Mortgages are often a necessary part of all of our lives, and we can be left in the dark about our different options for managing it around our finances, lifestyles, and personalities. That’s why today we’re talking with Rebecca Casey from Custom Coast Mortgages about what a mortgage is and how we can make it work for us. Rebecca is a certified mortgage broker who really knows her shit, so make sure to check her out!
Besides the fact that a mortgage is a house loan, we generally aren’t taught a lot about equity, variable and fixed rate options, interest rate factors, etc. In this episode, we dived into what you should look out for when looking into mortgages, what kind rate is best for you based on your personality type (hint, there’s fixed payment options for variable terms to give type A’s a bit more flexibility), and so much more. Learning about finances helps to empower us and set us up for the future, and this episode will really help us all to learn.
This episode had so much good information in it, and we’re sure you’ll keep coming back to listen to what Rebecca shared with us. We not only covered what a mortgage actually is and how it works, but some really great tips and tricks for incorporating your mortgage in your big financial plan, so make sure to come back to this episode before looking into your own mortgage!
Want to learn more about this episode and all it has to offer? Join the UM Club! Every week features a new guest speaker and hot topic, and right now you can join for as little as $3 a month!
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Guest Expert
Rebecca is a mom to two girls (5 and 7) and has been a mortgage broker for 5 years. She has a team of 4 and they process 250 mortgages per year. Rebecca’s primary niche is families who are already in the market and want to uplevel their financial game. She is all about everything mortgage related, and wants to help people with their household finances and the growth and challenges associated with raising a family and moving ahead.
In This Episode We Talk About
00:22 – Who is Rebecca?
01:33 – What is a mortgage broker?
05:41 – Getting a mortgage, different term options, and other mortgage basics.
09:23 – Other qualifiers for a mortgage and extra insurance.
16:19 – Getting a downpayment the non-traditional way.
21:56 – Pulling equity out of your home.
24:39 – Mortgage rates and what to look for.
35:56 – Renewal and renewing your mortgage.
38:51 – When you should or shouldn’t refinance.
45:23 – Resources from Rebecca and where to find her!
Watch the Video
Listen to the Audio
Resource Links
Join the UM Club!
UM Club Facebook page
Custom Coast Mortgages
Contact Rebecca: [email protected]
Blog
Rockstar Real Estate Investing by Jessi Johnson
The Mortgage Code by Angella Calla
Burn Your Mortgage by Sean Cooper
Self Made Mama Melissa Rogers
Read the Full Conversation
Hello, and welcome to another episode inside the Unapologetic Moms Club. I’m very excited to be here today with Rebecca Casey from Custom Coast Mortgages to talk all about mortgages. Thank you so much for being here.
Oh, thanks for having me. I’m really excited to talk about all things mortgages.
Yes, you seem super knowledgeable on the topic and understand the family side of things. So I’m really looking forward to digging into things. So let’s hear a little bit about who you are, what you do, why you love doing this.
So I’m a mom, obviously, I’ve got two girls who are five and seven. And I decided to pursue mortgage broker licensing when my youngest daughter was brand new. Throughout the second trimester, you know, I’m gonna be a stay at home mom, I’m gonna focus on just being at home with the kids. And then about three minutes after she was born, I was like, “okay, what now?” So yeah, it just worked out.
I have a long standing relationship with real estate. I worked as a legal assistant for 10 years before even considering becoming a broker. And that experience has really helped me coordinate the process for our clients. So it’s been a total asset. I live in South Surrey, White Rock area, I’ve got two dogs, a cat, a husband. All the usual things. So yeah, that’s about it.
Lots of experience within real estate and mortgages, it sounds like. So I’d like to start out with just the real basics. So what is a mortgage? And I’m curious, what exactly is a mortgage broker? I know when we first started we just kind of jumped on a spam email from the bank, and just kind of went that way. So I’m interested in learning more about exactly what a mortgage broker is, and how people can utilize those for their benefit?
I’m actually really glad you brought that up. Because that is sort of a number one question that people who are new to mortgages and just the process, don’t really know the difference between going to the bank and using a broker.
So you asked initially, what is a mortgage. So a mortgage is financing for purposes of purchasing a home or any sort of financing to do with real estate. So if you’re buying bare land, you already own a home and you’d like to refinance it, or, you know, you’re purchasing a home – nobody does that with cash anymore. That’s something that’s just out of reach for most Canadians. So you need a mortgage.
A mortgage is registered in the land title office against the title to your property. And so therefore, it can’t just be easily changed, you have to go through a bunch of hoops, and ultimately have a lawyer help you prepare the documentation and register it.
