If you’re like many people, you want to understand the facts before you make a decision that can impact your financial picture for years to come.
When looking to finance a new purchase or refinance an existing home, consumers today have many choices of whom they can choose to work with. Making sure you ask the right questions is essential to ensuring you obtain the right mortgage products for your unique circumstances.
There are a few simple questions you can ask a prospective financial representative to determine if they are uniquely qualified to help you:
1. “What are mortgage interest rates based on?”
Your mortgage professional must be well versed in understanding how lenders calculate interest rates. The Bank of Canada prime-lending rate determines the variable mortgage rate, and mortgage-backed securities, specialized mortgage bonds, or government of Canada long bonds determine fixed rates.
2. “What is the current state of the mortgage market today, and where do you see it going in the near future?”
A mortgage professional should understand the directional trending of key market indicators that drive the mortgage market.
You wouldn’t get a root canal from a car salesman, so why would you get mortgage advice from someone who cannot explain how the bond markets interact with mortgage interest rates and where they are headed.
A mortgage is the potentially the largest debt you will likely ever undertake, so find a mortgage professional who can give you the proper advice.
3. “How will rising future interest rates affect my budget if I take a fixed rate product?”
Many people take the fixed rate mortgage product because they want to maintain a consistent payment and avoid any financial shocks to their budget over the term of their mortgage.
Unfortunately, many mortgage professionals don’t consider how well their clients will handle their new payment amount upon future renewals. Once interest rates rise from their current emergency low levels to more normal levels, the payment shock to homeowners renewing their mortgages could be substantial.
Be sure to work with someone who proactively manages your mortgage, notifying you when rates rise with suggestions on how to minimize payment shock and save money. There are many excellent strategies that can help homeowners avoid payment shock, and save thousands of dollars in interest payments in the process.
4. What strategy are you recommending and why?
Today’s mortgage products vary widely in the terms and conditions that are available. This is good news to homebuyers as it provides many financing options that were once not available.
If your mortgage professional cannot clearly articulate the strategy behind the recommendations they make to you, then they may not have your best interest at heart. On potentially your largest financial investment, make sure you are dealing with someone who has a solid financial plan and is considering your overall financial well being.
5. “What commitment are you giving me to personally manage my mortgage over the long term?”
In this highly transactional, commodity-laden world, your mortgage should be viewed as anything but a transaction.
Many lenders, especially bank personnel, don’t have the desire or ability to actively manage your mortgage over the long-term. Having someone on your team that understands the impact of market changes on your long-term well being is absolutely critical to your financial success.
Whether you decide on a fixed rate or variable rate mortgage, there are numerous strategies available to mortgage professionals to help you save money today and in the future. Anyone can sell you a mortgage, but only a truly committed mortgage professional can manage that mortgage over the long-term.
With this long-term management approach, we can significantly reduce your payment shocks, total interest payment and overall cost of ownership.
This may very well be one of the largest financial transactions you ever make. Do yourself and your family a favour and consult with a qualified mortgage professional before making your next move. We take your well-being and financial future seriously, and are ready to work for your best interest!