VANCOUVER — Nobody likes homework, but when the assignment is getting the best possible mortgage in Canada’s most expensive market, completing it pays off in so many ways.
A good objective initial stop, especially for first-time homebuyers, is moneytools.ca. The site is a creation of the Financial Consumer Agency of Canada (a government organization) and features mortgage qualifier and mortgage calculator tools, tip sheets and helpful links.
The agency is running ads in Vancouver that feature QR (quick response) codes, two-dimensional bar codes that take smartphone users directly to the website.
For first-time homebuyer Helen Kwag, using a mortgage broker was part of the process. The 32-year-old bought a one-bedroom-plus-den condo in east Vancouver in the spring. She said preparation and knowledge of her personal finances were key.
Kwag didn’t think interest rates were going to increase too quickly, so she went with a five-year variable-rate mortgage at 2.7 per cent.
“It was just nice that I didn’t have to do that haggling with the banks myself,” Kwag said. Mortgage brokers are typically paid by the lender, not the borrower.
Thirty-two per cent of B.C. mortgages have been negotiated through a mortgage broker, the highest rate of any province (nationally, it’s 25 per cent.)
Of new mortgages, 40 per cent were obtained through mortgage brokers, 39 per cent directly from major banks, 10 per cent from credit unions and 11 per cent from other sources, including life insurance firms and trust/loan companies, according to the Canadian Association of Accredited Mortgage Professionals.
Among new mortgage products, credit union Coast Capital Savings is promoting its “You’re the Boss” mortgage featuring a blended half-and-half rate and the nation’s highest prepayment limit (30 per cent of principal annually). The blend lets borrowers hedge their bets on possible prime rate hikes by having half their principal at fixed and half at variable.
Another innovative product from a local lender is redfrog, Envision Credit Union’s all-in-one mortgage product.
Redfrog lets consumers roll all their debt — including credit cards, lines of credit and car loans — into its mortgage account. Interest is calculated daily and charged monthly.
Paycheques are deposited directly into the account and the outstanding balance reduces principal throughout the month.
“The uniqueness of this is that your money’s always working for you,” said Tim Mackie, Envision vice-president, sales and service. “Every time your paycheque goes into your account, your money is working for you instantaneously.”
Mortgage holders must have at least 30 per cent equity in their home to be eligible and Mackie acknowledged the product is not for everyone. It requires discipline since homeowners can continue to rack up debt by drawing on funds for major purchases, he said.
“We have had members that have tried it and come back and said, ‘Having access and convenience to write these cheques is not the best for me,’” Mackie said.
On the other hand, for people such as realtors who deposit lump-sum payments or get irregular paycheques, the daily interest leverage can be a powerful tool.
About 3,000 homeowners have a redfrog mortgage — 25 per cent of Envision’s mortgage book, he said.
Manulife and National Bank offer similar all-in-one products.
Carolyn Heaney, mortgage manager with BMO Bank of Montreal, said going to the bank you have a relationship with and getting a pre-approved mortgage is the “wholistic” approach to mortgage shopping.
“When you go to the bank, it’s kind of like having a practice run,” Heaney said. A bank mortgage expert cannot only offer a full range of products, but also help with details such as securing a lawyer and home inspector, she said.
A first stop at the bank can be particularly helpful for first-time homebuyers who are new to the process, she said.