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Important Questions You Should Ask Your Mortgage Broker

Even the best mortgage brokers can help you in opting for the right mortgage depending on your requirements and the budget. This makes the task easier, as the brokers have a lot of information and their guidance can definitely make a difference, especially if you are buying a home for the first time.

Buying a house is one of the most important decisions of life and everyone wishes that it turned out to be the right one. That is why it is necessary to choose a mortgage whose rates are low and suitable to your budget.

However, before going deep into the topic, you must understand what mortgages are. These are simply the loans taken for homes and are of different types with varying rates as well. Thus, you can choose from the options and make the best investment.

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3 important tips that you can keep in mind while making the choice:

Fixed or adjustable mortgage

Broadly, the mortgages are divided into two classes; one is the fixed rate while the other is the adjustable one. It is entirely your choice, as which option is good for you keeping in mind the pros and cons of both of them. In the case of the fixed rate mortgages, as the name indicates will have the same rate all through the loan, while in the other one, the rate will change as per the changes made by the bank. For the first few years, the rate will remain constant and later on, it will start changing. It can go high and down depending on the financial conditions. So, based on the both aspects, you can easily decide which of them is the most suitable for you.

Rate comparison

The right way to avail a good deal is by comparing the rates of the different companies. This will surely prove beneficial, as you get an idea whose rates are low and worth availing. You can also get in touch with the best mortgage brokers or the professionals of the company, as they will be able to guide you on how the rate is calculated and what could be an ideal deal for you. In this way, you will be able to make the right choice and end up finding the mortgage rate that is best suited to your income.

Good credit score

Though there are lots of aspects to be taken into consideration when offering the best rates, but the credit score is the most important of all. If your credit score is high, there are chances that your interest rates could be low as compared to the other people. So, it will

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be a good idea if you can work on your score and try to maintain it, as this will help you in the long run. It is the first thing that the company sees and can help you to cut down the mortgage rates. Thus, reducing the burden on your shoulders.

Thus, these are three most crucial aspects that you can keep in mind while availing the mortgages. The ultimate aim of any homeowner is to grab the best deal and to bring down the rate thus, keeping your installments low. This is definitely an added advantage for the people, as they are able to grab the best deals and make maximum use of their investments. So, do not rush with the loans, but make sure you have inquired about the company, their rates, and other things. Only then, you will be able to make the right choice and buy your dream home.

Mortgage, New Car? Negotiate Loans To Save Big Money On Purchases

Seeking to remodel a kitchen or looking for ways to free up some cash for another purchase?

One way to save big bucks is to be a better negotiator when taking out a loan. Whether it’s a new or refinanced mortgage or car loan, financial experts say consumers are leaving thousands of dollars behind by simply not asking for better terms. That means less money to buy home items, add after-market improvements for a car or spend on other goods.

David Osborn and Paul Morris, authors of the New York Times-best-selling book “Wealth Can’t Wait,” said people negotiate the house’s price, but never consider negotiating with their lender, even though it may eventually save them more money.

“If you negotiate down one-eighth of (an interest-rate percentage) point and live there 30 years, it could be $50,000 in savings. You should negotiate harder over the money than you do over the price of the house,” Osborn said.

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Similarly, few people negotiate car loans, said Miron Lulic, founder and chief executive officer of SuperMoney, a financial-services platform. Citing data from the Federal Reserve, 76 percent of people negotiate the car’s price, but only 31 percent of people negotiate their car’s loan. When it comes to car loans, dealers know buyers will focus on the payment, not the total cost of ownership, he said. That means the dealer’s finance office can hide ballooning payments later in the life of the loan.

To save money — which could be spent elsewhere — start by shopping for loans. For mortgages, home buyers should apply with at least two lenders, say Osborn and Morris. Greg McBride, chief financial analyst at Bankrate, agreed.

“Doing so gives you a couple of advantages. One, it helps you sort out who's got the best deal. And it also gives you somewhat of a bridge in negotiating things like rates and fees paid,” McBride said.

