-This program is with all 3 insurers. The amount allowed for improvements is typically 10% -20% of the purchase price, or up to $40,000 maximum. The money is to be used for “improvements” or “upgrades”, not necessary repairs like leaks or structure issues. Also must be for something that adds value to the home, not a chattel like appliances.
-You need to get quotes for the cost of the improvements that the client wishes to complete. Add the amount of the quote/s to the purchase price, and this becomes the new purchase price. The down payment is now based on this new higher purchase price as well.
-The mortgage is funded in order to purchase the home, but the money to be used for improvements is held at the solicitor’s office until the work is complete.
-The work can be done by the client or a company/contractor, but client labor is not something that can be reimbursed for. If a client does the work him or herself, only the cost of the materials is released. If a contractor or company does the work, send us the invoice and we can pay them directly for the full amount at the end.
-An inspection report from an appraiser is required when all is done so we can confirm that the said work was completed.
-If the final cost ended up being less than expected, the left over money is applied back against the mortgage.
Wednesday, September 21, 2011
Wednesday, September 14, 2011
What style of variable should I take? Open, closed, or LOC
Open? Closed? Line of Credit?
I get asked often whether or not I should go with an open variable, closed variable or if I should get a line of credit.
This is what I say.
The only time you would want to consider taking an open variable mortgage, meaning you have the ability to pay the mortgage out at anytime without penalty, is when you know for sure that you WILL be paying off your mortgage within the first 10 or so months.
In order to have the abililty to pay out your mortgage without penalty the lender or bank will charge you an increased amount over prime as opposed to a discount off of prime. This could be a large spread of over 1%.
If you kept your mortgage for more than the 10 months, it would be cheaper, interest wise, to pay the penalty on the mortgage, which is a 3 month interest penalty. This is cheaper than paying the premium on Prime on an open for the 10 months.
Every case is of course different and this is why we talk about planning and strategy from the get go.
Now when people talk about a line of credit there's one one important thing that needs to be said first. You can only obtain a line of creit with 20% or more equity in your home. If you have less than 20% equity, you can NOT obtain a LOC.
I also say to people, why would you want a secured line of credit at say Prime +.50 or higher, when you can have the same amount of money at prime -.50 or deeper today? You'd be paying 1% more for the priviledge of that LOC.
Well, I guess the interest only payments may be enticing, however, in my opinon, and I beleive debt is not good and should be cleared, paying that little bit extra and paying towards principal at a much lower rate is more realistic and a huge cost savings!
Of course though, everyone's situation is different and there may be a reason why you need a LOC attached to your mortgage. One being, you know a large sum of money is coming in. why pay a penalty on that portion of the mortgage your paying out.
Everyone needs to find a plan and strategy to make your mortgage work for you and not for the lender. This is what we'll do together!!
I get asked often whether or not I should go with an open variable, closed variable or if I should get a line of credit.
This is what I say.
The only time you would want to consider taking an open variable mortgage, meaning you have the ability to pay the mortgage out at anytime without penalty, is when you know for sure that you WILL be paying off your mortgage within the first 10 or so months.
In order to have the abililty to pay out your mortgage without penalty the lender or bank will charge you an increased amount over prime as opposed to a discount off of prime. This could be a large spread of over 1%.
If you kept your mortgage for more than the 10 months, it would be cheaper, interest wise, to pay the penalty on the mortgage, which is a 3 month interest penalty. This is cheaper than paying the premium on Prime on an open for the 10 months.
Every case is of course different and this is why we talk about planning and strategy from the get go.
Now when people talk about a line of credit there's one one important thing that needs to be said first. You can only obtain a line of creit with 20% or more equity in your home. If you have less than 20% equity, you can NOT obtain a LOC.
I also say to people, why would you want a secured line of credit at say Prime +.50 or higher, when you can have the same amount of money at prime -.50 or deeper today? You'd be paying 1% more for the priviledge of that LOC.
