Our approach

There’s no question about it: in recent years the Canadian mortgage market has become incredibly rate driven.

While fierce competition among mortgage providers helped lower interest rates for many of us, it also compromised on the most important component of the mortgage:

A comprehensive plan that ultimately helps homeowners save money for the entire life of the mortgage

We call this phenomenon the rate war because apparently the rate is the only thing that many financial institutions are competing for these days. The end result is a rate-driven market where homeowners sacrifice long-term goals for short-term gains and focus is lost on how homeowners can truly harvest enormous savings. Why do we keep focusing on the price when in reality it’s the strategy that ultimately helps us take advantage of today’s low rate environment?

It’s about a lot more than just short-term savings

While having a low interest rate is paramount in achieving long-term savings, today’s mortgage market has become increasingly complex. With dozens of lenders competing for business and offering a myriad of options with different terms and conditions – including certain restrictions that can quickly erode any rate savings – how can we differentiate between the hundreds of mortgage choices that are available in market? What is the most suitable mortgage for what we’re trying to achieve? Better yet, now that we’ve borrowed this huge amount of money, what are our goals to begin with? Who can we rely upon to provide us with all of the options that are available from an unbiased perspective?

“People tend to give you advice that’s based on their own fears, their own experiences, their own expertise, and their own motivation. Their advice typically has little to do with the reality of your life. Even friends and family, who presumably know us fairly well, usually get it wrong.”

Carl Richards, Certified Financial Planner (CFP), founder of Presada Capital Management and author of the book “The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money”

These are all very important questions that regrettably many homeowners never ask themselves when taking out a mortgage. Ask yourself another question: what is more important to you as a homeowner when it comes to your mortgage? Is it realizing short-term savings or harvesting long-term returns? The answer may be seem rather logical: short-term savings lead to long-term rewards. However, when it comes to mortgage loans, this isn’t necessarily true. The reason why this isn’t true is because mortgages come packaged with different restrictions, fees, penalty options, blend options, portability clauses – even if the mortgage is with a different subsidiary of the same institution! What may seem like a “deal” today may actually end up costing you thousands of dollars in the not-too-distant future.

Did you know that nearly 70% of homeowners who take out a 5-year fixed rate mortgage end up refinancing or renewing their mortgage after only 3 1/2 years? If so many homeowners are renewing their mortgage just past the half way point, why then do we lock ourselves into mortgages that may not have necessarily been what we needed to begin with?

If you never heard about this before, chances are you have obtained a mortgage directly from the lender. Lender representatives (sometimes referred to as Mortgage Specialists) are there to market and sell the lender’s products; they are not there to present you with options offered by the competition and advise you about the best solution that works for you!

When you speak with your existing lender about your financial goals, have they explained to you all the options that are available in the marketplace? Specifically, if another lender out there has a better product that’s more suitable for your objectives, would your current lender bring this to your attention? Does your current mortgage plan take into account short, medium, and long-term goals? In fact, was there a mortgage plan to begin with?

These are questions that are typically asked by financial planners when preparing a financial plan for their clients. Why should we ask ourselves the same questions when taking out a mortgage?

Perhaps the best reason is because mortgages are affected by the same market forces that affect your investments’ return. For instance, the state of the financial markets and the overall economy plays a key role in forecasting where interest rates would head. But even with all the sophisticated technology we have these days, when it comes to predicting future rates, more often than not we still get it wrong… and by quite a margin! That’s why proper financial plans have risk-mitigating measures in place designed to offset the risk that’s unknown.

So if we put so much thought into putting together a financial plan – a proper, individualized financial plan is crucial to determine the most suitable investment strategy for a particular individual – why, then, don’t we put the same effort into creating a detailed plan for managing our mortgage?

After all, if you were to have $300,000 to invest in the markets, surely you would have some kind of a financial plan, prepared by qualified investment counsel, as to how to invest such a large amount of money. Borrowing the same amount entails very similar risks; we are purchasing an asset that we hope would appreciate in value or even generate income and increase our personal net worth in the future (Canadians, by the way, count their home as the most significant asset comprising their net worth!). Just as in the realm of investing, mortgage loans have financial implications that must be considered from both the applicant and product perspective: risk-reward premium, taxation, fees and expenses, cash-flow projections, insurance, etc.