Try to apply with different lenders in the same day, but don’t worry about having multiple inquiries hurting credit scores, McBride said. Multiple inquiries within that 30-day period are treated as one.

McBride said to consider mortgage application fees and other costs when comparing lenders’ offerings. These include fees charged by the lender to provide the credit, as well as third-party costs passed on to the applicant, including for appraisals, credit reports, home inspections, title insurance and taxes.

A home buyer can try to negotiate a lower fee or choose a different third-party vendor for those services.

Watch out for “junk fees,” McBride, Morris and Osborn said, such as high processing fees or delivery charges. Lenders can waive or lower their fees, Morris said.

“Are they entitled to a $100 processing fee, sure. One thousand dollars? That’s excessive,” Morris said.

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If the mortgage lender says there are no closing costs, it is likely the lender is charging a higher interest rate to make its money, Osborn said.

Like house hunters, car shoppers should also shop for loans ahead of time before heading to the showroom, McBride and SuperMoney’s Lulic said. Car financing is completely negotiable, although in the dealer’s finance office, there’s little transparency, Lulic said. The average new-car loan is now close to 70 months, according to car-research website Edmunds.com.

Having loan offers in hand gives buyers both knowledge and leverage, they said, and can be used as a fallback option if the dealer’s offer isn’t as good. Buyers who take the dealer’s offer need to scrutinize all fees and question the purpose. Avoid the hard sell by being willing to walk away, they said, which is easy to do with a new car purchase since there’s usually another dealer close by.

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Considering the average new car loan is closing in on six years, Lulic said it can be worthwhile to look into refinancing an expensive car loan.

“You can save a ton of money, maybe even shorten the life of the loan,” he said.

Why Home Buyers Should Consider Adjustable-Rate Mortgages

With interest rates on the rise, it may be time for home buyers to take a fresh look at some alternatives to the 30-year, fixed-rate mortgage, which has dominated the mortgage market since the financial crisis. While many out-of-the-mainstream loans got a black eye in the subprime debacle, today’s versions have been shorn of the toxic features—such as negative amortization and prepayment penalties—that tripped up many borrowers during the housing bubble a decade ago.

Plan to move

Experts say today’s adjustable-rate mortgages, or ARMs, as well as interest-only loans, are especially suitable for borrowers who expect to move before any rate increases can wipe out the savings in the early years. They’re also useful for sophisticated borrowers wrestling with uneven income, borrowers who expect their income to rise, or borrowers who are willing to bet they can invest their mortgage savings for a greater return elsewhere.

“Many of the mortgage products that some may have thought slipped into extinction, such as interest-

only loans, do still exist today, but in far less volume” than in the heyday of the subprime era, says Bill Handel, vice president of research and product development at

Raddon Financial Group, consultant to the financial-services industry.

Adds David Reiss, a law professor and academic program director at the Center for Urban Business Entrepreneurship at Brooklyn Law School: “The benefits of non-30-year, fixed-rate mortgages are legion.”

A sweet spot

Many borrowers can find a sweet spot, for example, in the so-called 7/1 adjustable-rate mortgage, which carries a fixed rate for seven years before starting annual adjustments. With a typical rate of 3.75%, the monthly payment on a $300,000 loan would be $1,389, compared with $1,449 for a 30-year, fixed-rate loan at 4.1%, saving the borrower $5,040 over seven years.

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Even if the loan rate then went up, it could take two or three years for higher payments to offset the initial savings, making the mortgage a good choice for a borrower likely to move within 10 years.

Once annual adjustments begin, they are generally calculated by adding a fixed margin to a floating rate, such as the London interbank offered rate.

“ARMs are very underutilized,” says Mat Ishbia, president of United Wholesale Mortgage, a lender in Troy, Mich. He expects the 7/1 ARM to account for 15% of new mortgages within the next few years, up from less than 5% today.

Historically, ARMs become more popular as interest rates rise, making savings from the loan’s low initial “teaser rate” more attractive, he notes.