A mortgage broker is a person who helps engage you, the client, with the end lender that best suits your needs. So if you go directly to your bank, let’s say you got an email from TD and they said “here’s our mortgage offer, give us a call, here’s the contact info,” that person at TD can only offer you TD mortgage products. And we’re conditioned to believe that the only thing you’re shopping for when it comes to a mortgage is the best rate. But there’s actually a lot more to it than that.
And something that even as a residential mortgage conveyancer, the person who works for the lawyers preparing the documents, I didn’t really realize the fullest extent of until I started brokering. So we look at all the terms, all of the different product features, the flexibility. And ultimately, yes, we do look at the rate, of course, we look at the rate. But we help match you with a lender that best suits your needs, regardless of where you bank, or regardless of what institution you have a relationship with.
And we are a 100% commission-based position. So I have a team, there’s four of us total, we don’t get paid until your mortgage funds and we get paid directly by the lender, you don’t pay us. So you’re essentially using all of the lenders that I have, all the rates and products that I have to offer, and you’re leaning on me to help you select the cheapest and most suitable option for you, and you don’t pay me, so.
That’s always nice, especially when going through the whole house purchasing process. There’s a lot of hidden fees with all the different things, with getting the inspection and lawyer fees and all that. So it’s nice to know that there are other options for looking into the mortgage that doesn’t have any upfront costs or any cost to you.
And that’s another point. You know, when you’re dealing with somebody at the bank, or the branch, they’re typically focused on the mortgage product that they’re getting you connected with, but they’re not focused on the entire approach. So because of my conveyancing background and working for lawyers, we never miscalculate closing costs, we’re always in a position to help explain the process to you.
A lot of times it’s just about getting it approved. But then what? There’s a whole other piece of the puzzle that you need to go through. And I find for most of our clients, it’s nice having somebody that can be that Ambassador. So that’s really what we try to do, you know, our section is actually really not that big. But we like to be involved from before you start shopping to long after you’ve closed your mortgage with us.
So throughout this whole chat, we’ll go through kind of the various stages, whether someone’s a first time home buyer, looking to refinance or renew. But let’s just start at the beginning. What are kind of the requirements to be able to qualify for a mortgage? What are all of those extra things you had mentioned that we should be looking for other than just the rate?
Yeah, I’m so grateful to have the platform to speak about this, because it does come up a lot. People will come at us and the first thing I’ll say is, “I was quoted x by my bank, can you beat it?” The answer is always yes, of course. But what is that going to cost you in the long run in terms of what would you be sacrificing?
So to start getting a mortgage in Canada, the bare minimum you need to have access to for downpayment is 5%. There are downpayment assistance programs. So if you’ve got two and a half percent, there are programs out there that can help you acquire the other two and a half percent. You know, I wouldn’t say that it’s something that works for every Canadian. And in fact, there’s a very small market of Canadians that those programs do work for. But the point is, they exist.
If you’re purchasing a property for more than a million dollars, which is pretty much the benchmark these days, you’re going to need a minimum of a 20% down payment. So for most people, there’s the big question of where do I get that money from? Like, where does that come from? And I bought my first townhouse at 25, and I paid $290,000 for it. And that was a $15,000 down payment. That simply doesn’t exist anymore. I mean, other parts of Canada, for sure. But you know, here in the Lower Mainland, and in most of most of the parts of the island where you are, there’s nothing. You can get a parking stall for 290 grand.
So coming up with that downpayment, money is a huge thing for a lot of Canadians. And then, you know, once they’ve got that – and we could talk about that a little bit more too in terms of some ideas that I have for people to help them get there. But you do need to have a job. That’s also key, the bank wants to know how you plan on paying this money back, and you need to have a stable job, which means that typically, they don’t want to see that you’re still on probation. They don’t want to see that you’re newly self-employed, they don’t want to see that you’re working part-time hours and you don’t have a two year history of those part-time hours.
Which is particularly frustrating for our nurses and a lot of people in our education system, because you can often make more money as a casual employee picking up as many shifts as you want. But unless you have a two year history of that, lenders aren’t particularly keen to lend you money.
So kind of the general rule of thumb is that you either need to have a stable full-time job with a base level income, or you need to have a two year history of the job that you have. So either of those.
That’s the category we fell into with both of us being self-employed. Thankfully, we like just had the two years at the time of purchase.
And it’s also important to bring up that it’s not just two years, like if you’ve started in June, it’s two calendar years. So you know, you want two full tax years to show for it. Yeah, there’s always workarounds, and yes, there’s always exceptions that we can get. So it’s not all hope is lost, it’s definitely worth communicating with somebody or connecting with somebody if you’re unsure. But you know, just as a general rule of thumb, that’s what I would recommend that you focus on.
