Top 5 Reasons To Use a Mortgage Broker

1. This is a rule of thumb with regards to obtaining a mortgage for everyone–NEVER go to your local bank! The big 5, CIBC, RBC, TDCT, BNS or BMO. If you are someone worried about high interest rates then you should know that they will NEVER be able to beat the rate of that of financial institutions. (i.e. FirstLine, ING, MCAP, MacQuarie…the list goes on!) they currently all have a lower 5yr fixed than any of the big five banks! You can ask anybody in the real estate industry–ask your Realtor, ask your mortgage broker, anybody in the industry, we all know that when we get a mortgage for ourselves, we will NEVER go to our local banks! As they can NEVER provide the rates that other financial institutions can. And even if they do match a rate of that of a financial institution you must look a little deeper as to why. For example ING has their 5yr variable at Prime – .75% and TDCT for example also provides Prime – .75% (with special approval from head office, if you are a client of TDCT then you can get this rate, you just have to dig a little) but TDCT calculates their interest compounding monthly while ING calculates their interest compounding semi-annually not in advance. This isn’t visible to the average client but the difference between a semi-annually mortgage vs. a mortgage on a monthly compounded format is huge! Were talking in the thousands just over the short term of 5yrs. Just think of semi-annual being a normal mortgage and monthly-compounded mortgage being calculated like a credit card! Interest is being calculated on the higher amount after you pay down per month! as opposed to once a year! Another thing that everyone should be aware of when going into your local bank is to be prepared for the spiel! The spiel is as follows: “Hi Mr. Client, I seen that you have been banking with us for X amount of years so I’m going to give you a discount on our 5yr fixed mortgage rate. I’m going to give you a discount of .5% below our posted rate, how does that sound?” What Mr. Client doesn’t know is that banks NEVER give out the posted rate. Right now the current posted rate for the majority of the big 5 banks is 6.99%, which NOBODY applying for a mortgage will get, providing your credit score is up to par. The banks have a posted rate/ceiling rate and a floor rate. The floor rate is the absolutely lowest rate they can give you, so each banker will try to get away with the highest rate they can get away with. I myself did some shopping around for myself just to see. I applied at one RBC they quoted me 5.74% on there 5yr fixed then I went down the street to the other RBC and they quoted me 5.69% and then I called the customer service line on the back of my bank card and they quoted me 5.59%. Now how is this consistent? They also mentioned my tenure with the company but I just started banking with them this year! Banks do not only want to have your mortgage business they want to do your investments, they want you to open new savings accounts etc. They want to get all your business and all your money, so yes, they do have a hidden agenda!

From my past experiences, even with my closest friends, they tell me, “Sterling, I’m going to my bank because I’ve been banking with them my whole life and they said they will give me a discount on my mortgage rate!” What I told him was, don’t be another victim of the classic spiel that they tell all their clients, fact is you aren’t special, you are client number 870,850. In the United States over 70% of people use mortgage brokers in Canada its 26% This needs to change! The reasons are clear, even The Donald uses a mortgage broker and he’s a billionaire with enough real estate knowledge! I’ve also heard, “Sterling if you get me a mortgage send me to one of the big 5 because I don’t want to go to a “no-name” mortgage company in case they go bankrupt!” What I have to say to these types of mind sets is, if they go bankrupt, who cares? Whats the worst that can happen, they go bankrupt then you don’t have to pay back the mortgage. The only thing you need to worry about is that they release funds to the lawyer on closing date! Realistically even if the mortgage company does go bankrupt you will still need to pay the mortgage, but I’m just theoretically speaking. Most of the financial institutions are owned by the big 5 banks in some way so don’t worry, there still getting paid!

Acutaly, I can’t say don’t totally neglect the big 5. Only go to the big 5 unless you have to. When I mean have to I mean if they are the only ones offering a solution to your unique situation. Your mortgage broker will know best and place you accordingly.

I just can’t emphasis enough the lack of education in mortgages within Canadians! The big 5 have our trust, and us being Canadians are either mis educated or are just too conservative so we just automatically assume that our banks are looking in our best interests. Do yourself a favour and use a Mortgage Broker!

