The Mortgage Broker Secrets

Who are mortgage brokers and who do they work for? This question is one you will hear a lot about these days here in Canada. Mortgage brokers are not a new phenomenon in Canada, but they are less well known here than they are in places like the United States, where they account for over half of the mortgage loan deals transacted each day. Here in Canada approximately 20% of the mortgages each day originate through mortgage brokers; in the United States that number is nearer to 60%.

In the past, it was only those who had poor credit ratings who sought the help of a mortgage broker to obtain a home loan. The mortgage broker had many connections in the financial world and was able to connect bad credit buyers with those willing to lend their money with more risk yet at a higher interest rate. The mortgage broker set up the deal and was paid a nice fee for their time. The borrower got a mortgage on a home, and the lender made a nice rate of return for the risk.

The mortgage broker of today works with borrowers of all credit types and specializes in being able to find a mortgage of any size and type on any given day. Financial institutions pay mortgage brokers a “finder’s fee” to bring them clients. They get paid for those with good credit as well as those with less than stellar credit ratings. They make more money with some lenders than others, but generally are looking out for the best interests of their clients.

Mortgage brokers also serve to educate the public on the various types of mortgages available, how to understand what all the paperwork means, how to decide between mortgage options, and so much more. They can connect you to a lender and they can also help you to navigate through the steps the lender requires of you as well. It is like having an advocate on your side during the lending process.

Long ago, if you wanted a mortgage you went to your local banks and applied for them. You worked with the bank and gave them all of the required paperwork, and in the end they made a decision on whether or not they wanted to lend to you and told you at what interest rate. With the technology and global economy of today, this strategy just doesn’t work any more. You are much better off going through a mortgage broker and letting them sift through their hundreds of lenders to find you the best deal available. Because they have a huge variety of lenders to choose from, you can be assured that you will get the best deal available to you. You also have the option of going online on the Internet and seeing what kind of rates are available to you there. You can compare rates with your mortgage broker and make sure that they are in fact getting you a good deal.

Mortgage brokers build their business through learning where they can get you the best rates and deals out there. They also build their business through personalized service and education to their clients, which larger banks are just simply unable to provide. By providing you with “one stop shopping” a mortgage broker can get you a good deal and educate you along the way.

Successful mortgage brokers generally work with a handful of lenders. They send a lot of borrowers to these same lenders and in exchange the lenders give the mortgage broker a discounted rate for their clients. It is a win-win situation for both the mortgage broker as well as the lender. The mortgage broker becomes known for his ability to secure the lowest rate for his clients, and the lender is assured of repeat business from the mortgage broker’s other clients. The more business they transact together, the better rate the client sees. This is great for you as the buyer.

While mortgage brokers are better known for the work they do in the United States, the prevailing trend is that more and more mortgage brokers will be working in Canada over the next few years. They offer the best service and availability for both borrowers and lenders alike. They work independently and save the lenders a ton of money by simply being able to pay a finder’s fee, rather than having to employ brokers themselves. If you are looking for a mortgage, you should always contact a few mortgage brokers and see what kind of deals they can offer you —you might be pleasantly surprised at the results.
Copyright© Robert Dymont
All Rights Reserved.

Real Estate Market Connection To Capital Market

Understanding the Real Estate Market and its Connection to the Capital Market

Would you be surprised to know that a simple 1% increase in residential mortgage rates has the ability to price thousands of Canadians out of the housing market? Why? Because the real estate financing rate directly affects the amount Canadians pay on their mortgage each month. When the rate is up, the payments on a new mortgage are up as well. Even a simple 1% increase can make a mortgage financially out of reach for many people.

The mortgage market is an entity in itself; however, it is also intimately related to the capital market. The capital market is the overall market for funding of all kinds all over Canada. The capital market functions on a simple principle: on any given day there are people who have extra money to lend, known as investors, and others who have a desire to borrow that extra money, known as borrowers.

The capital market is defined as the market which facilitates the transfer of money from those who have extra to those who need to borrow it. The biggest factor in determining the supply and for money is the interest rate which governs the process. The prevailing interest rate provides a quantitative measurement for the reward of investing and the cost of borrowing. The interest rate is the balance point between the amount of money borrowed and the amount of money lent.

In times past, banks made mortgage loans from the deposit money from their customers. However, banks today no longer have enough of a deposit base to be able to lend from. Banks themselves now borrow money from the capital market to fund their mortgages. The interest rate at which they lend at is determined by their borrowing cost, the borrower’s credit rating, and the rate of inflation over the term of the loan. If you have a bad credit rating, or desire a long loan term, then you will pay a higher interest rate to borrow money.

Generally, mortgages today are backed by federal government bonds. A bond is a promise by the stated at a given date. By definition of government, the bond is secure because the government can always raise taxes to pay-off the bond if it had to. There is no more secure lender than a federal government.

If you are trying to speculate which direction mortgage rates are headed, by watching the bond rate you can make an educated guess. This can allow you to get the best possible mortgage rate.
Copyright© 2008 Robert Dymont
All Rights Reserved.

What is Your Credit Report?

As credit has become more and more prolific in our society, your credit report, and thus your credit rating, has become more and more important in your daily life. Your credit rating affects all aspects of your financial life when it comes to borrowing money. Your credit rating also has the ability to affect the job you get, the apartment you rent, and even if you are able to open an account at a certain bank or not.

Your credit report itself is simply a listing of all of your mortgage and consumer debt. Here in Canada, the two main credit reporting agencies are Trans Union and Equifax. Both agencies have a credit history file on anyone who has ever borrowed money. Every time you borrow money, or make a payment on a loan or credit card, the lender then reports the information about the transaction to these two credit reporting agencies. In addition to credit information, you will also find liens and judgments on your credit report as well as your address and possibly your work history. The accumulation of all of this information is called your credit report.