So we have downpayment, work history. Are there any other things that go into the requirements? I know there’s the extra insurance. Is it just when your down payment is under 10%, the insurance? So let’s talk about that a little bit more.
So it’s 20%. So if you’re purchasing a property and you’ve got less than 20%, then the lender requires – it’s a federal rule that is required that that mortgage is default insured. And this extra insurance costs about 4% of the mortgage balance. So it’s quite expensive and it gets rolled into your mortgage. And it actually protects you, the borrower, from nothing, it protects the lender. So you know, it’s a thing, it’s frustrating. And it can add a lot more to your cost of borrowing and your mortgage payments and so on. But it is the vehicle that protects us as Canadians from large amounts of default.
And I’ll explain it really briefly. So basically, if you’re putting less than 20% into a property, and there’s just a tiny little gully in the market, just a tiny little dip, that could mean that then you have your upside down on your mortgage, so you have no equity, which puts the lender in a vulnerable position. And they don’t want to be in that position. We learned a lot from 2008 in the US, it had far less of an impact here in Canada, because we had high ratio mortgages being default insured. So that insurance gets lumped into your mortgage, rolled into your amortization, you don’t have to come up with it upfront, but it does form part of your mortgage.
The other thing I wanted to mention is that when it comes to a mortgage application, and we could talk about this further in detail later. But credit, you know, it’s really important that if you are planning to purchase a home in the next two years or one year or six months, just really be diligent about your credit. And it’s not just about making payments on your credit cards, it’s also about your utilization. So try to keep how much credit you’re using, you know how much of your visa limit you’re using, 50% or below if you can, and just really focus on hitting those payments, or paying it off in full whenever possible.
If you’re struggling with that, request a limit increase. If that’s something that could land you in a little bit of hot water, because maybe you’re having a hard time managing your credit, then speak to somebody, speak to a broker, speak somebody the branch, you know, try to get some information and some resources on how to better manage it. You know, we’re in a rising inflation environment, everything is costing more and more and more. So nobody would blame anybody for struggling to make the money last the entire month. But if you do want to buy a home, protecting your credit is very important.
Yeah, it takes a long time to really build back up after you damaged it. I know I was in the boat that lots of others are, 19/20 got a credit card, ran it right up, and then kind of just put my head in the sand for years. And then it takes a lot of time once you actually start looking at things and putting in the work to pay things off.
Oh, absolutely. And it always blows people away the silly little things that can stand in your way. The main one being cell phones. So you’re in a fight with Rogers, what are you gonna do? You’re not gonna pay them. If you’re disputing a charge on your bill, our mindset is the best way to hit them where it hurts is to not pay them. But that actually hurts you more than it does them. So even if you are disputing a charge, you know, just make sure you get everything documented. And at least make the minimum payment and do your best not to just go silent on them.
Because as soon as you start missing payments for more than 30 days, that’s when it gets really ugly. When I was in university, I took out a library book, and, you know, I was young, whatever, and I lost it, never returned it, found it later, returned it. And I didn’t know that they had lodged a collection on my credit bureau. So when I went to buy a home, my existing bank that I bank with and the credit union who I had started to move some banking over to, both of them declined me. A broker ultimately got me approved because I had all the paperwork to prove that this was like an old charge and had been paid off and whatnot. But it was just one of those stupid things that just caused such a headache. So it’s not unusual for that to happen.
And that’s something to note too is these things happen. And people that work within the industry that you’re looking to for help, you don’t need to hold back those things because you’re embarrassed. They’re here to help, they’ve dealt with it all. Just put it all out there and they’re going to be able to help you work with what you got.
And you really need to be upfront with them, because yeah, it’s not a source of judgment for us because we look at these things all day long. They’re just numbers to us. And frankly, as soon as we’re done working on your file, we don’t we don’t carry that into our day. Like, you know, I don’t remember who had collections with who and how much they owe and whatnot.
And as a broker I have resources to help you dispute charges too. So, you know, if there is something lingering on your credit bureau that you need to fix that may be – because often Equifax makes mistakes, they’re not perfect. And neither are all of the companies that report to Equifax. So it’s key to use those resources and just make sure that you know, if there is something that needs to come off that you get it off.
And on that note, there are consumer reports that you can pull on yourself. I know people talk a lot about Credit Karma, or a lot of online banking apps have them built in, you know, this is your credit score. But the best source, as far as I’m concerned, is going to Equifax consumer reporting, like open an account and just keep an eye there. Because that’s where you’re going to see what exactly is lodged against you in collections, what’s reporting. My very first credit card that I opened when I was, you know, 18 or whatever, that still reports on my bureau, even though I closed it a decade ago.