Well, I guess the interest only payments may be enticing, however, in my opinon, and I beleive debt is not good and should be cleared, paying that little bit extra and paying towards principal at a much lower rate is more realistic and a huge cost savings!
Of course though, everyone's situation is different and there may be a reason why you need a LOC attached to your mortgage. One being, you know a large sum of money is coming in. why pay a penalty on that portion of the mortgage your paying out.
Everyone needs to find a plan and strategy to make your mortgage work for you and not for the lender. This is what we'll do together!!
Friday, September 9, 2011
More tightening of mortgage rules? Why?
Here's an article I read this morning in the Financial Post talking about tightening up mortgage rules, again. When are these people going to understand that it's not the mortgages that are causing the debt issue, it's the unsecure debt loads that Canadians have. I see it everyday in this field pulling credit bureaus.
Leave the housing market alone. Without a strong housing market the economy could fall apart. There are so many people that are involved with one transaction. And I'm sure, especially in BC, they would hate to stop losing revenue on the way overtaxed Property Transfer Tax.
David Pett Sep 8, 2011 – 11:22 AM ET | Last Updated: Sep 8, 2011 5:47 PM ET
With Canadian interest rates now on hold for some time to come, the government may move to tighten mortgage rules again to keep the already hot housing market from bubbling over, says the chief economist of Canada’s biggest bank.
“As we go forward in an environment of lower rates for longer now, we may see another round of mortgage rule tightening,” said Craig Wright, chief economist at RBC Financial Group during a panel discussion on Canada’s economy at the Economic Club of Canada.
Following Wednesday’s decision by the Bank of Canada to keep its key lending rate unchanged at 1%, it is now widely expected that interest rates will stay at uncommonly low levels well into 2012 or longer if the global economy continues to deteriorate.
Mr. Wright believes that Canada’s fast-growing housing market, which resulted in an impressive 6% increase in building permits last month, will start to slow in the months ahead.
Several factors boosting mortgage activity in the first half of the year, including the HST in Ontario and B.C., are becoming less important catalysts, he said, while consumer confidence about the economy and overall affordability are growing headwinds.
In a cooling scenario, he said it is unlikely that more stringent mortgage rules will be forthcoming. However, if a moderate slowdown doesn’t take place as expected, it becomes increasingly possible that regulatory changes, including shorter amortization periods and an increase in the amount of mortgage insurance required will be needed in the future in order to curb a growing appetite for credit.
“Lower rates make debt more attractive but that is countered by the confidence shock that we are all feeling towards the economy,” he said. “So the jury is still out but [Ottawa] may end up feeling the need to tighten a little bit further.”
Part of the run-up that Canada has seen in personal debt levels over the past decade has largely been driven by mortgage growth that has coincided with easier access to credit.
In more recent years, concerns about the rising levels of household credit has prompted Ottawa to tighten its mortgage rules and this past January Finance Minister Jim Flaherty announced three new changes:
The first reduced the maximum amortization period to 30 years from 35 years for government-backed insured mortgages with loan-to-value ratios of more than 80%; the second lowered the maximum amount Canadians can borrow in refinancing their mortgages to 85% from 90% of the value of their homes; and the last adjustment withdrew government insurance backing on lines of credit secured by homes.
Mr. Wright points out that even with these tighter measures, mortgage rules are still much looser than they were ten years ago.
He noted that the required downpayment used to be 10%, compared to 5% now, while amortization was previously a maximum of 25 years. Furthermore, the qualification for mortgage insurance had been 25% and is 20% today.
“There is still, if need be, some room to move back to where we were,” he said. “We may not need to go back there, but there is an option if we don’t see any moderation in debt going forward.”
While Canada’s mortgage rules may be looser than was previously the case, they have remained much more stringent than U.S. regulations governing home loans, said Sherry Cooper, chief economist at BMO Capital Markets. Because of that, she considers Canada’s housing market to be in much better shape than it would be otherwise.
