It seems that every bank these days has a special on their mortgage rate for new and existing clients alike. Many clients I have spoken to, believe that owning a home, automatically qualifies them for receiving the banks best posted mortgage rate or a special on their second mortgage refinancing endeavour. The reality, however, may differ from what we all may believe to be fair or acceptable when it comes to borrowing money for a mortgage from our local branch. Most of the banks in Canada are highly regulated under the “Banking Act”, but this may not necessarily apply to all aspects of their marketing and follow up service with respect to facilitating a client’s request for mortgage funding on their property. Below, are just some points to keep in mind when approaching your local branch for a second mortgage or any form of mortgage refinancing.
I will accept the rate they give me, the branch is working in my best interest
If you qualify for a second mortgage or a new mortgage for that matter, I believe its one’s best interest to ask for a better mortgage rate (if you are uncomfortable with this, speak with a mortgage agent who can assist you with this further). Mortgage agents and brokers have a wide lender network where they can shop and find the lowest mortgage rate for their clients. Large independent financial institutions have a number or mortgage products under their product roster, and in many cases, are willing to negotiate. Just be respectful and have some fun in mortgage rate negotiating process, you may be very surprised!
I have a copy of my credit report that the bank can use for my mortgage application
Unfortunately, this is not the case, and almost every lender will ask for you to fill out an mortgage loan application. This application will request details of your assets and liabilities, inclusive of your employment status and income. The latter part of the application may state in general terms that you agree for the bank to run a credit check on you and share its information with relevant parties in-order to ascertain the credit worthiness of your mortgage application. More importantly, some banks make use of multiple credit reporting agencies when pulling a client’s credit bureau. Equifax and TransUnion seem to be the two most common credit agencies used by most banks in Ontario when qualifying a mortgage application. From my experience, both reports are not necessarily similar, and may report or not report items that one may feel are inaccurate. I had a client who was applying for a mortgage with 10 percent down on a first mortgage and had to apply for mortgage insurance in-order to be approved. Since graduating from college and working for the past five years, he never looked into his credit report until the bank advised him that his mortgage application had been declined due to a collection item on his credit report for $26 dollars, from 6 years ago, when he was a student in residence. This was truly a sad circumstance where the mortgage fell through and my client lost his ability to purchase his home, despite, believing he had done his due diligence to date.
In my opinion, it is therefore imperative to address any inconsistencies prior to an application with the branch, as it would make little sense to apply for a second mortgage that may be declined on credit items you may be unaware of. This would eventually work against you, so being aware of your credit report(s) prior to filing an application with the bank may make more sense.
I have an appraisal on hand that the bank can use for my second mortgage application
I have clients calling me on a regular basis, asking as to whether they can provide me with a copy of their home appraisal as the basis for determining the value of their home. Unfortunately, most mortgage agents and brokers will request a current appraisal report when underwriting a new mortgage or a second mortgage on a client’s property. Most banks, are no different, and prefer to make use of a reputable appraisal agency of their choosing. In some cases, they can approve without a full appraisal, given the established value in the geographical region, which may allow for you to bypass the appraisal process all-together. Many clients prefer this process, as there is a perceived level of savings, from not having to pay any money upfront. I would speak to a mortgage agent in detail, when considering this option so as to be sure that the mortgage rate and savings are indeed what they seem to be.
What about mortgage insurance?
Many clients have asked me about mortgage insurance in the past, and whether it makes sense to apply for in their particular circumstance. And, although many individuals see the premiums as an added expense, I believe there is value here in having mortgage insurance protection. I would insure that I can take the insurance at the time of signing my mortgage documents, but have the option to cancel without penalty if need be at some point in the future. I would also consider working with a licensed insurance agent who understands this sort of mortgage insurance coverage and ask for the insurance agent to tailor something specific to meet my mortgage coverage needs.
As a mortgage agent in Mississauga, I am licensed to work with various banks and credit unions, and can assist you with the negotiating process, when looking to find the best mortgage rate for your circumstances. For further information, or to discuss your second mortgage needs, please feel free to contact me via email or the telephone number listed below.