Oh wow.
It doesn’t have a balance, but that’s fine.
So go straight to Equifax for the most up to date and comprehensive look at your credit.
Yeah, I definitely recommend that.
Okay. Now, you had mentioned that there’s things, there’s options, for getting that down payment together. So what about those? Let’s hear it.
Yeah, okay. So the first thing I recommend is setting your expectations. So talking to a broker and seeing okay, with our income, if we had a down payment, how much can we afford? And then that gives you kind of a target to start with. And it’ll also be a bit of a dose of reality for you too. If the income that you’re making isn’t enough for you to achieve the purchase price or the mortgage amount that you want, you know, okay, I’ve got to do something to get this up, I need to either think about maybe changing jobs, or I need to think about asking for more money, or I need to do some research on am I being paid fairly in the market. That’s a good first step.
And then, what I usually do with clients who don’t have a downpayment yet is we do a mortgage practice. So if you’re paying two grand a month in rent, and the mortgage that you want is gonna cost you $2500, then we help you set up a direct deposit. So that every time your rent payment comes out, so does an extra $500. And that automatically goes into a savings account.
So that’s kind of your first way of just sort of practicing making those mortgage payments so that when you do finally get a mortgage, you’re not sort of completely blown away by the “we can’t sustain this budget, this isn’t going to work for us,” which is a good way to sort of get your head around how to budget.
And the other thing that I recommend is – and it depends on your status as a first time homebuyer – is RRSP loans. So this is actually how I bought my first home. And of course, you know, as interest rates move, and the bond market moves, whether or not this is still a viable option is going to continue to shift. But back when I bought my home, I borrowed an RRSP loan, and did it this time of year, this is perfect timing for this conversation. And we put the money into an RRSP. So I got a huge tax return, threw that right back on the loan. And then the interest on the loan was less expensive, and was a lower amount than the interest I was making back on the loan.
So essentially, the money was sitting there in an RRSP, I got the benefits of the tax return, I was making more money on it, and it was there now ready for me to use. And then, you know, my goal was just to repay that loan as quickly as possible.
And sometimes, when you’re thinking of it as a loan repayment as opposed to forcing yourself to put money away in a savings account, it’s a little bit more of a psychological like, “this is the bill I have to pay.” It’s not so much like – because if it’s like, well, I want to put away 500 bucks a month, but I also want to go to the Backstreet Boys concert.
Yeah.
I actually do want to go to the Backstreet Boys concert.
That would be awesome. They just announced a Foo Fighters concert for the end of the year. I’m like, this has to happen, we’ve got to figure it out.
Yeah.
And so that’s exactly like you said, if any optional kind of payments, I would definitely be dipping into that to make it happen. So it’s nice to have it be more that must.
The other main one too, and I approach this topic with caution because I recognize that not every family has access to support from other family members. But in this current rising value market, it’s important to know that to ask for help from your family, if they own their home, isn’t necessarily like asking them to reach into their bank account and pull out 100 grand to help you. If their home is worth substantially more than what they paid for it, it would be pretty easy to ask them to help you by putting either a home equity line of credit on their own home, and then you know, either they make the minimum interest only payments or you do. And then when your home increases in value, you can then repay the funds later kind of thing.
So, asking family for help, if you do have family that can help you – and I recognize this is sensitive, because not everybody does. But if you do approach that conversation, I would recommend approaching it with an open mind and wanting to be in a solutions based position, and just sort of it not being like, you know, “please can you give me $100,000.” More “is there any way we could look at pulling some equity out of your home so that I can get into the market kind of thing.”
And I find that when we do it that way, there’s a little bit more of an openness to it. Most parents want to help their kids, most parents recognize that it’s not like in the 80s, when you bought a house for 75 grand, and it’s now worth, you know, 3 million. Those are real numbers, by the way, which is insane. But most parents recognize that, and most parents want stability for their own kids. So, you know, there’s different ways to approach it as opposed to, “can you reach into your retirement savings and just hand over 100 grand?”
So how does that work then for the pulling the equity out? Can you explain that a little bit more?
Yeah. So if you have a parent who, like I said, owns her home, even if they have a mortgage on it, and the value has gone up, a home equity line of credit is a really good vehicle to access equity, and you’re only paying for whatever you pull out of it. So if you pulled out a $100,000 home equity line of credit, you only have to pay the minimum interest only payments on that, if you’re okay with carrying the balance on it – which again, different preference. But, you know, there’s 1000s of different ways that we could organize this solution for a client. But we do this a lot.