Mortgage Calculator: See How Rising Interest Rates Affect Your Payments

Mortgages are Canadian families’ largest source of debt by far, so how will this affect them?

Global News has teamed up with rates-comparison site RateHub to provide a calculator that will show you how your monthly mortgage payments will change with rising interest rates. Please refer to the user guidelines below. (For more mortgage tools, you can visit RateHub.ca’s mortgage payment calculator or mortgage affordability calculator.)

How it works

General instructions: To use this calculator you need to know your current interest rate, amortization period, mortgage payment amount and payment frequency.

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Amortization period — this is the length of time it will take you to pay off your mortgage in full. In Canada, most mortgages have a 25-year amortization. This is different from your mortgage term, the length of time you commit to a specific rate, lender and loan conditions. The typical mortgage term in Canada is 5 years.

Payment frequency — most people pay their mortgage once a month. “Semi-monthly” means you pay twice a month, for a total of 24 yearly payments. “Bi-weekly” means you pay every two weeks, for a total of 26 payments a year.

“Accelerated bi-weekly” means you pay the same amount you’d be paying with a semi-monthly option but make 26 rather than 24 payments per year, which allows you to pay down your mortgage faster and save on interest.

Variable-rate mortgages: If you have a variable-rate mortgage, this calculator tells you how your payments will change when the BoC hikes rates.

Today, rates went up by 0.25 of a percentage point. Many economists expect the central bank to raise rates by a full percentage point (up to 1.5 per cent) by the end of 2018.

Lenders don’t always mirror the BoC exactly. For example, the last time the central bank made a move, in July 2015, it cut rates by 0.25 of a percentage point, but mortgage lenders cut variable-rate mortgages by only 0.15 of a percentage point.

“With an increase, however, it’s most likely the full amount will be passed along to consumers,” said to James Laird, co-founder of RateHub.ca and president of CanWise Financial. This is the working assumption of this calculator.

For highly anticipated interest rate changes, such as today’s hike, lenders generally adjust their variable rates within hours of the BoC announcement, said Laird. Variable-rate mortgage holders, in other words, will likely be affected immediately.

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Mortgages and Debt: How Lending Culture is Leaving Australians Vulnerable

A decade of housing price rises, low interest rates and relatively easy credit has left Australians carrying the second-highest level of household debt in the world.

And despite efforts to tighten lending and to address problems in the lending culture, the ABC's Four Corners program has learnt bank staff and mortgage brokers are still required to meet tough lending targets and some staff are threatened with dismissal if they do not meet the banks' requirement to sign up more mortgages.

The problems in the lending culture were acknowledged by the banks themselves earlier this year in a review conducted by the former public service chief, Stephen Sedgwick.

Incentive payments and lending targets are still a primary motivator for bank staff.

Internal performance expectations for Westpac bank lenders, obtained by Four Corners, include targets of six-to-nine home-finance requests a week and between two and three home-loan drawdowns a week. All the big banks have performance targets. ANZ chief concedes need for further reform.

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Most bank CEOs, including Westpac, were unavailable for interview but ANZ chief Shayne Elliott did agree to talk to Four Corners.

Mr Elliott said changes had been made and not all the targets were simply sales targets.

"The targets are small in relation to their overall income," he said.

Mr Elliott said, following the Sedgewick review, 70 per cent of ANZ's targets were weighted towards good customer outcomes and customer satisfaction.

"[The targets are] not all about sales, not about the number of mortgages," he said.

Banking regulators have also moved to tighten lending, forcing banks to make investor loans in particular harder to get — but bank staff told Four Corners they still had to meet tough performance targets.

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Four Corners has obtained letters written to bank staff by branch managers at NAB and Bankwest — owned by the Commonwealth Bank.

The letters warned staff who had not met their targets that their positions were under review, and canvassed the possibility of termination.

In a statement, the NAB said: "As part of regular reviews, staff are assessed based on a mix of financial and non-financial objectives.

"Product sales is but one of these measures. The others include living NAB's values and delivering the right outcomes for customers."

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