When it comes to shopping for a mortgage, low interest rates aren’t the only thing home buyers are looking for.
With banks, credit unions and independent lenders all offering various ways to finance a home purchase, prospective buyers must also determine who they’ll work with to find the mortgage deal that fits them best.
Not everyone is comfortable negotiating directly with their potential financier, even if they’ve dealt in past with their chartered bank, credit union or private lender.
In such cases, homebuyers often use the services of a mortgage broker as a way to avoid the stress that can come with dealing with an institution that may not be able or willing to work within your financial capabilities.
“It can help having somebody who’s a bit more invested in the deal and who does these sorts of things on a regular basis,” says Realtor Tim Ayres, president of the Victoria Real Estate Board.
Mortgage broker Lori Lenaghan says one thing brokers can offer that financial institutions can’t always guarantee is the lowest rates, since they shop the client’s financial situation around to various lenders to find the best fit.
“People will move from one bank to another for a quarter per cent,” she says of the search period.
Since they are working in the customer’s best interest, a broker tends to have more flexibility than large institutions that are bound to corporate policy, she adds. That means the client can avoid the hassle of pitting their home financial institution against another to get the best rates and terms.
That flexibility can come into play in refinancing situations as well. Some lenders will extend a borrower’s amortization period to 35 years of they meet certain criteria, where others are limited to 30 years, she says.
In terms of interest, homebuyers are blessed with continued low rates, with no expectation of rate hikes until at least 2015. Variable rate mortgages, which fluctuate with the prime rate, are still a good bet, Lenaghan says, although more conservative people still go with a fixed rate. Even those mortgages are hovering just over three per cent for a five-year term.
For people who would rather approach their financial institution directly, there are some choices on the market.
Ryan McKinley, senior mortgage development manager with Vancity, says the issue of affordability in the Greater Victoria market has prompted it to get creative with how it helps buyers finance their homes.
One option allows its members to work with friends, family, roommates and others to combine their resources and purchase a property together.
“This is a great option for parents who may not want to gift their children a down payment, but would rather invest with them and give them a hand up,” he says.
The idea of working with a mortgage specialist in advance and talking about your future plans is always a good idea, McKinley adds.
“Even if they’re not planning to purchase for some time, at the very least we can provide a road map so they’re able to achieve home ownership in the future.”
Lenaghan says people are very educated about shopping for mortgages these days.
“Realtors are very good at getting people in ahead of time so there’s no surprises,” she says.
“Once they’re here, we can educate them about what their options are if they don’t qualify. We really work with the client over the long term.”
Q: WHAT ARE SOME POINTS TO CONSIDER ABOUT MORTGAGES?
Consider a smaller mortgage, rather than the maximum you can afford – Taking a smaller mortgage can help you comfortably deal with unexpected changes to your monthly budget
Evaluate the impact of an increasing interest rate on your payments – For a mortgage of $250,000 at 5%, a jump of 2% would increase monthly payments by about $300
Plan to be mortgage-free faster – Make weekly or biweekly payments, lump sum payments to your mortgage principal or increase your regular payment amount
Ask for help if you have trouble making mortgage payments – If unforeseen financial circumstances impact your ability to make regular payments, seek help sooner than later
Source: Canada Mortgage and Housing Corporation