So a lot of times, when parents want to help their kids, it’s more like we either put a home equity line of credit on their property, or we refinance whatever existing mortgage balance they currently have, and then that cash becomes available to gift to their children who can then use it as a down payment on their own home.
Okay. And then it would be kind of a similar situation, once your house is increased in value, you can then do a similar thing to repay that money,
You could either repay it, or if it is technically a gift or an early inheritance, your parents would need to update their estate planning to include that information. I always recommend anytime there’s any kind of gift that involves parents equity that they do update their estate planning. So either, you know, add a schedule to their will or just completely re-up, redo their will. But just, you know, often there’s other kids and it can get really messy. So, you know, yeah, that’s one of the main ways.
And I would say that’s the biggest source of – I mean there was an article that came out recently that, you know, the average gift through intergenerational wealth transfer, for purposes of real estate, was in like the 200,000 range or something like that. That’s what the average gift is.
That’s average? Wow.
That’s average, yeah. And again, it’s not to suggest that there’s all these rich people out there that are, you know, that are just soaking it all up. These are people that have made gains on real estate. And that’s how they’re doing it. That’s how they’re sharing the wealth and helping their kids get into the market.
Yeah, that makes sense. And when you have those options available to you – like you said, not everyone does – but when you do, we got to work with what we got. And that’s definitely a viable option.
Yeah, absolutely.
Okay. So let’s talk rates. You said that’s the big question. When I asked my husband if he has any questions before we went into this, that was the only one. And then I’m also curious, you’d mentioned flexibility. So what exactly is that and what wouldn’t you want?
Okay, so interest rates are – it’s a complex issue, and most people, like I said, they come at me, they just fly out the door. And it’s like “I don’t want to do a mortgage application, I just want to know, what’s your best rate?” I don’t know, how much is a red car? I don’t know. Every situation is gonna be different.
So, first and foremost, like without a doubt, our team is a variable interest rate promoter, supporter, that is 90% of the files that we’re doing. I actually can’t remember the last time we did a prime lender of fixed rate mortgage, we do tons of variables, and we do hundreds of transactions a year, like I think we did 250 mortgages last year.
So we do a lot of variable rate mortgages, because of the fact that there’s a stat that I read from Canadian mortgage trends, and it’s that 68% of Canadians break their mortgage at around the 36 month mark. So if you’re in a fixed rate mortgage, when you do that – have you ever broken a mortgage yourself?
No. So we’re in a fixed rate mortgage. At that time, we felt like interest rates were low, they’ve gone down. And so we’re about a year from renewal. So we do keep checking how much is this going to cost us versus how much we’d save if we do get out and go to the variable? And it hasn’t been worthwhile.
Because of the penalty, right?
Yes, exactly.
Because you have a huge penalty to break the mortgage. So in a fixed rate mortgage, if you’re a bank client – so there’s several different types of mortgage lenders, there’s banks, like your HSBC, TD Scotia banks, then you’ve got mortgage finance companies, or we used to call them online lenders. So these are lenders like first national financial, ICICI, home trust, there’s a whole bunch of them. And then there’s the straight up credit unions, and private lenders in the mix and all that kind of stuff.
But if you’re a bank client, and you’ve got a fixed rate mortgage, and you break it, you have to pay an interest rate differential penalty. I’m not going to go through how to explain it, because you’ll fall asleep on me. But basically, it’s a lot of money. They factor in what interest rates are at the time you’re breaking the mortgage versus the interest rate you have, and they charge you a penalty accordingly. That’s the most expensive penalty in all the types of financing.
The second most expensive is from the monoline lenders or the mortgage finance companies, they have a different way of calculating it. But still, interest rate differential. If you’re in a variable with any lender, it’s a three month interest penalty. So substantially cheaper. The biggest penalty we saw this year was $45,000. And the mortgage wasn’t even a million. Which, you know, a million dollar mortgage is big, but a $45,000 penalty is just a lot of money.
That is a lot.
That same mortgage, if it had been on a variable at today’s market rates, it would have been about $3000.
Yeah, the difference is astronomical.
Yeah. So that’s the main thing about variable versus fixed, it actually has nothing to do with the rate alone. And you know, variable rates, as you mentioned, are cheaper. Right now you’re looking at about a 1.5% difference between a fixed rate and a variable rate.
Variables cheaper?
Yeah. So there’s definitely a lot of benefits. But again, it’s more than just the actual cost. Flexibility is a big part of it. So when we have people who come to us, and they want a five year fixed rate, you know, we don’t argue right out of the gate, because I can go a little bit tangent-y and I like to rein that in. So I try just to go through the qualification, and then we start going back to rates.
