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July 9, 2004
Trying to negotiate a mortage?
An independent consultant could get you a better deal than your
bank.
MIKE AVERBACH SPECIAL TO THE JEWISH BULLETIN
Shopping for a mortgage in Canada is changing. New mortgage features
and options are being introduced every day. Knowing what's right
for you and how much to pay has become increasingly complicated.
Maybe that's why more than one in four Canadian mortgages are now
negotiated by mortgage brokers.
Contacting different lenders, trying to compare different rate structures
and options – the entire mortgage process can be quite intimidating.
All mortgages are not "created equal" and, based on your
circumstances, one mortgage could be substantially better for you
than another.
Financial institutions sell only their own products to the public
through their own sales force. As a result, they can neither provide
unbiased advice nor a wide variety of products, whereas mortgage
consultants can. Consultants deal with as many as 27 different lenders,
therefore they are able to search for numerous products from a variety
of institutions, including banks, trust companies, insurance companies
and credit unions. Finding the one that offers the best product,
rate and terms for your particular needs is their primary objective
– consultants are able to negotiate on your behalf, structuring
deals to meet your criteria and those of the lenders.
Many people believe that if they've been with their bank for a certain
number of years, they will automatically get their bank's best rate
or better. What they don't realize is that the branch is looking
out for the institution's own bottom line and bank representatives
are actually rewarded when they offer the client a rate higher than
the lowest discounted rate, as that means more profit for the bank.
On the other hand, a mortgage consultant doesn't represent a specific
bank and is better able to look after your interests.
To gain market share from mortgage consulting companies and individual
brokers, the majority of lenders pay a finder's fee for referred
business. Due to the volume of business done by such companies as
the Mortgage Group, Capital Direct Lending Corp. and other mortgage
consultants, fees are paid by the banks and consultants receive
fast approvals in order to gain their business. This allows consultants
to shop among the various financial institutions with, in almost
all cases, no cost to the borrower.
How can banks offer independent mortgage brokers a better rate for
their prospective clients? Lenders want to gain new business without
the stress and cost of directly dealing with customers on a time-consuming,
one-on-one basis. Essentially, it is more cost-effective for lenders,
as they only pay independent brokers for production and there is
no overhead, which there would be if the consultant worked at the
branch.
Furthermore, when you deal directly with a financial institution
and your mortgage is declined, for whatever reason, you must begin
the application process all over again with another lender. When
you deal with a consultant, the application can easily be redirected
to another lender(s) for consideration. Typically, the entire application
process can be completed in under a day.
An independent consultant can also often help co-ordinate your "home-buying
team," with referrals to realtors, financial advisors, real
estate lawyers, appraisers, home inspectors, insurance advisors
and even moving companies and landscapers. Many of these services
can be offered at discounted rates just like the mortgage.
Whether you are purchasing a new home or commercial property, refinancing
to consolidate consumer debt on high-interest credit cards and loans,
doing home renovations or new construction, or simply switching
your current mortgage to another institution for a better rate,
a mortgage consultant can be of considerable help and can save you
both time and money. Two things in short supply these days.
Mike Averbach is a mortgage consultant with the Mortgage
Group in Vancouver. Any questions can be e-mailed to him at [email protected].
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