Shopping around for the best mortgage rate and product can be an excellent exercise to save you money, but it can also affect your chances of being approved.
Although some mortgage brokerages have access to a few more lenders than others, for the most part, most mortgage brokerages all use the same twenty-plus mortgage lenders, which include some major banks, credit unions and non-banks.
If you are rate shopping or looking for the best mortgage product, you may consult a few brokerages and major banks directly. You may even approach credit unions, too.
In the end, you may end up getting the best rate and product, but you may also meet difficulties depending on your financial situation and how mortgage lenders and insurers view your application.
Here's what you need to know.
If you're applying through many different mortgage channels at the same time, you are at increased risk of your application getting sent multiple times to the same lender or insurer by different brokers or banks you've been 'shopping.' Applying this many times with the same lender through different channels can create confusion and ultimately lead to the decline of your mortgage application.
High-risk mortgage applications must get approved by both mortgage lenders and one of the three high-risk insurance companies. If a lender want to approve your application and the insurance company declines to insure it, your application still gets declined.
Although most high-ratio mortgage files that are approved by mortgage lenders get approved by one of the insurance companies, some applications will get declined by the insurers regardless of whether or not the lender wants to approve it.
For example, some borrowers don't have the best credit history, but their current credit score still falls within acceptable insurable parameters. They may have a history of delinquencies or a unique income situation that needs to be explained or rationalized by the lender to the insurer.
When applying, in addition to your credit score, income and down payment information, a lender heavily relies on broker or bank specialist comments about your file. In the case of having credit issues, the professional you use must tell a truthful story about why there are hiccups in your credit. Communication and writing skills are essential and should influence your choice about whom to work with for mortgage financing.
Sometimes, the 'story' is sufficient and acceptable to both the lender and the insurer, but other times it's not, and ultimately leads to a decline.
Therefore, if you apply with many different channels, the application process can become complicated because a new, reworded story gets sent to a new or the same lender but ultimately, reaches the same insurers, which creates unnecessary "red flags" and can evoke an automatic decline or jeopardize a previous approval.
Does this only apply to high-ratio mortgages and insurance companies?
Even if you don't need high ratio mortgage insurance because you have a down payment of 20 percent or more, you may still find yourself at an increased risk of the same fate if you shop many different mortgage brokerages at the same time.
All brokers write up their specific "notes" about the file and provide credit score, income, and down payment information in an application to lenders.
Regardless of whether or not a lender declines or approves your application, you may become compelled to still apply with other brokerages. If declined, you may want to try and get approved by making sure you "leave no stone unturned." If approved, you may still want to determine whether or not you can find a better rate or mortgage product.
Whatever the reason, if you continue to apply with different brokerages, you are at an increased risk of having your application sent to the same lender who initially declined it. Unfortunately, most brokerages are not in the habit of advising borrowers of lenders they have applied with, which often makes it impossible for new brokers to know which lender has already reviewed the application.
Therefore, to avoid experiencing a situation that can harm your chances of getting approved for mortgage financing or even reversing a previously favourable decision, it's imperative to work with people whom you trust and have thoroughly vetted for efficiency, reliability and tenure in the industry, instead of shopping around unnecessarily.
Also, if you must shop around and shop multiple brokerages at the same time, be sure to ask your previous mortgage brokerage which lenders have already reviewed your application.
The mortgage process can feel overwhelming and become confusing, which is all the more reason mortgage brokers and banking specialists should lift the burden of finding the right mortgage off your shoulders and work with you to increase your chances of finding the best rate and mortgage product.
Have mortgage questions?
Feel free to WhatsApp me at (647) 773-4849 or visit www.coluccimortgages.com
Sarah A. Colucci, Sr. Mortgage Agent Lic. M14000929, Mortgage Edge Broker 10680
In a recent press conference regarding fiscal policy, the Finance Minister, Bill Morneau, boldly assured Canadians that the economy is doing well and growing as expected. He did mention.." but with challenges", however, failed to elaborate on what those were.
Regardless, events that have unfolded and continue to unfold have cast doubt about his statement specifically with respect to employment, insolvencies, personal debt ratios and inflation.
In October, insolvencies and bankruptcies were up 13.4% from the same month the prior year, and according to the Office of the Superintendent of Bankruptcy, 13,200 people either declared bankruptcy or sought help to rearrange their financial payments in a way that helped with affordability.
What's different about October is despite people still being employed, wages were not enough to service the debt they had, which compelled thousands to consult Bankruptcy Trustees. Usually, insolvencies relate to a higher unemployment rate, not just the debt levels.