And when we talk about interest rates, the first thing people say is “no, this is our house, five years, we can commit, we’re not moving, we’re not going to refinance.” But there’s so many other reasons why a person would break their mortgage, it’s not just because you’re gonna fall in love with another house more. It’s more about maybe there’s a situation in your family where you accumulate a bunch of debt, and you need to clear that out and bring your payments down.
When we saw the emergency rate cuts in the initial months of COVID, our phones were just blowing up with people wanting to get these great low rates. But if you’re in a fixed rate, that’s not going to work for you.
People split up, marriages dissolve, people pass away, jobs can have you moving around. There’s lots of reasons why you might break a mortgage. And most of them are things you’re not going to see coming.
But one of the main great benefits is that it gives you access to keeping the lowest possible rate at all times. So if you’re in a variable and your discount is prime minus point five. Well, now we’ve got prime minus one. So let’s swap you out of that. Because it makes sense to do that. And your penalty is not going to be so much that it doesn’t make sense to do that.
Yeah, because right now rates are so low, we keep hearing like they’re gonna go up, they’re gonna go up. So I was actually surprised that you said you still recommend the variable versus the fixed. But it does make sense. And even if you do end up changing your mind, the penalty is so low compared to us being locked in wanting to change, but it just doesn’t make sense.
And the other thing I’ll add is that with a variable, you can always walk into a fixed. So if it ever does feel like – our main priority is to have clients who sleep at night, just to be clear. I would never encourage somebody who is highly reactive, highly anxious, highly stressed, to take a variable if they’re just telling me that they’re just not comfortable, then fine, I’ll find you a fixed rate mortgage, and I’ll reserve my own sort of feelings about it. But ultimately, even those people that do have that mindset, they always come back to us at some point and say, “now we want a better rate” or whatever.
On the note of interest rates – so all of these economists all over Canada were calling for five interest rate hikes, and rates are gonna go up, and all this stuff. And of course, you know, we’re not strangers to the fact that those kinds of headlines grab your attention, especially as a young, home-owning family, you’re going to read that and you’re going to go “holy-” am I allowed to swear?
Yeah, feel free to swear.
I’ve made it this far and I haven’t sworn. I hope if anybody who knows me watches this, like, yeah, I’m very proud of myself.
Anyways, everybody was really worried about interest rates rising. So first of all, there’s a method to it, you wouldn’t just go to bed one night with your nice little cheap interest rate and wake up with a quadruple increase, it doesn’t work like that. The Bank of Canada has eight scheduled meetings per year, four of which are our interest rate announcements. They’re pre-scheduled, they’re on their website, we know when they’re going to happen. And each of those announcements, they tell us, these are the markers that we need to see, this is what we want to do and achieve. And we’ll talk to you next quarter. Like that’s how it goes.
So all of these economists were calling for the first interest rate hike this year, which didn’t happen. I was one of the few in the background quietly, because you know, you never want to say the wrong thing. Because nobody knows, we don’t have a crystal ball. Even the people at the Bank of Canada don’t know ahead of time, they can only state their intentions. So in the background, I was going I don’t know, I don’t see it, I don’t see it, I don’t see it.
And then sure enough, they didn’t. Because there’s supply chain issues. Omicron was still very much an issue for the economy. And then this Russia Ukraine thing, this is also very impactful to what happens next for Canada. So those things are important to kind of keep an eye on.
Obviously, with inflation and the bond market changing all the time, there’s more evidence that suggests that we might see this next rate increase happen. It’s the first Wednesday in March is when they’re going to meet. But even if they do raise interest rates, again, the consequences of that are actually very, very small. So it works out to about $12 per 100,000.
Oh that’s not much at all.
Right? Yeah, it’s gonna be a 0.25% increase, you know, anything more than that would be a little bit too bullish. Because considering the levels of household debt in Canada are quite high, and with the real estate market being a particular area of concern, they just wouldn’t jump rates like that, there’d be too much at risk.
So, you know, once you break it down that way, I find a lot more people are like “oh, what are we talking about?”
It’s not as worrisome.
It’s not, it’s really not. And again, there’s also a lot of things that you can do to protect yourself from interest rate increases, if you are the kind of family that is a to the penny, budget family, which I fully respect because those are the people that are always type a, super diligent, ducks are all in a row. We love working with those kinds of clients. But if that’s a concern, then there’s two options that we’d like to offer you.
Number one, there are lenders that offer variable rate mortgages where the payments don’t change. So if you’re with TD or HSBC in a variable rate, and interest rates increase or decrease, it’s just the length of your amortization that changes. So if you start with a 25 year mortgage and interest rates decrease, then you can shave off a year and a half or whatever. And subsequently, the opposite can happen. So that’s a nice little feature for people that want the flexibility, but don’t necessarily want to take on the perceived risk of payments fluctuating.
