Time to ask who’s watching your bananas
Ten to 15 years ago, the value proposition of using a mortgage broker was getting a better rate.
Today, however, consumers are just as likely to get low rates from their banks as they are from a broker – which makes sense given that “he who holds the gold generally gets to make the rules”.
This shift in the mortgage landscape has many brokers switching their focus from rates to mortgage management.
Mortgage management is a simple concept. In the same way a financial planner would manage your investment portfolio, a broker manages debt, helping you pay it off sooner and creating accountability.
Simple tweaks – such as adjusting mortgage payments to match pay increases or increasing payments to reflect changing interest rates – can save you tens of thousands of dollars.
Take the example of a newlywed couple looking to purchase their first home. While both the bank and broker might offer identical 2.99 per cent interest rates on a $400,000 mortgage, the broker can set up a strategy that will save them $15,000 in the first five years of their mortgage. That same strategy will also prepare them for rising interest rates and help them pay their mortgage off before their first child turns 18.
While almost all mortgage holders in Canada intend to accelerate their payments, very few actually do. Having a professional there to help along the way is highly effective to stay informed and be accountable.
Most borrowers who don’t pay off their mortgage faster do so because they either don’t take action or they do not know how. A good mortgage manager will both remind borrowers when to make mortgage changes and help them figure out which changes to make. For example, something as simple as increasing mortgage payments can go unnoticed on a month-to-basis, but can eliminate several years from the amortization period.
A strategically timed refinance can also save mortgage holders thousands of dollars – however, identifying that opportunity often takes the knowledge of a skilled professional who is reviewing your specific circumstances on a regular basis.
In the end, letting banks manage your mortgage is like letting the monkeys watch your bananas. They have an inherent incentive to let you take as long as they like to pay off your debt.
Who’s watching your bananas?
Let us help. Give an Accredited Mortgage Professionals (AMP) at Mortgage360 a call – we would be happy to help you make your home dreams a reality.
Nolan Matthias holds a Bachelor of Arts Degree in Economics, is the co-founder of Mortgage360 and the author of The Mortgaged Millionaire. www.mortgage360.ca