Therefore, current bankruptcy statistics may indicate two detriments impacting the economy:
1. Low wage growth; and
2. The rising household debt levels that are drastically outpacing low wage growth.
Unfortunately, the Finance Minister's public address did not speak to debt, which is one of the most considerable financial risks facing every single Canadian at this time. Instead, the Government admitted its plan to increase the deficit to $27B, meaning it will also be borrowing to keep the economy afloat amid a sluggish economic climate.
As Canadians, we should be concerned about the rise in insolvencies but also the rise of inflation. Just today, Bloomberg released the news that Canada's inflation has hit the highest level since 2009. The price index was up 2.2% compared to 1.9% in October.
Inflation means costs are rising. When we consider rising debt levels and the rate of insolvencies, is it likely consumers can afford an increase in living costs? Probably not.
According to Stats Can, on an annual basis, energy rose 1.5%, fresh or frozen beef rose 6.2%, mortgage interest rates also rose, along with the costs of transportation.
In the last Bank of Canada meeting, while many countries cut their overnight lending rate due to an uncertain global economy, BOC held its rate, which now seems justified. However, according to Michael Babad of the Globe and Mail, it must be careful about raising interest rates too fast since increasing rates with increasing costs will likely translate into a financial disaster for Canadians.
According to a survey "the proportion of Canadians who are $200 or less away from financial insolvency at month-end has jumped a significant six points since September, from 40 percent to 46 percent."
With the rise of inflation, the increase in debt levels, the possible rise in mortgage interest rates and the apparent low wage growth, is the economy actually doing well?
In November, Canada also shed 71,200 jobs in the private sector and according to the former Minister of Employment, Pierre Poilievre, Canada also faces imminent risk of companies leaving to go to the US where they won't get charged for carbon.
Do we need to rethink whether or not the economy is in good shape or whether it's headed for something much more concerning? Apparently we do.
Need help with debt? Getting out of debt is my specialty.
Jim Carrey Just Said What Santa Always Wanted Us To Know: How To Avoid Going Into Debt Over The Holidays.
A Jim Carrey quote reads, "No holiday should manipulate you to the point where you're going into debt to show someone you love them." It’s true.
Debt, unfortunately, will be the likely outcome for many people this holiday season. Not only will they be buying overpriced and overvalued plastic, glass, cotton and hand soap, but they will also be charging those purchases to major credit cards that bear substantial interest.
To put credit card interest in perspective, one credit card balance of $3,000 charged at 23.99% interest can take up to forty-seven months to pay off if just $100 (slightly more than the monthly minimum payment) gets made each month. Over the next 3.9 years, these payments would equal just over $1,300 in interest payments. Therefore, a person who shops on credit this season could be spending significantly more than they’ve bargained for and unnecessarily putting themselves in financial constraints soon.
As a mortgage professional, I can attest to the surge in mortgage refinance applications submitted after the holidays. Many borrowers who've accumulated large credit card balances from gift-giving usually prefer to consolidate and avoid expensive monthly payments afterward. It makes perfect sense.
How can borrowers take preventative steps, so that they won't find themselves forced to pay down debt and interest later?
It’s essential first to be cognizant of the reality: that expensive holidays can indebt someone for years!
Here are three ways to make the holidays more affordable without losing its sentiment.
Consider memberships or lessons instead of toys.
As a parent, I can attest to my basement, becoming a plastic scrapyard over the years. After my kids play with their toys for a week or two, they end up in the basement and later, either sold at a garage sale or tossed in the trash. This year, I have respectfully asked family and friends to refrain from buying my children what I consider to be glorified plastic.
Memberships and lessons, for example, hold higher sentimental value and can also be used throughout the year. A set of piano lessons, as one example, can be a gift that keeps on giving. Not only can a child and family member experience an increased bond between each other, but the present can facilitate the development of a new skill set and create a life-long memory.
Stop Buying For Adults
Most adults are (hopefully) aware that Santa is not real, so I question why we continue to exchange gift certificates that are devoid of thoughtfulness and originality?
Whey do we shop retail for adults? Do we need to buy thousands of ounces of perfume? Sure they smell terrific, but according to a Los Angeles Fragrance Expert, "the ingredients in the average bottle of prestige perfume cost about $1.20 to $1.50. The actual liquid in a typical bottle of $150 perfume is less than 1% of the retail cost. The bottle, box and display carton typically cost four to six times more than the fragrance itself."
