article, some of these sub-prime mortgage lenders are lobbying Ottawa for some help. Let’s see what happens!
Read the Globe and Mail article here...
Wednesday, March 25, 2009
The always outspoken Garth Turner recently posted a blog entry "How Not to Borrow". According to Garth, Canadians should choose a variable rate mortgage right now. The current variable rate mortgage is 3.30%, the five year fixed is 4.05%. It's not a huge spread, but a saving nonetheless.
I think the choice between a variable or fixed rate mortgage is an individual one. Yes, it has been proven that variable rate mortgages save you money over the long term. But, in the past, variable rate mortgages were always discounted off of the prime lending rate...today there are no more discounts. Borrowers pay prime plus 0.80% for a variable mortgage.
If you are a first time homebuyer with a minimal down payment or someone with a very tight budget, variable may not be the best choice. Yes, yes I know. You can always just call your lender and switch to a fixed rate at any time! The catch with a variable rate mortgage is that some legwork is required! You have to be committed to keeping an eye on the market and your mortgage so you can figure out the best time (if any) to switch over to a fixed mortgage. Many people don't have the time or gumption to do this. Variable rates move with prime and your mortgage payment changes right along with it. If you are someone who doesn't like surprises or has an air tight budget this may not be the way to go.
Read Garth's blog entry HERE.
Monday, March 23, 2009
According to the article's author, Jason Kirby, in the past "people spent years saving to buy a house and keep their mortgages to a minimum, and families that did find themselves in hock scrimped and saved to fight their way out. But, starting in the 1990's our attitude to debt changed. As interest rates fell and soaring house prices made everyone feel richer, our nation of savers became a nation of borrowers".
The article goes on to point out that Canadians are now in more debt than their southern neighbours! The average debt carried by Canadian households has jumped by a staggering 71% since 1990.
The good news? The recent economic downturn has exposed the unrealistic lifestyles many Canadians have been trying to live and will hopefully bring forth more responsible borrowing and debt loads. And who knows? We may even begin to save again...
Thursday, March 19, 2009
The real estate market is changing making it confusing for people to know what to do. Is it a good time to buy or sell? Should you just wait it out and rent for a while? Here's a clip shown on The Hour last night. It features an interview with Don Campbell, a Canadian Real Estate Investment Specialist. He seems to have a realistic outlook on the real estate market in Canada. He knows which areas of the country will be hot, says Canada is the best country in the G7, and that things really aren't that bad. I really agree with Don's take on the market. No doom and gloom here!
Watch the video HERE!
Wednesday, March 18, 2009
Thursday, March 12, 2009
Here are five things you could do to help your chances of getting approved:
1. Because your credit rating will affect the mortgage terms and rate that the lender offers you, make at least the minimum payment by the due date on your outstanding bills. Better yet, pay your bills off in full every month and reduce the number of unnecessary credit applications. For example, credit card kiosks at the airport or malls will do credit checks on you when you apply, which can negatively affect your credit score. One of the many advantages of working with a mortgage broker is that s/he will share your credit rating with you before approaching lenders.
2. Know the total amount you are willing to spend on your mortgage per month. This amount should include mortgage payment, property tax payment, home insurance, utilities, and any applicable condo fees, purchase closing costs, and other associated fees.
3. Have proof of your employment history.
4. Have your personal information handy, such as social insurance (SIN) number, date of birth, contact information and three-year history of residences.
5. Have your basic net worth information available, including an account of any assets and liabilities.
Wednesday, March 11, 2009
Tuesday, March 10, 2009
Read the entire market activity report HERE!
American's have more incentives to be debt ridden than Canadians. Americans receive tax breaks on their mortgage interest costs and property tax bills. As Canadians, we've long complained about this difference and have wished we could be more like our neighbours down south. We now realize that these tax incentives were part of what caused the meltdown across the border. No longer are Canadians ashamed of their ultra conservative culture. Our banks are doing just fine and sure, the housing market has cooled but is nowhere near the state of the real estate market in the U.S. We are a prudent and conservative society, and finally, proud of it, thank you very much. Read the full article HERE.
Wednesday, March 4, 2009
Tuesday, March 3, 2009
Read the full story HERE.