2. Our services are FREE! All our services are free unless you have a unique situation or if your credit is shot and we need to bend over backwards to finding a lender who will lend out money to you. This requires more time and energy so us mortgage brokers will add a fee anywhere between .5% – 5% depending on your situation.

3. Most of the major financial institutions who provide these low rates ONLY deal with mortgage brokers. I had a friend ask another friend of mine, “how does Sterling get these low rates? How does he have more connections than a bank manager?” Well the answer is some has to do with having the right contacts but the largest reason on how we can get better rates is because us mortgage brokers can go outside of the big 5 banks to provide you the lowest rates! Almost all mortgage brokers can provide the rates that I do, so if you don’t choose to go with me…Find a mortgage broker near you and find a good one and they will guaranteed find you a better rate than your bank. Having connections or not!

4. 2 in 1 – We play two roles here. 1. We do the shopping for you finding you the best rate. Really, who has time to go to all the big 5 banks and do research on the other 35 lenders out there. We do, this is our lives, this is what we know best. The market and rates change everyday, unless your willing to drive out to the big 5 banks and call 35 lenders everyday there is NO way you will be able to know who is offering the best rate and when. The second role we play credit counseling so you can make the right financial decisions moving forward with regards to your overall financial situation. And if you don’t qualify for a mortgage we will tell you the step-by-steps you need to take in order to get yourself into a mortgage. Most of us mortgage brokers have a background in credit counseling and we are very familiar with credit scores and how they operate. We know how to get you to the 700 beacon score…just ask!

5. We work 24/7 – Unlike the banks we work on evenings and on the weekends, we will come to your house and provide you with the best service possible!

6. I know this is a top 5 list but I can’t emphasis this enough…RULE #1 NEVER GO TO YOUR LOCAL BANK FOR A MORTGAGE! Us Canadians need to be informed on this and if you are a mortgage broker reading this you need to educate all your clients as well! The big 5 has roughly 70% of the market share out there. This number is decreasing as Canadians are being more educated, but this is far from where it needs to be! I’m not saying to be like the United States, but they are usually ahead of our time, so if 70% of them are using mortgage brokers then why are we? I know I personally got my mortgage through a financial institution…Where did you get yours?

If you have any questions please contact me directly at 877.979.4979 or sterling@xpx.ca this will probably be my last entry for awhile. So for now, I’m taking a break!

Also please visit my other two business that I run. Thanks for your support!

Xpress Property Xchange (XPX.ca) and ShiftRealty.ca

Best Regards,

*Sterling

CIBC World Markets – Benjamin Tal

North American & International Economic Highlights

What can we learn from the most recent numbers coming from the US? From the housing starts statistics we learn that housing starts of single-family units are now at the lowest level seen in seventeen years. But the rate of the decline is softening from 50% annualized rate to “only” 27%. But the more important message came from single-family housing permits that are now rising for the first time in more than a year. And given that permits lead residential construction by roughly six months, we might be seeing the light at the end of the tunnel.

What’s more, it is very apparent that the market is already pricing in all this bad news and some. That’s why we have not seen any reaction to the housing starts statistics and to the continued decline in house prices. In fact, based on the mortgage default swap index, we can calculate that the market is pricing in overall subprime-related losses of more than $500 billion—a significant amount that will probably end up being higher than the actual tally. And that’s precisely the reason behind the fact that all major announcements regarding subprime-related writedowns over the past six weeks were followed by winning days in the stock market.

We also know that consumers are in a bad mood with the University of Michigan Consumer Sentiment Index dropping 3.1 points in May. The index came in at 59.5, the lowest reading since June 1980. The decline from April was larger for the current conditions component, although expectations also fell.

More importantly, inflation expectations continued to rise, especially short-term expectations. One-year expectations increased to 5.2%, their highest level since 1982, from 4.8% in April. Five-year expectations rose more modestly to 3.3% from April’s 3.2%. The latter was the highest since 1996.