I had no idea that was an option, that’s really good to know.
Yeah, it’s great. And then the other option is to increase your regular payment. So if your regular payment is two grand a month, let’s bump it up to 2500, that then buys you several interest rate increases before you even know or feel a change in your payments. And all the while that extra $500 per month, or whatever it is, goes directly to your principal and pays your mortgage off faster. So there’s lots of ways that you can get all the benefits without the risk.
Yeah, that is all really good to know, because at the time, when we got the mortgage, we were scared about the variable rates, but it’s one of those things you don’t know what you don’t know. And we had no idea that those were available. So I think that’s a good segue into renewal. I’m sure we’ve covered some of it. But looking at your website, it looks like we actually are in the driver’s seat, and we have some power in terms of renewal. So let’s hear about it.
Yeah, so when it comes to renewals, we always want to talk. There’s never a situation when we don’t want to talk to you, even if through our conversation we discover that it’s best for you to stay put with your lender. So when it comes to renewals, once a mortgage is open at that time, it’s a good time to consider “are we rolling in any debt? Do you have a car payment that you want to get rid of? Is it a good time to do a reno?” Whatever the case is. So we have that conversation first. And if it’s really nothing’s gonna change, we just don’t want to re-up the term, then we’ll look at the offers that they’ve presented to you. And if we don’t feel they’re aggressive, we’ll give you some ammo to go back to your lender and talk about these other offers that are out there, and can they do anything to help you.
And the main reason we kind of do that first, before we even look at moving your mortgage, is because renewing with your existing lender, if there are no changes to be made to your existing mortgage, is just a matter of signing a document and you’re done. If you’re making changes, which could be adding more to the principal that you owe, increasing your amortization to lower your mortgage payments. You know, maybe you want to add a home equity line of credit, or whatever the case is, any of those changes would require you visiting a lawyer to sign documents and re-register the mortgage.
And all the lawyer fees that go with that.
And that costs you money. Exactly. So our first priority is making sure that we are actually saving you money, because nobody wants to find out later that I could have just signed with my existing bank and not paid the fees. So we start there first. And if they’re really not offering you the best, most competitive rates, and if there is a better way to structure things for you, then we’ll do that.
But there’s lots of clients throughout the year that just sort of come and go, we help them negotiate with their lender, we don’t get anything for it. But ultimately, we’d like to rack up the karma points and just make sure that you’re happy. And sometimes we get a Google review out of it. And that’s all we need and that’s fine. But you know, having somebody else take a look to help give you those options, and give you things to think about that maybe you hadn’t already considered.
Mm hmm. And so what are some situations where it does make sense to do the refinancing and pay for those fees?
So first one, biggest one, is debt consolidation. So if you are up for renewal, and you’ve got a car loan or two, you know, oftentimes that can be $1000, $2000 worth of car payments on top of your mortgage payment. Really, adding an extra 50 grand or even 100 grand to wipe those out, will lower your total monthly overhead. It’s kind of a no brainer, especially for families when we’ve got daycare, we’ve got – I don’t know, my kids Irish dance and I just signed up the younger one for hockey. That in and of itself is a mortgage payment. The name of the game is reducing the overhead and ultimately lowering financial stress for families.
Families are our niche, most of our clients are families. So when we get the odd single bachelor guy who’s saved all his income throughout, it’s a bit of a different conversation than it is when we’re dealing with a family. So you know, that’s the most typical thing that people are considering when it comes to switching lenders or reconfiguring their financing.
The other one is just having access to equity. So maybe you’re not ready to move today, maybe today you want to renew, but you’re talking two to three years, or maybe it could be sooner, but you don’t have access to a deposit to put on another place. Because all your money’s in your house. Then I would say, “let’s get a home equity line of credit on your house so that when you are ready to sell, you can get your listing up, and you can go shopping for a new house, and you can put a deposit down with your offer.” Which, in the wash, it works out that it’s not actually money you’re pulling out of your pocket, because we factor that in on the financing on the other side. But you still need to be able to do that. And most of the time, the unsecured loan options you’d get from the bank branch isn’t sufficient for a real estate deposit. So that’s another big one that comes up a lot.
Yeah, that makes a lot of sense. Add some more liquidity so you have a little bit more buying power.
For sure, yeah. Or if you’ve got a really keen financial advisor who wants to help you beef up some investments, or if you’ve wanted to get into the stock market, you know, diversifying your assets by pulling out a small amount of equity is a good way to go. Our parents’ generation always talks about like, “don’t use your house as an ATM” and all that stuff. But they’re also the ones that are using their real estate equity to buy boats and other houses and stuff. So, yeah, they’re full of shit.
