Increasingly Canadians looking to buy a house are seeking more information from the professional helping to secure their mortgage. They look to their mortgage expert for good financial advice, guidance and some level of consultation on what most likely is the biggest investment of their lives.
The Role of Mortgage Professionals
A survey by Maritz Research Canada conducted for the Canadian Association of Accredited Mortgage Professionals (CAAMP), shows mortgage brokers in particular are expected to provide clients with options and support through the complicated mortgage process. There's also an expectation clients will be offered competitive mortgage products, recommendations on product details and lenders, and in general a high level of customer service.
Mortgage experts are now on the front line when giving advice to new homeowners on how much they should borrow and at what rate. They’re committed to getting the best rate and product possible for the mortgage term a homeowner is seeking.
Here's the Good News
Canadian home prices have held up surprisingly well despite the economic issues that have plagued the world in the last 3 years. The Canadian housing markets remains stronger compared to the U.S and appears to be a far better investment than the stock market. On top of this, Canadians have roughly 68% equity in their home, compared with 43% in the U.S. an indication our housing market remains much stronger.
In the same survey Canadians admit they could handle a $200 a month increase on their mortgage payment if interest rates were to rise. If that's the case then we should be putting more money towards our mortgage right now. It will lower our principal and our loan will be much smaller when rates rise. Don't borrow money in anticipation of making higher payments in the future. Ask your mortgage professional how bigger payments will reduce your amortization. You will be pleasantly surprised.
This is My Concern
Interest rates still remain historically low, making it easier and more comfortable for Canadians to borrow more money than they should. Canada’s rules are not as lax as the U.S. when it comes to lending, especially after new stricter guidelines were brought in by Finance Minister Jim Flaherty in 2010. But that doesn't mean homeowners aren't full of false confidence they can borrow more than they can manage.
Before you meet with your mortgage broker or the mortgage specialist at the bank understand based on your financial situation how much you want to borrow. Remember when you borrow money you're buying the right to pay that money back in a pre-determined amount of time. Don’t get pushed out of your comfort zone when it comes to your mortgage.
We're quickly moving into the busiest time for mortgages in Canada. Springtime is when real estate sales ramp up as homeowners try to buy a home they can move into during the easy summer months.
It is easy to convince yourself to borrow more to get into a “dream home.” This is especially true for buyers who previously lost out on a home because they were outbid by another buyer. Remember if that dream home is out of your budget it can quickly becoming a nightmare if house prices fall even slightly and when interest rates start to rise.
Do Your Own Research First
My advice is to decide how much you can afford to borrow before you meet with your mortgage professional. Remember nobody cares about your money as much as you do. Getting better service and good advice is imperative, but do your own research to make sure the mortgage amount is best for you.
Mortgage professionals are there to guide you through this complicated process and give you the best advice they can, but ultimately the decision about how much you want to borrow (after you know the amount you can qualify for) is up to you.