When you think of the people who help navigate the real estate market, your first thought is probably realtors. These experts understand all the components of a home that make up its value, like what type of home it is, whether it’s close to good schools, and what similar homes have sold for recently. But there’s a second professional you should have on your side to help you navigate the Edmonton real estate market: A mortgage broker.
Much like real estate agents help you shop for homes, an Edmonton mortgage broker can help you shop for mortgages. They work with multiple mortgage lenders (including some you might not have heard of) to get the best deal for you. And their services are usually free because mortgage brokers earn a marketing fee from the lenders they work with. But since they get paid no matter which lender you end up using, their primary interest is in getting you a mortgage with the right rate and terms for your needs.
In hot housing markets, homeowners can count on their home to appreciate in value and mask the cost of mortgage mistakes. But in Edmonton—where home prices have been flat or slightly falling for the past few years—you can’t count on a rise in house prices to make up for the cost of paying interest on a mortgage.
It’s important to get the best possible mortgage rate to maximize your equity when it comes time to sell. Mortgage brokers have access to rates far lower than those available from any bank or credit union. On a $500,000 mortgage amortized over 25 years, the difference between 2.99% and 2.64% is close to $3,000 in equity over a five-year term.
If you’re like many Albertans who have run into financial trouble in the recent economic downturn, a mortgage broker can help you overcome credit problems to find options to buy or refinance a home. While Canada’s Big Five banks prefer to work only with people who are employed full time and have good credit, that’s not the reality for many people.
Fortunately, there are many alternative lenders who are willing to lend to people who don’t fit in the banks’ “ideal borrower” category. A mortgage broker can review your financial situation with you and help you find the lender that will give you the best deal given your circumstances. These services are available to support new Canadians as well.
If you’re buying a new home, the best time to engage with a mortgage broker is before you start your search. Start by looking for the broker with the best mortgage rate. There are many mortgage brokers with local offices in Edmonton and some others who serve the area from elsewhere if you don’t mind working with your mortgage agent over the phone or by email. Your broker can help you get a sense of options and explain the difference between mortgage products.
Your mortgage broker can also get you a mortgage pre-approval, which is a letter stating how much you can afford to spend on a home. Being armed with that information gives you great bargaining power when making an offer on a home. The sellers may be more motivated to give a good deal to someone they know is serious and won’t cause the sale to fall through because of financing issues.
The maximum mortgage amount on your pre-approval is based on regulations that state your mortgage, property taxes, heating costs, 50 per cent of your condo fees (if applicable), and payments on other debts can’t exceed 44 per cent of your income. This calculation is known as your total debt service ratio (TDS). Buying a home that maxes out your affordability can cause stress on your budget later on so many people prefer to spend less than their maximum pre-approval amount. Talk to your mortgage broker about what your mortgage payments will be using different purchase prices or use a mortgage payment calculator for a quick estimate.
Navigating the Edmonton real estate market can be easy if you have the right professionals on your side. Using a mortgage broker is a great way to ensure you get the best mortgage rate and the right mortgage terms for your needs. Talk to a mortgage broker before you begin your search and you’ll be armed with the right information to find your new home.
Ratehub.ca is a website that compares mortgage rates, credit cards, high-interest savings accounts, chequing accounts, and insurance with the goal to empower Canadians to search smarter and save money.