“Not only did Canada dodge the sub-prime problem, but when you look at the aggregate of equity in homes among Canadian households it is much higher than in the United States,” she said during the panel discussion.
She is also encouraged by the fact that Canada’s home-ownership ratio is much higher than it is south of the border and statistics that show Canadians typically pay off their mortgages prior to retirement.
While there has been an inordinate rise in house prices in some regions of the country, notably in Vancouver and to a much smaller degree Toronto and Calgary, which already seen a correction, she doesn’t believe a massive housing bubble is going to burst, largely because much of the demand for Canadian homes is coming from foreign investors who aren’t reliant on mortgages to make their purchases.
“As anyone who has been involved in the housing market, there seems to be tremendous interest in our markets by foreigners who want to diversify their investment and see Canadian real estate as a positive and affordable — believe or not — opportunity,” she said.
Leave the housing market alone. Without a strong housing market the economy could fall apart. There are so many people that are involved with one transaction. And I'm sure, especially in BC, they would hate to stop losing revenue on the way overtaxed Property Transfer Tax.
David Pett Sep 8, 2011 – 11:22 AM ET | Last Updated: Sep 8, 2011 5:47 PM ET
With Canadian interest rates now on hold for some time to come, the government may move to tighten mortgage rules again to keep the already hot housing market from bubbling over, says the chief economist of Canada’s biggest bank.
“As we go forward in an environment of lower rates for longer now, we may see another round of mortgage rule tightening,” said Craig Wright, chief economist at RBC Financial Group during a panel discussion on Canada’s economy at the Economic Club of Canada.
Following Wednesday’s decision by the Bank of Canada to keep its key lending rate unchanged at 1%, it is now widely expected that interest rates will stay at uncommonly low levels well into 2012 or longer if the global economy continues to deteriorate.
Mr. Wright believes that Canada’s fast-growing housing market, which resulted in an impressive 6% increase in building permits last month, will start to slow in the months ahead.
Several factors boosting mortgage activity in the first half of the year, including the HST in Ontario and B.C., are becoming less important catalysts, he said, while consumer confidence about the economy and overall affordability are growing headwinds.
In a cooling scenario, he said it is unlikely that more stringent mortgage rules will be forthcoming. However, if a moderate slowdown doesn’t take place as expected, it becomes increasingly possible that regulatory changes, including shorter amortization periods and an increase in the amount of mortgage insurance required will be needed in the future in order to curb a growing appetite for credit.
“Lower rates make debt more attractive but that is countered by the confidence shock that we are all feeling towards the economy,” he said. “So the jury is still out but [Ottawa] may end up feeling the need to tighten a little bit further.”
Part of the run-up that Canada has seen in personal debt levels over the past decade has largely been driven by mortgage growth that has coincided with easier access to credit.
In more recent years, concerns about the rising levels of household credit has prompted Ottawa to tighten its mortgage rules and this past January Finance Minister Jim Flaherty announced three new changes:
The first reduced the maximum amortization period to 30 years from 35 years for government-backed insured mortgages with loan-to-value ratios of more than 80%; the second lowered the maximum amount Canadians can borrow in refinancing their mortgages to 85% from 90% of the value of their homes; and the last adjustment withdrew government insurance backing on lines of credit secured by homes.
Mr. Wright points out that even with these tighter measures, mortgage rules are still much looser than they were ten years ago.
He noted that the required downpayment used to be 10%, compared to 5% now, while amortization was previously a maximum of 25 years. Furthermore, the qualification for mortgage insurance had been 25% and is 20% today.
“There is still, if need be, some room to move back to where we were,” he said. “We may not need to go back there, but there is an option if we don’t see any moderation in debt going forward.”
While Canada’s mortgage rules may be looser than was previously the case, they have remained much more stringent than U.S. regulations governing home loans, said Sherry Cooper, chief economist at BMO Capital Markets. Because of that, she considers Canada’s housing market to be in much better shape than it would be otherwise.
