[Rate Update] Beware of the “Flea Market Effect”

What does this mean for your mortgage? 

With such an incredible number of mortgages maturing this year, listening to the radio is now like walking through a flea market.  Everyone is vying for your attention and trying to sell you something “cheap, cheap, cheap”. 

And if you are like me, you probably did buy something from that incredibly persuasive flea market guy, only to regret it a few weeks later once you realized that the product didn’t exactly fit your needs like “flea market guy” promised it would.  

Where am I going with the flea market analogy?   It seems like the marketers ( aka Flea Market Guy ) only know how to speak to us in one dimension of the mortgage process – rate.  While rate is an important part of every mortgage conversation, it should be at the end of the conversation after your life goals, family plans, job changes and future purchases are discussed.   Fitting the topic of life goals into a 30-second ad ( let alone a 30-second pre-qualification like one bank is advertising ), is impossible, and let’s face it rather boring.  So now that you know that marketers are trying to feed you your dessert before your vegetables, here are a few things you need to consider if your mortgage is maturing this year:

• Before you take any equity out of your home call me:
  • If you purchased your home before the end of 2016 you qualify for special rates.  It’s too complicated to explain here in this post, but if you refinance your home, you lose access to the special program FOREVER!
  • If you need access the equity in your home give me a call, there are ways to structure it to make it work.
• Never just sign the renewal:
  • Canadian banks have the highest percentage of clients in the world who just simply sign their mortgage renewal and drop it off at the bank!
  • The special program mentioned above can actually get you access to some amazing products at amazing rates with some amazing lenders.  In some cases, we can bypass the Stress Test when qualifying you!  That is a significant piece of information that most bank mortgage staff don’t know about.
  • Because of the stress test, banks are trying to see if they can get people to simply sign the renewal.   The popular sales tactic I’m seeing is preying on people’s fear of missing out.   The bank staff will offer you a rate but tell you it’s a limited time offer – usually that expires within one week.   I’m seeing this one a lot! Call me before you sign!  Don’t get rushed into making a quick decision with the biggest piece of your financial picture!
• Be wary of any special low rate offers:
  • 67 percent of Canadians make a change to their mortgage within 36 months of setting up it up.
    • low rate mortgage offers don’t allow you to make any changes and could potentially trigger a 4% penalty on the outstanding balance of your mortgage if you do make a change.
• Paying a higher rate can save you money:
  • I’m serious!  It sounds like hyperbole but we now have access to a mortgage product previously only available to financial planners.   My team has gone through just over 10 mortgage reviews with our clients – one of them was able to take 12 years off the total time to pay their mortgage!  That’s not a typo – 12 years!!
  • Given how flexible this product is, it does have a slightly higher rate, but how much money could you save if you took 12 years off your mortgage!

The bottom line:

The new mortgage rules have made it impossible for consumers to figure out what their mortgage options are.  Now more than ever you need a mortgage professional with knowledge and experience to guide you through your mortgage options.  Don’t get lured in by “Flea Market Guy” and take that mortgage that you’ll regret later.

The next Bank of Canada meeting is July 11th, 2018.

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