What does all this mean for the Fed? With conditions in the financial system starting to stabilize and some indication of rising inflation expectations, the Fed will be much more guarded with regards to further monetary easing. In fact, the market is not expecting the Fed to cut any more.

This also means that the Bank of Canada will be less willing to cut rates at the pace we have seen in the past two months. While it’s possible that the Bank will cut one more time, the days of the current easing cycle are numbered.

While we expect credit spreads to ease somewhat in the coming months, they probably will not return to precrisis levels any time soon. For Canadian mortgage rates, it means that any future relief will be minimal and we might see rates rising in 2009, as the Bank of Canada starts hiking rates and the bond market starts reacting to rising inflation.

As a result, the Canadian housing market which recently has entered a balanced position will get even deeper into this position. But at this point we doubt that the market will turn into a buyers’ market any time soon.

CIBC World Markets – News

Interest rates set to climb back, taking resource stocks with them: CIBC World Markets Toronto – “Unrelenting pressure” on food and energy prices will reverse the direction of interest rates in the next 12 months, and lift energy and materials stocks to new record highs, notes a CIBC World Markets report.
“While the bank of Canada may still have one more [rate] cut up its sleeve, markets will be surprised at how rapidly the Bank is compelled to take back those easings,” says Jeff Rubin, Chief Strategist and Chief Economist at CIBC World Markets in his monthly Canadian Portfolio Strategy Outlook report. “We expect to see at least 100 basis points of tightening” by the end of next year.
Because rising interest rates make bond yields less attractive, Mr. Rubin is paring back the bond weighting in his model portfolio to “neutral” from “overweight”. That frees up funds to take a slightly overweight stance in equities, with emphasis on energy and materials stocks.
Mr. Rubin’s increased weighting in energy stocks reflects supply struggles and surging demand that he predicts will push oil to US$130 a barrel and natural gas to US$13 per Mn BTUs in 2009.
“We remain wary of near-term market volatility. But the strength of the resource market, particularly energy, and a gradual recovery in the U.S. economy should see the TSX justify our equity weighting,” says Mr. Rubin.
Mr. Rubin’s “overweight” stance in materials is tied to the strength of emerging markets where infrastructure developments are driving demand for metals and other resources, and rising income levels and meat consumption are pushing up global agricultural prices.
“An expected return to a global supply deficit in 2009 has led us to upgrade our forecast for copper prices,” says Mr. Rubin. “In comparison to the other metals, the golds haven’t shone of late. But the pullback there should prove temporary, given the prospect for further dollar weakness and continuing inflation jitters, fuelled by rising oil and food prices.
“Agricultural commodity and chemical producers, along with purveyors of needed infrastructure or crop improvements like irrigation and biotech firms offer the greatest potential positive leverage to global food supply troubles. Profits in the agricultural chemicals sector are expected to nearly triple this year.”
While those sectors are winners, Mr. Rubin says companies that “rely heavily on grain, oil, or other commodities as inputs face increasing costs and thus weaker profits.” As a result, he has cut a half percentage point of weighting in the consumer staples group, which includes both food retailers and processors.
He has also shed weight in the utilities sectors where dividend yields are likely to prove less attractive in a rising interest rate environment. “In addition, rising carbon abatement costs could also reduce future profit growth, especially for coal-dependent power generators.”
Mr. Rubin’s end of 2009 forecast of 16,200 for the TSX, versus 1,475 for the S&P 500, points to the globally leveraged Canadian market continuing to outperform the S&P 500 for at least another year, aided by continuing strength in energy and materials stocks.
“We now expect TSX earnings to rise by an above-trend 16 per cent this year. That should easily surpass the consensus estimate of a 10 per cent rise in S&P 500 earnings, marking the fourth consecutive year of better earnings growth north of the border.
“Beyond the positive effect of triple-digit crude, US$4/lb copper and US$1,000/tonne potash on the energy and materials groups, profit expectations have also been upgraded for info tech and more modestly for key industrial producers like the rails. Alternatively, financial sector earnings are expected to fall modestly for the first time since 2002. That compares with expectations just three months ago for a near-double-digit gain for the sector.