“Not only did Canada dodge the sub-prime problem, but when you look at the aggregate of equity in homes among Canadian households it is much higher than in the United States,” she said during the panel discussion.
She is also encouraged by the fact that Canada’s home-ownership ratio is much higher than it is south of the border and statistics that show Canadians typically pay off their mortgages prior to retirement.
While there has been an inordinate rise in house prices in some regions of the country, notably in Vancouver and to a much smaller degree Toronto and Calgary, which already seen a correction, she doesn’t believe a massive housing bubble is going to burst, largely because much of the demand for Canadian homes is coming from foreign investors who aren’t reliant on mortgages to make their purchases.
“As anyone who has been involved in the housing market, there seems to be tremendous interest in our markets by foreigners who want to diversify their investment and see Canadian real estate as a positive and affordable — believe or not — opportunity,” she said.
Monday, August 29, 2011
BC Retains AAA Credit Rating
British Columbia will retain its AAA rating despite the defeat of the harmonized sales tax, says credit rating agency Standard & Poor's.
An AAA rating reflects "extremely strong capacity to meet financial commitments," according to S&P's website.
Regarding its decision to continue the top-level rating for B.C., the agency said the province has the solid revenue and expenditure flexibility necessary to meet its deficit targets and a moderate tax-supported debt burden.
But it said B.C. faces new challenges - the loss in revenue; the initial administrative costs of transitioning back to a PST-plus-GST tax system; plus the likelihood of having to repay $1.6 billion in HST transitional funding from the federal government.
B.C. Finance Minister Kevin Falcon welcomed S&P's statement. "I believe this is a reflection of the fiscally conservative approach we have taken over the past decade," he said in a press release. "During this time of global economic uncertainty, our credit rating is more important than ever and we will continue to manage taxpayer dollars responsibly while we focus on strengthening our economy and creating jobs."
medha@vancouversun.com
An AAA rating reflects "extremely strong capacity to meet financial commitments," according to S&P's website.
Regarding its decision to continue the top-level rating for B.C., the agency said the province has the solid revenue and expenditure flexibility necessary to meet its deficit targets and a moderate tax-supported debt burden.
But it said B.C. faces new challenges - the loss in revenue; the initial administrative costs of transitioning back to a PST-plus-GST tax system; plus the likelihood of having to repay $1.6 billion in HST transitional funding from the federal government.
B.C. Finance Minister Kevin Falcon welcomed S&P's statement. "I believe this is a reflection of the fiscally conservative approach we have taken over the past decade," he said in a press release. "During this time of global economic uncertainty, our credit rating is more important than ever and we will continue to manage taxpayer dollars responsibly while we focus on strengthening our economy and creating jobs."
medha@vancouversun.com
Friday, August 19, 2011
The more you make the more you pay???
I just read this and had to share it:
"In the Bank of Canada study I referenced earlier they cite: “The results indicate that high-income borrowers pay more for their mortgages, as do loyal consumers, consumers who search less, and those that value large branch networks”."
We have to be reminded that without mortgage brokers, and the competition we bring to the big banks, we all as mortgage consumers would be paying far higher interest rates.
The banks are in business to make money and that's the bottom line. In the end more times than not they will try to fill their pocket books with your money. Where as me, the Mortgage Broker, who works for you, will do the opposite and try to keep your pocket filled with your own money.
Day in and day out I hear stories from people who are at their branch and they feel the branch is not doing a good enough job, especially when it comes to rate. They talk to me, find out that I can usually do a better job not only on rate but on overall product, then they go back to the bank and the bank matches them and they call me back and say 'thanks for your help, the bank matched you and I'm staying with them.' WHAT ARE YOU THINKING!?!?
Why would you go back to them when they've clearly tried to charge you more and have clearly shown that you are just another potential sucker? And most importantly, what product did they suck you in to? Read my other posts on my blog about products and why the best rate is not always the cheapest for you.
