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.
Fact: buying a home today can be complicated.
First, there’s the financial terminology to learn and understand (I.e. fixed vs. variable rate, term, amortization, loan-to-value). Then, there’s the all-time high housing prices. And then there’s understanding the mortgage stress test: how it works, and how it impacts you when you’re searching for a mortgage.
Better fact: a mortgage broker can help simplify this process. Yet, according to a survey by the Mortgage Professionals Association of Canada, 39% of first-time home buyers have a poor understanding of what brokers do or how they can help.
With a sharp increase in first-time home buyers looking to buy a home in the coming year, compared to pre-pandemic, understanding the role mortgage brokers play in the homebuying process can save you thousands of dollars in interest charges.
Mortgage brokers also play a vital role in assisting borrowers whose mortgage is coming due for renewal. As this critical milestone approaches, borrowers often face the challenge of finding the most suitable mortgage terms and rates for their financial needs.
What is a mortgage broker?
Mortgage brokers are licensed professionals who act as an intermediary between borrowers and lenders. Mortgage agents, on the other hand, are licensed individuals who carry out mortgage activities on behalf of the mortgage brokerage.
Interested in growing your mortgage lingo? View our glossary of terms.
How can a mortgage broker help?
1. You are a mortgage broker’s first priority.
Unlike your bank’s mortgage specialist, whose only option is to sell you one of their mortgages, a mortgage broker‘s priority is finding a mortgage that’s tailored to your specific needs and budget, whether you’re an occasional education employee or have experienced credit challenges in the past.
2. A mortgage broker means more choice.
A mortgage broker works with many different lenders on an ongoing basis, some of whom offer rates only accessible through a mortgage broker. Because mortgage brokers are not tied to one lender, they have multiple mortgage options to choose from and can negotiate on behalf of the buyer and borrowers with mortgage renewals.
3. 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 for you, saving you time and worry. You don’t need to master mortgage terminology because they already have. 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.
4. A mortgage broker has specific training.
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.
5. A mortgage broker makes sense of the stress test.
With the introduction of the stress test in 2018, using a mortgage broker has become even more crucial.
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 Mortgage Agent Level 1 – Regional Director, Lending Services Chris Knoch 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 and alternative lenders that may have different parameters regarding the stress test, has become more important.”
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.
Don’t have time researching multiple lenders and rates? Call on Educators Financial Group.
As a brokerage, we’ve been providing specialized mortgage products and advice to education members since 1975. Whether you’re shopping around for your first mortgage, coming up to renewal time, or thinking about purchasing a second property, we can provide you with the right mortgage based on your specific needs and budget.
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