The information on your credit report varies based on your creditors and what they have reported about you. Most however, report the amount of money you could potentially borrow from them, also known as your credit limit, your payment history, and the status of your account. Your account status will be open, closed or charged-off.

Potential lenders and others, such as employers, view your credit history as a view of your character. Whether we like it or not, our financial habits have a lot to say about the way in which we choose to live our lives. One thing that many people do not know is that you have the legal right to obtain a copy of your credit report from both Equifax and Trans Union. You can obtain a copy by contacting them through their information listed below.

Equifax
Consumer Relations Department
Box 190 Jean Talon Station
Montreal, Quebec
H1S 2Z2
(416) 227-8800, (800) 465-7166
Trans Union
325 Milner
Toronto, ON
M1B 5N1
(416) 609-2070; (800) 663-9980.

Once you have obtained a copy of your credit report, you will want to go through it with a fine-toothed comb. Look at all of the information on the report and verify that it is true and correct. For anything which is not correct, you have the legal right to request it be corrected.

Research has shown that most credit reports do have some information on them which is incorrect or even belongs to someone else with a similar name! You want to make sure and request that the credit reporting agencies change any data which is not accurate. If the agency will not correct something which you believe to be incorrect, for some unknown reason, then you have a legal right to submit a note to them to be placed on any item you wish. Once you have done this, then when someone pulls your credit report they can see your side of the issue.

You should obtain a copy of both credit reporting agency reports on you at least once every year or two. You will likely find that both reports are different and one may have errors while the other one does not; this is very common. If you are going to be making a large purchase such as a home or vehicle, you should obtain your copies of your credit report months in advance so you will have time to request any verification or changes.

You should also make sure any correspondence you have with the credit reporting agencies is in writing. You may need this documentation if you have something in dispute and need to prove to a lender that you have been trying to have the issue resolved.

The good news is that your credit report is a working document. This means that you have the ability, over time, to increase your credit score. Most things stay on your report for up to seven years. After seven years they drop-off of your report and no one can see that they ever even existed. By paying your bills on time, each month, you can have a good credit report as time passes. And, if your credit has some old negative marks on it, then over time they will drop-off and leave your last seven years of better credit!
Copyright© 2008 Robert Dymont
All Rights Reserved.

Who Pays Your Mortgage Provider?

Have you ever wondered how your mortgage provider gets paid for the services which they provide for you? Do they make more money for getting you into one mortgage over another? You need to know the answer to these two simple questions. You need to know the answers so that you can understand if your mortgage provider has your best interests at heart — or their own financial gain!

As you might expect, most mortgage providers do have a financial stake in which mortgage you choose to go with. And, as you might also expect, the best paying mortgage for your provider may or may not be the best financial option for you as the consumer!

By understanding the position of the provider you are working with, and who is paying them, you can better choose a mortgage option which works for you, rather than the one which simply makes your mortgage provider the most money. Let’s look at the three most common mortgage providers you may choose to work with:

The Bank Branch Manager

Your local bank branch manager has likely been a lot of help to you over the years with your personal and business banking needs. They are generally friendly folks and always available to help you with any questions or requests you might have. However, on the flip-side
of this equation is the fact that they ultimately are charged with making your local bank money. Their promotions, salary, and bonus pay are each determined by the sales they make month after month. And, make no mistake; your mortgage is simply a sale to them!

Canadian banks are very profitable businesses. Your local branch manager has a sales quota to make each month, just as a sales person in any other business, to help keep the bank as profitable as possible. Generally, there are particular mortgage and loan products which make the bank the most money. These are the loans which the bank manager is most likely to recommend to you as a first choice.

Please understand, I am not trying to steer you away from doing business with your local bank. However, you should always know that your branch manager is paid ultimately by the bank. They will try to push their products which make them personally, and the bank, the most money possible. Look at all of your borrowing options and compare those of your local bank with other lenders. Go with the option which is best for you — not for your local bank’s bottom line!

The Bank Mortgage Representative

Unlike your local bank’s branch manager, a bank mortgage representative is generally a contracted employee who works solely on commission from loan sales. Some bank mortgage representatives sell only one bank’s loan products, while others work for multiple banks at one time. The bank mortgage representative is paid based on your loan size, the loan term, and the discount they choose to give to you. While it is to your advantage to get the best rate, lowest mortgage amount and shortest term, it is in the representative’s best interest to get you the highest rate, largest mortgage and longest term possible. Again, for the best option for yourself, shop around and compare options.

The Mortgage Broker

A mortgage broker is someone who works for you, the consumer, rather than for any particular bank. A mortgage broker is paid a commission or “finders fee” by the lender who they connect you with. A mortgage broker’s fee is generally determined by the size and term of your loan. However, not all lenders pay the mortgage broker the same fee, so they also have a stake at which lender they choose to suggest for you to work with. A mortgage broker also generally has the largest selection of loan products for you to look at and compare. This makes them a good option when you are looking to get the best deal possible on your mortgage.

So, if you are in the market for a mortgage and you don’t know who to go to for the best deal, what should you do? The trick is to keep in mind who is paying your mortgage provider and what they personally have to gain from the transaction. Then take the time to look at various offers, from various lenders, and then decide who has the best loan option for you. Go with the best mortgage for your financial situation and let the provider worry about their own compensation independent of your choice. Their income simply isn’t your issue; your issue is to get the best deal possible.
Copyright© Robert Dymont
All Rights Reserved.

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