Anyways, I could go on and on about this, however, I wont bore you!
"In the Bank of Canada study I referenced earlier they cite: “The results indicate that high-income borrowers pay more for their mortgages, as do loyal consumers, consumers who search less, and those that value large branch networks”."
We have to be reminded that without mortgage brokers, and the competition we bring to the big banks, we all as mortgage consumers would be paying far higher interest rates.
The banks are in business to make money and that's the bottom line. In the end more times than not they will try to fill their pocket books with your money. Where as me, the Mortgage Broker, who works for you, will do the opposite and try to keep your pocket filled with your own money.
Day in and day out I hear stories from people who are at their branch and they feel the branch is not doing a good enough job, especially when it comes to rate. They talk to me, find out that I can usually do a better job not only on rate but on overall product, then they go back to the bank and the bank matches them and they call me back and say 'thanks for your help, the bank matched you and I'm staying with them.' WHAT ARE YOU THINKING!?!?
Why would you go back to them when they've clearly tried to charge you more and have clearly shown that you are just another potential sucker? And most importantly, what product did they suck you in to? Read my other posts on my blog about products and why the best rate is not always the cheapest for you.
Anyways, I could go on and on about this, however, I wont bore you!
Thursday, July 14, 2011
"Beware of collateral-charge mortgages"
I've talked about collateral mortgages a few times in the past.
Today I opened up the latest edition of the CMP (Canadian Mortgage Professional) Magazine and came across an article that I had to share.
"Beware of collateral-charge mortgages"
While private lenders are increasingly looking for 'opportunity financing' that expands their portfolio beyond refinancing and debt consolidation, that core business remains an industry pillar. The growing use of collateral-charge mortgages by the big banks, however, is threatening to erode that support, said David O'Gorman, broker/owner of MortgageLand Inc., an independent firm brokering private lending deals.
'We're saying 'no' more often now than we did in the past, and i can think of no less than six people since last year that we've simply had to turn away because there was nothing we could do for them,' he told CMP. 'It's because they've signed up for a collateral mortgage with the banks, and have pledged all their equity to that bank. It makes it all but impossible for a second lender to come behind and provide a second mortgage or refinancing or even for a homeowner to switch lenders at renewal.'
Last fall, O'Gorman and other brokers working with private lenders raised the specter of a loss of business stemming from collateral mortgages at the big banks. They are securing mortgages with a promissory notes backed by collateral charges. That translates into a first or second lien on the property for as much as 125% of its value. That doesn't, in fact, mean the borrower is guaranteed access to all those funds.
The private lenders that O'Gorman deals with - along with most banks and monolines - refuse to accept the transfer of collateral mortgages, forcing homeowners to pay additional fees to register a new mortgage in order to move the loan from the original lender for a much-needed second mortgage or refinance.
O'Gorman wrote to people, with 'different to the norm' conditions and increasing the borrower's exposure to significant loss, all the while flogging a cheap closing service, enticing the borrower to go without the opportunity of having an independent legal opinion of the documents they are signing, just plain stinks' he wrote in the two-page letter.
A policy adviser for Flaherty did contact O'Gorman for a brief discussion, although the broker doubts the matter will move beyond that.
Be leary of collateral mortgages. Ask a professional to explain them to you and why they may not be the best option for you.
Today I opened up the latest edition of the CMP (Canadian Mortgage Professional) Magazine and came across an article that I had to share.
"Beware of collateral-charge mortgages"
While private lenders are increasingly looking for 'opportunity financing' that expands their portfolio beyond refinancing and debt consolidation, that core business remains an industry pillar. The growing use of collateral-charge mortgages by the big banks, however, is threatening to erode that support, said David O'Gorman, broker/owner of MortgageLand Inc., an independent firm brokering private lending deals.
'We're saying 'no' more often now than we did in the past, and i can think of no less than six people since last year that we've simply had to turn away because there was nothing we could do for them,' he told CMP. 'It's because they've signed up for a collateral mortgage with the banks, and have pledged all their equity to that bank. It makes it all but impossible for a second lender to come behind and provide a second mortgage or refinancing or even for a homeowner to switch lenders at renewal.'
