Myths have been perpetuated by man since the dark ages. They are mysterious and can evolve into ‘beliefs’ to such an extent that they are thought to be ‘true’. Examples of nouns analogous with the word ‘Myth’ are ‘legend, fable, parable, fairy story, folk tale, urban myth, illusion, delusion, falsehood, fabrication’ etc. A myth can also be a popular belief that has become associated with a person, institution, or profession. In our profession/industry several myths are alive and well.

Some of the most popular ones come from clients of ours who have been told by their banks, quote: “Mortgage brokers should only be used ‘as a last resort’; Mortgage brokers always charge fees; Mortgage brokers hurt your credit rating when they pull several credit reports; Mortgage brokers use lenders who aren’t reputable or stable and who may  collapse” etc. Earlier this year, a bank mortgage specialist tried to perpetuate the misconception very publicly ‘in print’ that mortgage brokers are unreliable, here today gone tomorrow entities who charge ‘set up fees’ and have ‘hidden costs’.

It is true that over 30 years ago mortgage brokers main source of money was from private lenders. Our industry was in its infancy and had not developed the channel of institutional lenders that we have today. Our industry was not organized, regulated or sophisticated then, and yes fees were charged for services rendered as it was the only way to be compensated. Today we have over 40 institutional lenders including banks, (all highly regulated and reputable) who pay us a ‘finder’s fee’ for sourcing and sending them new business. In the vast majority of deals we do not charge any fee, we only charge fees for deals for more difficult transactions, and we cannot charge a ‘set up’ fee. Also because we are highly regulated we must provide full disclosure, something which the banks are not required to do.

We only pull one credit report for each client/transaction which is accepted by all our lenders. We also discuss credit reports and issues in detail with our clients, something that the banks also do not do. Most importantly, we are independent professionals who provide you with unbiased advice, in your best interests, not the other way around.

These are just some of the reasons that our services and market share have grown so dramatically, especially in the last decade, and that our industry will continue to grow and ‘Win’ business from the big banks as Canadians become more aware of the benefits and value of our services.

Mortgage rates are once again at ‘all time’ lows, in fact lower. Yes we still have 40 year amortizations and we still have 100 per cent, no down payment mortgages too, at rates you won’t believe. Anyone who is renting should do everything they can to own real estate because it is much cheaper than renting.Not looking to move, but would like to buy a cottage or investment property?Do it now!

If you are a renter: $1,295 rent per mth can buy you a $350,000 home with 5% down. With no down payment the price drops to $250,000.If you have 20% down you avoid a 3.25% CMHC fee and you can afford a $400,000 home with a mortgage payment of $1,295. Incredible isn’t it? How about buying that dream home at $750,000 ? Your payment can be as low as $1,820 per mth. A $1,000,000 home will carry for as little $2,346  permth with $275,000 down. All above payments are OAC.

Real estate has and will continue to be the safest and best long term investment with the greatest return. If you have good equity in your present property, why not tap into some of it to buy an income producing property, put in a basement apartment, do that renovation you have been dreaming of?

Financial experts tell us that having all our eggs in one basket, meaning low or no mortgage is the least effective approach to wealth creation. Why? Because you only have one investment generating a (paper only) return for you. Why not take some of that equity to purchase more real estate, especially income producing real estate that will help you pay down the mortgage much faster thereby creating more wealth and financial security for your future. Think about using some of your equity to invest in private mortgages or our RENT TO OWN program as an investor.

Our services not only save you money but we help you create wealth. Please call us today to see what we can doto help you achieve greater financial security.

A new trend we are seeing is more people refinancing their homes to consolidate debt and put away funds for the proverbial ‘rainy day’ should it come unexpectedly.

There is growing concern about job security in this volatile economy as export manufacturers have seen demand diminish for their products as both the U.S. and European markets grapple with the threat of another recession. RIM in Waterloo recently laid off 2000 workers in a proactive move to weather the storm should things worsen. This has had a ripple effect on other businesses as well in south western Ontario.

The current consensus on our ‘near term’ economic future has turned pessimistic as unemployment increased last month and remains a persistent problem. Canadian consumers are putting off or delaying ‘big ticket’ purchases ‘just in case’.

