Why use a mortgage broker?

Are you buying a home? Along with finding the right place to live you will need to find financing for your mortgage. Here is an article by Taya Weiszhaar. Taya provides us with information relating to mortgages and the ins and outs of finding the financing you will need. Her contact info is moc.prgegagtrom|ayat#moc.prgegagtrom|ayat.

The Best Reason for Using a Mortgage Broker

The topic of mortgages seems to be the flavour of the day across the country. While we continue to cycle through a prolonged global recession, the mortgage industry in Canada has remained at the epicentre of commentary and policy revisions.

On March 18, 2011 we saw the second round of changes come into effect to restrict mortgage lending in Canada in less than a year. This round consisted of restricting the maximum amortization to 30 years and reducing the maximum loan-to-value on refinances to 85%. In April one more set of restrictions will be imposed limiting the ability for a bank to lend beyond 80% on HELOC (Home Equity Line of Credit) products.

You will recall that in April 2010, the government restricted the maximum amortization to 35 (from 40) years on Insured mortgages and established a benchmark qualifying rate for customers choosing to take an ARM mortgage or term less than 5 years. In addition, the government imposed additional restrictions on how much a client could borrow to refinance (reduced from 95 to 90%) and how much they were required to put as a down payment on rental properties (now 20%).

The housing market has been a vital component to the success of the Canadian economy during the past decade. In many respects, the industry has helped to stabilize a faltering economy. By allowing consumers an opportunity to purchase by taking advantage of low interest rates or to tap into their equity for either spending or investing purposes, the mortgage channel has contributed positively to consumer spending and confidence.

We need to look at the headlines with a cautionary eye. While debt-to-income levels are indeed at its highest point in Canadian history, "over the past 20 years personal lines of credit have accounted almost exclusively for the surge in total consumer debt" (Action Canada: Task Force on Household Debt, February 2011, P.9), we have also seen consumer credit card debt surge at higher levels than mortgage debt.

And with all these changes all the more reason why Canadians should seek the advice of independent mortgage originators such as myself. If there was ever an inkling of doubt of the value that brokers provide here are a few items not to lose sight of:

  • On average consumers using a mortgage broker saved 19bps on their interest rates (Competition in the Canadian Mortgage Market, Bank of Canada Review, Winter 2010-2011, p.5)
  • Those who renewed or renegotiated recently with a Mortgage Broker reported an average rate decrease of 1.4 points, compared with 1.0 point among all renewers. (Maritz Research Canada, January 2011)
  • Since 1992 changes to the Bank Act, the Big 8 (Big 6 plus Desjardins and ATB) now own more than 80% of mortgage assets in Canada. In the wake of that reduction in competition, the mortgage brokerage channel has grown by over 300% (from 10% to 30%). This competition IS in the best interest of consumers.

Yes, the government in Canada has had to keep our economy afloat during the recent recession firstly, by injecting billions of dollars in spending into the economy and secondly, by instilling a degree of confidence in Canadians and investors by tweaking credit guidelines. However, at the end of the day, it still comes down to actions taken by everyday Canadians who put their faith in their ability to repay loans, their ability to manage their household debt, and through consumer spending that is pulling us through this most recent recession.

We live in the best country in the world. We are very fortunate to have weathered the recession as well as we have. Canada is operating on sound financial principals and our housing and mortgage markets will continue to remain robust. It's been proven that mortgage professionals get better deals for Canadians and it's been proven that competition is vital to Canadians' best interests.