Last fall, O'Gorman and other brokers working with private lenders raised the specter of a loss of business stemming from collateral mortgages at the big banks. They are securing mortgages with a promissory notes backed by collateral charges. That translates into a first or second lien on the property for as much as 125% of its value. That doesn't, in fact, mean the borrower is guaranteed access to all those funds.
The private lenders that O'Gorman deals with - along with most banks and monolines - refuse to accept the transfer of collateral mortgages, forcing homeowners to pay additional fees to register a new mortgage in order to move the loan from the original lender for a much-needed second mortgage or refinance.
O'Gorman wrote to people, with 'different to the norm' conditions and increasing the borrower's exposure to significant loss, all the while flogging a cheap closing service, enticing the borrower to go without the opportunity of having an independent legal opinion of the documents they are signing, just plain stinks' he wrote in the two-page letter.
A policy adviser for Flaherty did contact O'Gorman for a brief discussion, although the broker doubts the matter will move beyond that.
Be leary of collateral mortgages. Ask a professional to explain them to you and why they may not be the best option for you.
Wednesday, July 6, 2011
Mortgage Apprenticeship
The write up well below belongs to http://www.canadianmortgagetrends.com However I thought it so important I wanted to put my words into it and pass it along. For comments and other greatly written articles in our business, I encourage you to go to their website.
Here's my take:
I've been in the Mortgage business approaching 7 years. My first couple of years were very difficult. Fortunately I was able to be mentored by one of the best brokers I know today.
In my first year of the business I did place a few mortgages, with the help of my mentor. My MAIN focus though was learning products and learning them well. I used to go for coffee on a daily basis with lender reps so I can gain knowledge. I still do this. I thought that this was mandatory as, why would I want to put someone in such a big investment and not know what I was doing???
So often I see "Mortgage Professionals" come right out of school and try to jump in and sell mortgages to people without knowing if that's the best product for someone. All they worry about is having the best rate. As you've read in my previous posts, IT'S NOT ABOUT RATE. It's about knowing your products and finding the right match for that person(s) need, for the short term AND the long term.
As a true mortgage professional, I am still consistently going out with my lender reps to gain product knowledge and being an AMP, (Accredited Mortgage Professional) I am required to do a minimum 12 hours of education, which I consistently do more than every year. Not to be a bad mouth, however, bank reps do NOT have to go to school to get licensed. They also do not have to do training hours yet I do know some that do.
I truly believe to keep our industry as professional as possible, we must be adhered to proper training in the beginning 2 years and mandatory education for EVERYONE no matter if you have the AMP designation or not. We have to stay on top of our products and make sure we always do the right thing for the client.
Article from http://www.canadianmortgagetrends.com
Mortgage Apprenticeship
Plumbers can't get a license without an apprenticeship.
Makes sense. You wouldn’t want a botched pipe job putting your house under water and costing you thousands.
The advice of a mortgage banker or broker could cost you just as much—if it’s bad.
That might make you wonder: Why is there virtually no legislation to ensure that bank reps and brokers have the practical knowledge to advise you properly?
We as brokers do have to write a licensing exam (depending on province). That, however, doesn’t prepare us to skillfully counsel you about:
term selection and suitability
mortgage restrictions
refinance analysis
mortgage portability rules
prequalifying with atypical income or credit
credit rebuilding
financing condition removal
porting default insurance
…and dozens of other mortgage topics where advice could cost (or save) you thousands.
Few things would boost our industry’s creditability more than practical training requirements. A 12- to 24-month apprenticeship under an experienced sponsoring broker would ensure new brokers have a minimum degree of competence when advising consumers.
