These 9 mortgage myths highlight popularly held misconceptions that can affect your directly. Enjoy.
The banks look out for the best interests of the potential and existing homeowner.
Banks are in the business of producing profits for their shareholders so their products and, sometimes, their advice reflects those interests. Their clients, therefore, can become of secondary importance to profits and bonuses. Due to a great deal of persuasive advertising over the years, this mortgage myth has taken hold of many people's imaginations.
Getting the lowest interest rate is the most important thing to get from a mortgage broker
Focusing solely on a getting the lowest interest rate doesn’t necessarily equate to:
- Expert advice and ethical practices
- Quick turnaround of your application
- Having calls returned promptly
- Speedy problem resolution, and having
- The best product for your situation
Getting a low interest rate won’t affect the level of service you receive from a mortgage broker.
The interest rate you get is tied to a broker’s commission. If they’re making a lot less money for managing the complicated application process, it might mean:
- Reduced services and slower turnaround time
- Additional fees and charges for poorly explained services
- Delays or mistakes made in paperwork
- Not getting called back
- Problems being dragged out
Like many mortgage myths, this one developed due to the wishful thinking of customers and ambitious promises made by inexperienced mortgage brokers. The application process has many steps and when issues come up, especially financial ones, it takes a great deal of know-how, connections, and follow-up to get it approved. Low interest rates and good service are incompatible.
"We have a big down payment saved up so our credit rating isn’t that important."
A good credit rating is essential for your mortgage application to be approved. To find out more about credit scores, please refer to theFinancial Education section.
A mortgage broker's background is of no importance to a potential homeowner.
Actually, your broker’s career history tells you a lot about their level of expertise and efficiency. Experience in related fields relates to immediate answers and informative examples. You’ll be more confident because you’ll know more and what to expect. Learn more about your Money Coach, John Wright.
"Once we’re set up for a mortgage, our finances are set and saving money isn’t really important."
Making your mortgage payment each month is only the first step. Setting up an emergency savings account, separate from your home expenses account, is essential to deal with the unexpected. Your Money Coach can teach you all about home budgeting to prevent disasters and overspending.
A mortgage broker’s primary job is just to get a good rate.
Your interest rate depends on many factors: down payment amount, credit rating, incomes, length of term, etc.
Your mortgage broker assesses your current financial situation and helps you decide on the best product and lender for your situation. They then negotiate the best interest rate and manage the application process. Finally, they deal with any issues that arise.
During this process, they stay in constant touch with you, keeping you aware of any developments. Mortgage myths like this one began decades ago when housing costs were much lower and the market not varying too much: not like these last 20 years.
Bank branch staff have the same knowledge level as mortgage brokers.
Not generally the case. Bank employees are responsible for a fewer number of mortgage products; consequently, they process fewer mortgages. In contrast, due to their diversity of products, mortgage brokers serve a broader market so their expertise is more highly developed. Not surprisingly, they spend a greater amount of time spent processing applications.
To become an Accredited Mortgage Professional (AMP), mortgage brokers must study and pass an exam overseen by the Ontario government’s Financial Services Commission. Thereafter, any mortgage broker in good standing can become a member of the Mortgage Professionals of Canada association.
The value of using a mortgage broker backed by a well-regarded company is not important.
Beyond the in-house expertise and resources, a market-leading firm has the benefit of long-term, established relationships with: lenders, underwriters (risk assessors), home inspection professionals, and so on. Their system is streamlined, providing fast answers and turnaround so you get the home you want, quickly.
A well-supported mortgage broker provides greater flexibility and options to those with unique needs and circumstances. Pilot projects and special promotional rates are often made available.