The heat in some of Canada’s housing markets and the new regulations by the Office of the Superintendent of Financial Institutions (OFSI), makes home ownership a little bit challenging for a first time homebuyer. To top it up, he or she has to choose between a big Bank or a mortgage broker for their mortgage needs.
In 2009 alone, many more people opted for representation by a mortgage broker. The figure was at 40%, an increase from 26% in 2003, according to CAAMP (Canadian Association of Accredited Mortgage Professionals).
Who is a Mortgage Broker? He or she acts as a connection between you (as the home buyer), and the potential lenders. They will provide you with assistance during the application process.
If you get a good broker, he or she will match you with a lender who is ideal for your needs. In that, you get to shop around for the best rates. On the other hand, if you choose to go to the bank, you will only have one option for the products they just offer.
If you play hardball, you may be able to get a lower rate than the one posted. A bank may, however, be in a better position to give you advice on your large financial needs. You should keep in mind that saving yourself a point of percentage, could be good in the long term.
What are the Benefits of a Broker?
• Shopping Around
Well, we believe that you want to secure the best deal available for you. A mortgage broker will negotiate and look around for the optimal contract, for your needs. He will strive to present you with the lowest rate, available in the market.
• A ray hope for borrowers with poor credit
Your credit score plays a vital role in whether or not you can access a mortgage product. Every mortgage broker has to stay up to date with the latest mortgage news in the industry. With this vast knowledge, the mortgage broker can advise you on the lenders who would consider your case.
• Exclusive deals
Some of the best deals within your grasp are not in the open market. A mortgage broker can help you find a suitable product for your needs. The will negotiate, on your behalf, for a better interest rate or a lower application fee, where needed.
A mortgage broker has access to lenders that the bank has not, and a bank only has access to itself. They provide you with a one-stop shop for your mortgage options. Choosing a mortgage option and signing your name to it, is a big financial decision. Make the right choice.
Month: February 2018
At the start of a New Year, many people strive to make New Year resolutions. Is becoming a homeowner on of them? Well, it may not be an exciting period for first-time homeowners as the new mortgage rules took effect, since the 1st of the year.
Previously, only applicants who had a down payment of less than 20%, had to pass a stress test. However, under the new rules, all home buyers will have to face the stress test. It is a way for the lender to determine whether the potential homeowner will be able to pay back the loan amount with interest, should the interest rates change.
Under these new guidelines by the OFSI (Office of the Superintendent of Financial Institutions), you will have to show that you can make mortgage payments at:
• The posted average 5-year rate by the Bank of Canada or
• A rate higher by 2% of the actual mortgage rate
These rules may affect those contemplating about refinancing or renewing their mortgage. Only those who will renew with their current lender, won’t.
Impact
First Time Home Buyers
Are you planning on going house hunting? Well, both uninsured and uninsured borrowers will have to face the stress test. In vetting your application for a mortgage, the lender will vet you using the five-year Bank of Canada, benchmark rate, or the at a 2% points higher than the contractual rate.
It implies that you may need to wait longer to get your dream house. That is by saving more for your down payment. Or you will have to settle for a cheaper home than the one you would have been able to buy, previously.
Mortgage Renewal & Refinancing
If you are renewing an existing contract that was in play before the implementation of the new regulations; this stress test won’t apply to you. However, for renewing borrowers who fail the stress test, you may have to stick with your existing lender. You won’t have the luxury of shopping around for better rates.
For those who may be considering mortgage refinancing as an option, with the new OFSI rules, you may have to settle for a much smaller loan. It is so, especially for those who are close to their borrowing limit.
Well, all your hopes of owning a home may not be lost. These rules only apply to financial institutions that are regulated federally. You can reach out to Expert Financial Corp, for insight on the mortgage products that may be suitable for you.