After two years of ultra-low, pandemic-induced core lending rates, inflation in Canada is now the highest it has been in 30 years. To accommodate, the Bank of Canada is hiking those rates back up.
For mortgage seekers and current borrowers, payments could be on the rise. Add in record-high home prices and a constantly changing real estate market, and it can be a tough field to navigate.
There’s help for potential homeowners or those with existing mortgages coming up for renewal, though. According to Vancouver author, radio show host and mortgage broker Angela Calla, the current climate is all the more reason to schedule an appointment with an independent mortgage broker.
“A licensed mortgage professional’s interest is to help you navigate the market without bias,” she says. “That’s incredibly important when taking into consideration all the changes that are constantly happening and how you can navigate that with your changing lifestyle.”
In partnership with the Angela Calla Mortgage Team, we take a look at how current and prospective homeowners can navigate their finances during the current real estate market flux.
READ MORE: Food, shelter push inflation in Canada to 6.8% in April: Statistics Canada
Getting a personalized option
When Nadine Furnell and her husband, Scott, needed to renew their mortgage, they wanted options beyond the bank. After three homes and several mortgages, they were ready for a more personalized approach that accommodated their lifestyle and needs. So they called broker Angela Calla and her team for help.
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Furnell says not only did the team lock in a lower interest rate before the Bank of Canada’s most recent hike, but her family is now saving $1,500 a month.
“Over 20 years, we had not one phone call from the bank telling us our mortgage was renewing,” Furnell says. “The Calla team consolidated two vehicle loans into the mortgage with a lower interest rate. The mortgage itself didn’t even go up — it might have increased $100 or something like that.”
An independent mortgage broker usually accesses your credit score once and uses it to source several loan options, whereas borrowers shopping around with different lenders open themselves up to multiple checks. That can take points off their overall score, which then potentially impacts which products are available.
Calla points out banks can only sell their own products, whereas a mortgage broker examines options from a range of lenders. That allows them to source the best rate while also considering paydown and amortization options, potential insurance coverage and other products.
“If working with the lender you already do business with has the lowest cost of borrowing, then that’s what an independent broker will recommend,” Calla adds.
READ MORE: What to know about using a mortgage broker as a first-time — or repeat — homebuyer
Climbing the property ladder
Even with rising interest rates, a mortgage still has a lower rate than most lines of credit, credit cards and other unsecured loans. Since lending institutions make the most amount of money on unsecured products, they typically focus only on the rate of the mortgage when bringing in new clients or renewing existing loans.
But according to Calla, that doesn’t always benefit borrowers. “Different lending products make different profit margins for institutions, and everybody within banks has different roles, depending on their sales goals and targets,” she says. “You can’t just assume that’s going to line up with what’s financially beneficial for you.”
By consolidating any pre-existing, high-interest debts into a mortgage, an independent mortgage broker can help clients achieve long-term financial goals sooner. If they’re saving hundreds — or sometimes thousands — of dollars a month on interest, a borrower can then reinvest that money into an RRSP, for example, and save even more at tax time.
“Effectively, focusing only on the mortgage keeps you in debt for a longer period of time, making it harder to move up the property ladder,” Calla adds. “When you have an independent mortgage broker, the goal is to reduce your overall cost of borrowing and improve your financial health.”
In many cases, it’s also a much more personal relationship, where the dialogue is open for yearly financial check-ups to ensure a borrower is always in the best situation for their goals and needs.
“We got nothing but radio silence from the bank,” Furnell says. “They would rather just throw more money at me and get me more into debt. We’re quite happy with our decision to go through a mortgage broker service.”
Above all, Calla advises, don’t wait to take charge of your financial health. “Don’t expect real estate prices to go down and don’t try to time the market,” she says. “What’s important is finding a budget that works for you and aligning yourself with the right people to ensure you’re in the best position with the products that are available.”
To learn more about navigating the market or finding a mortgage, visit The Angela Calla Mortgage Team.