The Learning Centre:
Why mortgage brokers are more essential today than ever
With the mortgage stress test, it’s especially important to get the best possible mortgage advice.
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Fact: buying a home today is complicated. First, there’s the financial terminology to learn and understand. (Fixed or variable rate. Term. Amortization. Loan-to-value.) Then, there’s the high housing prices. (Despite efforts to cool down a hot market, the average price for a Toronto home in 2018 was over $800K*). And now, there’s understanding the mortgage stress test: how it works, and how it impacts you when you’re searching for a mortgage.
Better fact: there’s professional help available that will make it easier.
The mortgage stress test and its impact
The mortgage stress test, introduced in 2018, was meant to determine whether you would be able to make payments if interest rates increased. Home buyers now need to qualify at the greater of the Bank of Canada’s five-year benchmark rate, or your contract mortgage rate plus two percent. This creates a buffer between the rate you’re being offered and the rates you might be paying in the future.
Educators Broker-Director of Lending Services Amedeo Perfetto says that, for some buyers, the stress test has led to new questions. “First-time home buyers may find it more difficult to know what houses they can afford, where to start looking, or whether they can afford to buy in the areas they want.” In addition, “looking at a variety of sources for their mortgage (including credit unions that are not regulated to use the stress test), has become more important.”
A mortgage broker can help.
Before the introduction of the stress test, would-be homeowners found that working with a mortgage broker (like the experts at Educators Financial Group) offered important advantages.
You are a mortgage broker’s first priority.
Talk to a bank about a mortgage, and their priority is to sell you a mortgage – one of theirs. A mortgage broker, on the other hand, is a middleman, and not employed by a lender. Their priority is finding the right mortgage for you.
A mortgage broker means more choice.
A mortgage broker works with many different lenders on an ongoing basis. Because they are not tied to one lender, they have more mortgages to choose from.
A mortgage broker saves you time.
With your demanding job in education and other commitments, you don’t have much extra time. A mortgage broker takes much of the responsibility of finding the right mortgage off you, saving you time and worry. You don’t need to master mortgage terminology … because they do. (And they’ll explain it to you.) You don’t have to spend time researching and comparing mortgage rates, terms, and fees … because they will. And the job of negotiating to get the best deal isn’t yours … it’s theirs.
A mortgage broker has specific training, as well.
Mortgage brokers must successfully complete a provincially-regulated Mortgage Broker course and exam. Then they must take professional development education courses to maintain their status.
A mortgage broker makes sense of the stress test.
With the introduction of the stress test, using a mortgage broker has become even more crucial.
Many industry experts report that home buyers are confused by the stress test, and how it affects them. The key to understanding it is working with an expert in the mortgage field. A mortgage broker will help you assess your financial situation to determine what you can afford today. They’ll explain how the stress test works.
They’ll also help you understand that a mortgage rate is just one element of a mortgage to consider. Other elements, such as the term and fees, also have to work for you. (For more information on what goes into a mortgage, check out Home-Buying 101: How to choose the right mortgage lender.)
Home buyers are also wondering about how prices in different housing markets have changed, and whether they can afford to buy in the area they would prefer. Mortgage brokers are up-to-date with the most recent prices, and can give you practical and timely advice.
Because of a mortgage broker’s superior experience and knowledge, they offer a better perspective on home buying. Educators mortgage agents also bring years of experience working with members of the education community. This is what will make the difference in finding a home – and a mortgage – you can live with.
For more information on the stress test, or any questions about mortgages, you can contact an Educators lending specialist at 1.800.263.9541 or online.
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The information provided is general in nature and is provided with the understanding that it may not be relied upon as, nor considered to be, the rendering of tax, legal, accounting or professional advice. Please ensure to consult your accountant and/or legal advisor for specific advice related to your circumstances. Educators Financial Group will not be held responsible or liable for any losses, costs, damages or expenses incurred by reason of reliance as a result of the aforementioned information. The information presented was obtained from sources that are believed to be reliable. However, Educators Financial Group cannot guarantee their completeness or accuracy.