Beware: Banks scare customers into not talking to mortgage brokers (part 1)

Just this week, I've spoken to two clients who came to me despite their banks advice, which was "don't go to a mortgage broker for your mortgage".  I asked them why they still decided to shop around for their mortgage and visit a mortgage broker after the banker told them not to.  They both answered in a similar way, "I wanted to see what all the bankers anxiety was about".

The realty is that the majority of people who need to revisit their mortgage because they are moving or refinancing, normally go to their bank and then a mortgage broker.  I suggest it's two hours of time well spent (one for the bank and one for the broker) considering it's the largest debt that most people have and the largest household expense.

I'll be writing a series of articles on the bankers' myths about mortgage brokers:


It's not a good idea to shop around for your mortgage because it hurts your credit score.

For most people who have good credit history, having a few credit inquiries in a short period of time is the normal course of doing business for them and it will not be detrimental to your credit history. 

In fact, I've found that banks have become lazy in qualify people for mortgages and don't necessarily do a credit check until there is an actual mortgage to process.  This could be detrimental for the client who's looking to buy a house.  That's because if there are any issues that the client is not aware of regarding their credit history, and the credit history is not checked before an offer is made on a house, the client may be disappointed to find that the mortgage they thought they could qualify for, is not in fact the case.

At my office we receive about one referral each week from either the bank directly or the client where this has happened.  The client is normally angry or in tears that the proper credit history checks were not completed by their bank. When I do a pre-approval for my clients, we ensure a credit history is done immediately so there are no surpises.

Also, mortgage brokers can shop your mortgage to multiple lenders with one credit history.  If you where to do the same, each bank would (hopefully) do a credit check.

Regardless, when someone does a credit check on you ensure you give them authorization to do so.

More to come on the facts around mortgage brokers...stay tuned.

New lending impacts first-time home buyers

The new changes that have been put into motion by the Canadian Minister of Finance will have a significant impact on first-time buyers.  The impact is the limit on a first-time home buyer’s borrowing capacity.

In Guelph and the surrounding area, most first-time home buyers choose to purchase a townhouse condo.  Most “nice” detached, free-hold homes are out of the price range of a first-time home buyer.  I believe that the average price of a detached home in Guelph is over $350,000.

You can purchase a “nice” town house condo in Guelph for approximately $225,000 – the condo fee is on average $200/month, and property taxes would be approximately $2800 per year. The average household income to support a mortgage with 5% down is approximately $55,000 in this scenario (without any household debt).  Under the new lending guidelines, with a decreased amortization to 30 years from 35 years, the household income would need to be approximately $5000 more per year.  Big deal?  Actually it is.  What I’m finding in my business is that many first-time homebuyers require two jobs just to carry a mortgage on a decent home.  Given the country is in a recession few employers are giving their employees pay raises.

I believe expectations will change among first-time buyers on what they can afford to purchase – and there will be a change in expectations on what sellers ought to sell their home for.

So here’s one important point to consider.  If you know someone who is looking to buy a home in the next six months ensure they speak to a mortgage broker, who has the experience to help. In this market – experience counts.