Yeah. And it’s a new time, that is coming from the generation where you’re at the same job for decades and decades and decades. And that’s just not the reality now.
It’s not, and on that note, there’s a lot of people that have that mindset that they need to stay in their job in order to be more attractive to a lender. I would say that’s not a thing anymore. You’re attractive to a lender when you’re not on probation, you’ve got a letter of employment, and two pay stubs in hand. But, you know, it doesn’t matter if you’ve worked the same job for 30 years. In fact, if you’ve moved around a few times and increased your income frequently, they like that as well.
That looks awesome. Okay, that’s good to know too. That’s why it’s so helpful to talk with people who work in the industry, have all the updated information, and you’re not hearing from things that really don’t apply to you anymore.
It’s a different game. I mean, brokers, we have to adhere to a different regulatory standard, you know, for education and all that stuff. I actually sit on the board of directors for the Canadian Mortgage Brokers Association, and I’m on several committees, we talk a lot about education and stuff like that.
And even accountability, if a mortgage broker commits fraud, or makes a huge mistake that has financial repercussions for a client, we are held accountable personally. Not only our license, but financially, there’s fines and everything. The worst thing that’s gonna happen to somebody at the bank, who makes the same mistakes, or commits the same type of fraud, is that they might get fired. And for that alone, I feel like we just have a certain higher standard of empowering our clients with the right education that applies to each unique situation.
Absolutely. And you’re not just getting commission on the one product that’s being pushed at the bank for this time. There’s lots of options and you get your kickback. So it’s not like you’re extra motivated, to put something in, something that doesn’t actually work for them.
Yeah, and the Commission for brokers is pretty standard across the board. Once in a while, there will be a promo where we’ll maybe make a little bit more. But for all clients borrowing money in the province of British Columbia, that commission is disclosed to you. So you get to see what we make on the product, which I think is really important. And, you know, I’ve never been challenged on it. But frankly, I couldn’t even tell you lender to lender what we get paid. Just because that’s not my focus. That’s on a completely different sheet for me, and it’s the rate and the product info first. But as far as I see, it is pretty much the same, so it doesn’t really make a difference.
Yeah. There to fit people with what they need.
Yeah, absolutely.
Well, that is a ton of really helpful information. I’m sure some of you are gonna have to listen over and take some notes again for certain things.
Just call, just call me and call any broker. I do mortgages across Canada but I’d be more than happy to break it down specific to your situation, because that is part of a general mortgage conversation that every family’s going to have a different set of requirements. So, you know, don’t try to learn it all. And I mean, I’ve got lots of resources if you do want to be like a big time real estate investor, I’ll send you some books. But ultimately, that’s why you have a broker, is to have somebody guide you.
Okay, great. What are some of those resources if some of our listeners would like to check it out?
So the owner of my brokerage actually wrote a book called Rockstar Real Estate Investing. So you can look that one up on Amazon, that’s a good one. Another broker that I have a lot of respect for is Angela Calla, and she wrote The Mortgage Code. That’s a good one. There’s a guy, he wrote the book called Burn Your Mortgage, that’s also a good one. He’s the guy who bought a house, lived in the basement of it and rented out a bunch of rooms, and then paid his mortgage off in like five years. Again, house prices were half the cost of what they are now.
And again, not exactly practical for families, but it’s still pretty incredible.
Absolutely. But you know, if there’s this particular question or piece of information or resource you’re looking for, I’d be happy to help. I’ve got lots of blogs that I’ve written that are on my website. But yeah, I mean, I’m all for just that unique concierge, direct, what is your situation? And how can I help you specifically?
Perfect. I love that. So where can people find you specifically?
So I have an absolutely gorgeous website that I would love for you all to go check out, it was just recently built by Self-Made Mama Melissa Rogers, a huge fan of her and all the work she does. It’s just a stunning website so go check it out. It’s customcoastmortgages.com. You can hunt me down via email, [email protected]. My phone numbers plastered all over the internet. So if you just Google me, you’ll find me. And yeah, my team – like I said, there’s four of us all together. And we’d love to connect with you and just see if there’s a way to help increase your borrowing power, or make sure you’ve got the right resources to plan out your first purchase or next purchase.
That sounds great. I know we’ll be in touch when it comes time for our renewal next year for sure.
Fabulous. That’s great, I look forward to it.
Me too. Well, thank you so much for taking the time out of your day to chat with us and share all your knowledge. I really appreciate it.
Thanks for having me. This was so great.
Thanks. And thank you for everyone listening, you can head over to our Facebook group and group chat and we can chat about this a little bit more. Take care.
Buh-Bye!
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