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Trying to negotiate a mortgage?

Jewish Independent

An independent mortgage consultant could get you a better deal than your bank.


Shopping for a mortgage in Canada has changed. 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 consultants. Gone are the days of the stigma attached to mortgage brokers where they are only used for the self-employed, poor credit or income challenged. These days, Canadians go to mortgage consultants to get the best rates, pre-payment options, investment advice and to learn how to pay their mortgage off faster. Best of all, itís free!

Contacting different branches, trying to compare different rate structures and options Ė 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 offer the wide variety of products that mortgage consultants can. Consultants deal with as many as 27 different lenders including the big 5 banks; therefore they are able to search for numerous products from a variety of institutions, including major banks, trust companies, insurance companies and credit unions. Finding the one that offers the best product, rate and terms for your particular needs is a mortgage consultants primary objective Ė 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, Invis and The Mortgage Center, 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. Typically, the entire application process can be completed in under a day.

How can banks offer an independent mortgage consultant 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.

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.

A few tips to remember and things to watch out for when negotiating a new mortgage:

1. Donít be fooled by branches offering to pay for legal fees or appraisal costs. Most likely, these costs are being clawed back by the rate you have been offered. The higher the rate, the more profit the bank makes from you. Remember, banks are in the lending business, not the charity business. If it seems too good to be true, it probably is. A consultant may sometimes use their own commissions to pay for one or both of these on behalf of a good client.

2. Donít allow the branch to take advantage of your loyalty. Perhaps you have been an outstanding client for many years. You have RRSPís, GICís and not to mention, savings and chequing accounts, so your branch should be offering you the very best rate right? Wrong. Remember, the bank is looking out for their bottom line, not yours. They can see you coming a mile away.

3. Has your branch representative explained everything to you about your mortgage before you sign that commitment? More than likely you have not been told about pre-payment privileges and penalties for early payout and how they can be avoided or reduced. There are just some things the banks DONíT want you to know. Closing costs are another thing that are commonly failed to be mentioned. Donít sign anything until youíve spoken to a licensed mortgage consultant first. You will be very glad you did.

For more information, call Mike Averbach at (604) 710-2550