With mortgage money so cheap, savvy Canadians are deciding to ‘self insure’ against job loss by using home equity to put away (usually) 6 month’s worth of living expenses just to be safe. Of course this can also be done proactively for anticipated maternity/paternity leave, sickness and injury, and so it is looked at as low cost ‘insurance’ against the unexpected.

We had a couple recently do this very thing AND borrow funds to put in a basement apartment to generate rental income to help them pay down their mortgage faster. Since prepayments are voluntary, creating rental income can be viewed as another form of ‘insurance’ and is a very smart thing to do. It also increases both the value and marketability of a property.

If you are concerned about your job, or are looking for professional guidance or advice on financial strategies that may be helpful to you, call us today. We are on your side and remember, we have many more options than the banks can offer you, and our services are free, OAC.

A common misconception about more frequent payments is that they help you pay down your mortgage faster. Bob and Alice brought in their(bank mortgage) amortization schedule. They had been on biweekly payments for 5 years and thought they were paying down their mortgage faster. What they did not know was that the bank put them on biweekly alright, but not biweekly ‘accelerated’. The net result was no different than had they made monthly payments. We see this happen too often, which begs the question. Why would the bank put them on a more frequent, non-accelerated payment that does not help them pay their mortgage down faster?

The only benefit to the customer was the ‘convenience’ of having it tied to their paycheck, but there was no financial benefit at all since the remaining principal balance was virtually the same as a monthly payment mortgage.  That’s no benefit to the customer, but it was a benefit to the bank. Why? Because, payments are only(required) monthly. So by receiving payments sooner, the bank can use the funds for two weeks each month before applying it to the mortgage, thus making extra interest (profit).

What the bank absolutely should have done was put them on biweekly ‘accelerated’ payments (which Bob & Alice did not know to ask about) which would have saved them approximately $5,000. Presumably the bank was able to do this for the duration of the term. We are talking about a huge amount of ‘free’ money at the bank’s disposal to utilize as they wish.

And did you know that default on a mortgage occurs after 3 paymentsbethey 3 weeks, 6 weeks or 3 months. So the bank can foreclose on you much more quickly when you make more frequent payments. Obviously in case of job loss etc., this represents a much higher risk to homeowners and most people do not know this.

Financial Details:

Monthly payments $931.50 x 12 = $11,178/year. Balance at term end  $160,453

Biweekly: Bank divided yearly by 26 = $429.92    Balance at end of term  $160,479

Biweekly Accelerated divide yearly by 24 = $465.75   Balance at end of term $155,497 Savings = $4,982

Remember, we are on your side, we protect you and save you money, and our services are free, OAC.

Three years ago we helped a client who was a former bankrupt get a no money down mortgage.  These were the so called ‘subprime mortgages’ which were all over the news as the main culprit for the real estate downfall in the States.  Here in Canada we also had some subprime mortgages for clients who could not qualify due to credit or income.    We had stricter rules for these sub prime mortgages  but nevertheless a small percentage  of mortgages got done here in Canada. 

Lee wanted a home very badly and his bankruptcy was caused by a job loss and bad advice.  He had no money saved so he knew he home ownership would cost him more, but he did not want to rent any longer.  We found a lender who would do the deal.  He had steady employment now and worked part-time (hard worker with great attitude) in addition to his $50,000 a year job.  He found a modest  home in Cambridge for $150,000.  We arranged a mortgage at 9.2% for  the full amount of his purchase price and  the mortgage payment of $1,300 was similar to what he paid in rent, so it was tough but affordable.  Under our  tutelage over the past three years Lee re-established excellent credit.  People with credit scores of 620 and above are considered prime by  many mortgage companies.  Lee did his penance and this week we were able to get  him a mortgage at an unbelievable rate of 3.79 percent.  He has to pay a penalty of $13,000 to get out of the old mortgage which we were able to amalgamate into the new mortgage at $155,000.  His mortgage payments even with the higher mortgage have been cut in half to $750 a month.  Lee is now on  firm financial footing and can save money. 

Subprime mortgages have received so much bad press and we just wanted to let you know that some of them work out just fine and actually help worthy people into homeownership.