May 23, 2009
Book, Case Study, Credit, Employed Persons, First Time Home Buyer, Interest Rates, Mortgage Insurance, News, Pre Approval, Proving income, Small Business, Switch
No Comments
Over the past few months I have confirmed something that I have suspected for the last several years – People need to know more about mortgages and the mortgage process.
So in an effort to address a number of the key issues I have began writing this blog.
Through this blog I have attempted to inform people about some of the basics of the mortgage terminology, products and process. The response has been outstanding to say the least. People really appreciate the straight forward information that I have been giving them.
I think that this is worth while and fun so I will continue to blog, but I want to do more. So I am officially announcing that I am in the process of writing a book for people who live in Alberta and who are looking to purchase or refinance a property. The working title of this book is “So you want to get a mortgage in Alberta”.
I am excited about giving Albertan’s clear information about mortgages.
The chapters and topics have largely been decided but feel free to leave a comment below to let me know what you would like to see included in this book.
If you keep reading then I will keep writing.
March 3, 2009
First Time Home Buyer, News, Switch
No Comments
In my last column I looked at the reasons why you should consider using a Mortgage Broker to help find the financing you require: Mortgage Brokers have the expertise, the experience, and their services are typically at no charge to you.
Armed with this information, you have decided to use a Mortgage Broker – there are literally hundreds of them in Calgary and the surrounding area. Looking up names in the phone book or on the internet doesn’t really tell you anything. Are all Brokers created equal? Do they all have the same access to lenders and products? How do you know if they are all equally competent? In short, how does one pick a Mortgage Broker?
The answer to this question is not simple. There are many factors to look at. Here are the key things for you to consider when choosing your Mortgage Broker. Use these as guidelines to get you started on your journey.
- Start with the people you know best; your friends and family. With 37% of Albertans choosing the services of a Mortgage Broker, chances are that someone you know and trust has already used one. Find out who they used and what they thought of them. If their experience was positive, get that Mortgage Broker’s information and move to the next step.
- From a business standpoint: when you leave a message for a prospective Mortgage Broker, do they return your calls promptly? Do they sound like they know their business? Are they unnecessarily pushy or do they take the time to get to know your business style and work with it? Are they honest? If they are not honest with the lenders (their business partner) then are they being honest with you? Do they run their business full time or is this a part time job for them; will they be able to give you the attention you need?
- From a relationship standpoint: do you feel appreciated by them or do you feel like a burden? Remember, they are working for you. Are they doing what is right for you or what is right for them? Do they use new technologies that fit your lifestyle? Do they speak in your mother tongue? Do they speak highly of all people in their industry or do they bad-mouth people behind their backs?
Do your due diligence then trust yourself. You will have made a good choice for the person that is right for you so stick with that Broker instead of shopping around further. A great Mortgage Broker will work hard for you and they deserve to be treated with respect. Speak to them directly about any issues or concerns that may arise and be clear and honest about your expectations. Communication is the core of any good relationship: especially with your Mortgage Broker.
Use this list as a starting point and add to it based on your specific needs. It is important to have thought through these questions prior to your first meeting. Have the list handy and don’t hesitate to refer to it as you are interviewing your new Mortgage Broker. While this may seem like a lot of work, you will find that you will be able to get the answers to these questions in a few short phone calls. The benefit in the end is a business relationship that you are comfortable with and can trust.
June 12, 2008
Case Study, Switch
No Comments
A switch is what the mortgage industry calls it when a person who has a mortgage with one lender decides they are unsatisfied with their current interest rate and want a better rate. So they “switch” from one lender to another.
Generally these type of files are really simple for the borrower, the lender and the broker.
It is important the key aspects on file do not change from one lender to the next; for example:
- Amortization
- Mortgage Amount
- Borrowers
- Property
Case Study
George purchased a detached house in September of 2007 for $300,000. He used $15,000 as a down payment. He also took advantage of the 40 year amortization option. His mortgage amount at the time of purchase was $294,547.50 including the insurance premium.
At the time he got a 5-year fixed rate of 5.7% from lender A. His payments were $1,546 per month.
Nine months have passed and prime has come down.
George is wanted to know if he could switch his mortgage to a different lender and get a better interest rate.
He understood that he would pay a penalty and wanted to know how much it would be.
He called and let me know what he wanted to do so I took an application. The whole process took less than 15 minutes.
It is important to know that he did not want to change anything on his mortgage, just his interest rate.
After I had his information I asked him to send me some key data:
- Employment letter
- Recent paystub
- Most recent mortgage statement.
While I was waiting for him to send me this information, I investigated how much his penalty would be with his current lender. It came out to $4,139.80.
Then I figured out how much interest he would have paid for the duration of the term on his mortgage, and compared that to how much he would pay if he switched to a five year variable rate (assuming interest rates stay steady).
The total interest he would pay if he stayed with the fixed rate at 5.7% would be $65,108.08 for that period.
The total interest he would pay if he decided to switch to a variable rate currently at 4.15% would be $47,223.96 for the same time frame.
So even including his penalty of $4,139.80 he could save as much as $13,744 over the course of the next four years.
When I told George the news he was very pleased and ready to change. I made sure that he was aware that the prime interest rate will fluctuate and his real savings would likely be different.
I also made sure he was aware that he could choose to fix his interest rate at anytime to the best fixed rate available with the lender at that time.
He understood the situation and decided to move forward.
When I had all the paperwork and George’s “ok”, I submitted the data to the lender. The file was complete by the end of the following week.
George paid the penalty from his own funds and was surprised how easy the entire process was.
The morale of the story is – Ask me to give you the straight facts to help you determine if it is advantageous for you to switch your mortgage.