At the moment, our industry relies on a system whereby someone who passes a background check, completes a licensing course, and joins a brokerage firm, can counsel you on a transaction worth hundreds of thousands of dollars. Poor guidance generally goes unnoticed because, most of the time, customers don’t even know they’ve received bad advice.
Fortunately, the majority of practicing mortgage professionals are experienced and highly capable. But it takes time and a lot of mistakes (often at customers’ expense) before most new brokers have the skillset needed to be proficient.
Having a senior broker review and sign off on a new recruit’s applications for 12-24 months would be one way to help clients avoid paying for inexperience.
Rule of Thumb: Never be afraid to ask your bank rep or broker:
How long he/she has been a full-time mortgage professional
How much volume he/she has closed in the last 12 months.
If the individual has been full-time less than a year or has closed less than $5 million of mortgages in the last 12 months, take extra care when evaluating their expertise.
Here's my take:
I've been in the Mortgage business approaching 7 years. My first couple of years were very difficult. Fortunately I was able to be mentored by one of the best brokers I know today.
In my first year of the business I did place a few mortgages, with the help of my mentor. My MAIN focus though was learning products and learning them well. I used to go for coffee on a daily basis with lender reps so I can gain knowledge. I still do this. I thought that this was mandatory as, why would I want to put someone in such a big investment and not know what I was doing???
So often I see "Mortgage Professionals" come right out of school and try to jump in and sell mortgages to people without knowing if that's the best product for someone. All they worry about is having the best rate. As you've read in my previous posts, IT'S NOT ABOUT RATE. It's about knowing your products and finding the right match for that person(s) need, for the short term AND the long term.
As a true mortgage professional, I am still consistently going out with my lender reps to gain product knowledge and being an AMP, (Accredited Mortgage Professional) I am required to do a minimum 12 hours of education, which I consistently do more than every year. Not to be a bad mouth, however, bank reps do NOT have to go to school to get licensed. They also do not have to do training hours yet I do know some that do.
I truly believe to keep our industry as professional as possible, we must be adhered to proper training in the beginning 2 years and mandatory education for EVERYONE no matter if you have the AMP designation or not. We have to stay on top of our products and make sure we always do the right thing for the client.
Article from http://www.canadianmortgagetrends.com
Mortgage Apprenticeship
Plumbers can't get a license without an apprenticeship.
Makes sense. You wouldn’t want a botched pipe job putting your house under water and costing you thousands.
The advice of a mortgage banker or broker could cost you just as much—if it’s bad.
That might make you wonder: Why is there virtually no legislation to ensure that bank reps and brokers have the practical knowledge to advise you properly?
We as brokers do have to write a licensing exam (depending on province). That, however, doesn’t prepare us to skillfully counsel you about:
term selection and suitability
mortgage restrictions
refinance analysis
mortgage portability rules
prequalifying with atypical income or credit
credit rebuilding
financing condition removal
porting default insurance
…and dozens of other mortgage topics where advice could cost (or save) you thousands.
Few things would boost our industry’s creditability more than practical training requirements. A 12- to 24-month apprenticeship under an experienced sponsoring broker would ensure new brokers have a minimum degree of competence when advising consumers.
At the moment, our industry relies on a system whereby someone who passes a background check, completes a licensing course, and joins a brokerage firm, can counsel you on a transaction worth hundreds of thousands of dollars. Poor guidance generally goes unnoticed because, most of the time, customers don’t even know they’ve received bad advice.
Fortunately, the majority of practicing mortgage professionals are experienced and highly capable. But it takes time and a lot of mistakes (often at customers’ expense) before most new brokers have the skillset needed to be proficient.
Having a senior broker review and sign off on a new recruit’s applications for 12-24 months would be one way to help clients avoid paying for inexperience.
Rule of Thumb: Never be afraid to ask your bank rep or broker:
How long he/she has been a full-time mortgage professional
How much volume he/she has closed in the last 12 months.
If the individual has been full-time less than a year or has closed less than $5 million of mortgages in the last 12 months, take extra care when evaluating their expertise.
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