Keeping all of this in mind, we hope that you now begin to understand why we place so much emphasis on strategy and breaking away with conventional wisdom preached by salespeople working directly for financial institutions. Focusing on the rate alone not only distracts us from other important components of the mortgage but more often than not, how do we know if we’re really getting the best rate in the marketplace?

Why are you discriminating against me?

One of the first things homeowners look for when “shopping” for a mortgage is the interest rate that’s charged by the lender. In recent years, numerous websites have sprout up that allow homeowners to comparison shop the rates offered by different institutions, be it major banks or independent brokerages.

While open access to discounted interest rates has put a tremendous amount of bargaining power in the hands of homeowners, what’s lacking in many of these offers is a strategy. Simply put, when we see a rate, all we see is a number. What we don’t see is what’s behind that number or even more importantly, how to make that number work for us.

In February 2011, the Bank of Canada published a white paper about rate discrimination in the Canadian mortgage market. To help demonstrate this ubiquitous practice, the researchers concentrated on mortgages that are insured with CMHC where the default risk to the lender is virtually non-existent. The paper concluded that when the risk of loss remains the same and both consumers easily meet the underwriting criteria of the bank, the banks routinely discriminate among their own customers by giving fully discounted or unpublished rates to some while selling higher rates to others. How comforting!

How are we different?

First, let’s summarize the obstacles that Canadians face when dealing directly with their lender:

1) Banks discriminate among borrowers with some clients receiving the lowest rates while others pay higher rates even if both clients are equally creditworthy. The banks call this policy “selective” or “discretionary” pricing

2) Dealing directly with lender reps means consumers never get the full picture of all the options that are available to them. Lender representatives are there to sell their employer’s products, not comparison shop the mortgage market and advise you about other products that may be more suitable for your objectives

3) The majority of homeowners in Canada have a fixed rate mortgage which may carry exorbitant penalties to discharge early. In fact, nearly two thirds of 5-year mortgage holders refinance before the term matures, providing lenders with huge profits in terms of discharge fees, “re-investment” fees, and rate blends

4) Fees matter! Whether you’re paying a penalty to break the existing mortgage or renewal fees to renew your mortgage, or even lack of prepayment planning where thousands of dollars are wasted on interest, mortgage fees eat directly into your wealth. And we’re not talking small amounts here. If you add up all these fees over the life of your mortgage, make sure you’re sitting down once you tally up the result!

Now let’s see how we can help you eliminate some of these little nuisances that just eat away at your money:

1) We provide strategies! We have a unique process that’s focused on getting to you know and understanding what’s important to you. Every client is provided with a detailed mortgage plan that includes a prepayment plan as well as personalized strategies on becoming debt-free sooner. All of our mortgage plans are proprietary and developed in-house from scratch, which means no one else offers what we offer. If you have experienced financial difficulties that have impacted your credit file, we offer a credit re-establishment plan, free of charge and tailored specifically to you, with the mortgage to help increase your beacon score and re-establish your credit rating.

2) We provide fully discounted rates from multiple lenders, including major banks, non-bank prime lenders, trust companies, credit unions, and private investors. With us, you never have to second guess about getting the lowest pricing in the marketplace because discounted rates is all we offer!

3) Personalized advice: we are independent brokers. We don’t work for any lender and can offer unbiased advisory services about obtaining the most suitable mortgage for your objectives. We are a small unique team that specializes in niche markets and we’re dedicated to building and preserving strong relationships with all of our clients. Strong emphasis is placed on attention to detail, personalized approach, and staying in touch after the mortgage funds.

4) Long-term approach… without the fees! We see your mortgage as a long-term investment plan. Our mortgage plans are structured to save our clients fees for the entire life of their mortgage. If you never heard about this concept before, we’ll be happy to show you. We can help you avoid prepayment penalties, unnecessary legal fees, renewal fees, interest costs, and extended amortization premiums just to list a few. Can you imagine walking into a bank and asking your financial representative to save you money on your mortgage for life?

5) Niche market products: in addition to residential mortgages, we specialize in structuring mortgage solutions for self-employed individuals. Our portfolio includes mixed-use properties, self-made (custom) home construction, investment properties, and tax-efficient mortgage planning with fee-only financial planners. We are well-versed with CMHC requirements (for insured mortgages) and can guide you through the maze of requirements.