Similarly, the typical markup on clothing "ranges from 55 to 62 percent. If the wholesale price of a silk dress is $50, the retail price might range from around $110 to $130. Premium denim jeans often wholesale for around $150 and may sell at retail for up to $375 or more."
So, can we honestly ask ourselves if buying holiday gifts for adults is realistic, and more importantly, whether our adult friends and family could understand the benefit of refraining?
Revive Kris Kringle
"Kris Kringle," an ancient Secret Santa gift-giving tradition, has always been an excellent way to include everyone without a person's having an enormous obligation to buy something for everyone. It's fun, and the mystery of it all can make for an exciting gift exchange.
Sarah A. Colucci
Sr. Mortgage Agent & Real Estate Expert
Reverse mortgages allow senior citizens to borrow up to 100% of their property’s value in order to receive scheduled monthly payments or access lump-sum payments. The “reverse” part of the mortgage means a lender will make payments to the homeowner while the balance, interest and fees accumulate and will eventually need to be repaid.
Today, more and more lenders are offering reverse mortgage products since the demand for them has become more significant. Times have clearly changed, and life expectancies have increased, and this means the retired population will likely require additional sources of income after the age of 55.
According to Sunlife Assurance Company of Canada, programs such as the Canada Pension Plan and Old Age Security get funded out of general tax revenue, so, in theory, if there is a change in legislation or not enough Government funding to continue the programs, they could be eliminated.
Longer life spans also mean more employers are refusing to offer work pensions, and so, Canadians will need to plan wisely for retirement years.
Further, one of the largest financial threats to retirees is the sharp incline of Canadian debt levels. According to Stats Can, the average debt level is currently 174%, which means an individual is likely to owe $1.74 in credit, which is composed of mortgages, unsecured loans and car loans for every $1.00 they earn. Considering the upward trend of debt, it's all the more likely that fewer Canadians will retire debt-free and, therefore, should consider new ways of managing their monthly liabilities after retirement.
How are reverse mortgages administered?
Reverse mortgages are very different from the classic-type mortgage. When borrowers are buying a house and going through the mortgage qualification process, specific criteria must be met, such as employment verification, credit approval and loan serviceability. Once the mortgage is approved and registered against their property, the borrower will start to make mortgage payments towards paying off both the interest and the principal balance. Eventually, the borrower will pay off the entire mortgage loan over a specific amortization period. In this way, paying down mortgage debt is equivalent to a savings plan.
Reverse mortgages, on the other hand, are only suitable for retired individuals who have already paid off their mortgages, are mortgage-free or who have a considerable amount of equity in their property but have new concerns such as health, medical concerns and stability in house prices. Since older people may face more financial uncertainty, they may be more inclined to liquidate their real estate assets without officially selling.
Therefore, their need for alternative income sources to sustain the cost of living creates a satiable market for reverse mortgage products.
What are the benefits of a reverse mortgage?
The most considerable benefit is a homeowner's ability to stay in their home without having to downsize or join a retirement community. Additionally, there are various ways a reverse mortgage can be set up, including monthly installments, lump-sum payments and even as a line of credit. The apparent additional benefit would be that there is no loan payment required each month as long as the homeowner can pay their property taxes, insurance and maintenance expenses.
Also, unlike other sources of income, which may affect the amount or entitlement of certain allowable benefits, generally, a reverse mortgage will not affect their eligibility.
What are the disadvantages?
All qualified borrowers need to be aware of the disadvantages of a reverse mortgage. First, as monthly or lump sum payments get made, the mortgage balance increases along with fees and interest accumulation.
Sometimes, fees attached to reverse mortgages can be higher than conventional or classic loans, so its essential borrowers learn the details beforehand. A reverse mortgage also has a maturity date (Maturity Event) just like a regular mortgage and will become due and payable on a specific date. However, the maturity date would not be the same as one outlined in a conventional mortgage. It would be on the date a borrower passes away, for example, or the property is no longer the borrower's principal residence. This date is often referred to as the "Maturity Event."
Since there are many lenders who offer a reverse mortgage product, it's important that borrowers shop around and obtain different opinions. Fees and rates may differ among each financial institution and cost savings should be considered just like they would be in a conventional or classic mortgage loan process.
Sarah A. Colucci
By: Sarah Colucci
Senior Mortgage Agent, Lic. M14000929
411 Queen St.
15 Wertheim Court, Suite 210
Richmond Hill, Ontario
Sarah A. Colucci, Mortgage Agent Lic. M14000929
Mortgage Edge, FSCO Lic. 10680