canuckguy

Well the missus and I are going to buy a new house soon and I am alittle confused on a view points. Now I've already been pre-approved for a mortgage from my bank and have a price range I am interested in..etc. I've been looking on the mls.ca site and I see a couple houses I would like to go see.
Now here are some questions that may or may not be stupid. First off, what is a mortgage broker and why would I want one verus going to the bank directly? any difference either way pro's/con's?

Now if I hire a realestate agent do they get paid by me or by the seller when I find a house to purchase? If there paid by me, why would I not just contact the realtor that is listing the property directly by calling the number on the sign? I don't really need a realator to do any leg work as our town is fairly same and I can cruise any neighourbood for listings that are not on mls site. Any tips or info anyone can add or shoot my way would be great. I am in ontario for the record. cheers.

the_tyipist

I have gone through both a bank and a broker to get a mortgage. The first time I bought a house I went through a broker. Since I did not have a big credit history it was easiest because they did all the leg work to find a bank that would take me. The second house we had to go through a bank because my wife is self-employed and doesn't have a five year history of self-employment income, but she has a great rapport with the bank and got a great rate. So to sum up little credit history -> broker, good credit history with one bank (or self-employed) -> your bank

As the purchaser of the property, you don't pay the realtor, the seller pays it all. I have my own agent, and have never called the one on the sign. When you sell a house the agent has you sign a waiver saying that he will disclose if they are working for both the buyer and seller, they are not supposed to disclose what the sellers bottom price is or what the buyer is willing to pay to other parties, but my agent has told me others do it to him all the time. I would reccommend getting a different agent than the one on the sign.
Good Luck

Sticky

A mortgage broker is not affiliated directly with any one bank (although they may have a good relationship with some banks).
They are able to see rates from various institutions including the major 6 banks and other financial institutions and get you the best rate possible.
They know more than the average home buyer/mortgage seeker and should be able to help you get a better rate with any specific terms that you want.
Remember to tell the mortgage broker that you want the financial institution to pay for the:
- inspection
- Notary fees (or legal fees)

You don't pay the mortgage broker anything (somebody will correct me if I am wrong). The mortgage broker gets a commission from the financial institution where the mortgage is placed.

This is good and bad.
The good part is that you don't have to pay for this service which could be a very big benefit.
The bad news is that the mortgage broker has their own agenda that is not necessarily in sync with yours. They want the most commission you want the best deal. those tow will not always be in line. They may prefer a certain institution becuase they get a better deal. They may also just me happy with placing your mortgage anywhere and making whatever they make.

All I am saying here is that you have to remember your own interests when making your mortgage decision.

Also, nothing stops you from looking for a mortgage on your own while at the same time using a mortgage broker. In fact some financial institutions don't allow mortgage brokers. For example, you can get a great rate from ING Bank but you cannot use a mortgage broker.

The realtor is not paid by you.
Both the sellers and buyers realtors share a percentage of the sale.

In my opinion this system does not benefit the buyer. Becuase the buyer's realtor is making a percentage of the sale price they are not interested in getting you the best price (this means less comission for them), they are just interested in geting you to buy it.
You may hear things from them like, "it is only another $10,000, what is that over the 25 year life of the mortgage".

Damn I hate that. What the hell do they know hom much I can afford.

At the same time a realtor has a lot of benefit of you have not purchased a house before. There is a lot that they can help you with with the procedures of putting in offers and counter offers. They also know how the seller's realtor works. Remember you are not dealing with the seller you are dealing with their realtor.

If you know exactly which house it is that you want, it may save you a few thousand dollars to use the sellers realtor. Becuase they will be the realtor for the seller and the buyer, they get to keep the whole commission for themselves. This means that when you and the buyer are not able to come together on a price you may have room to move with the realtor. The realtor can give up some of the commission to the seller instead of the seller haveing to come down further in price and you having to come up. They should be willing to do this becuase if you had chosen a different realtor they would have had to gove half (or part) of the commission to the other realtor.

Whicever way you go, just as I said with the mortgage broker - keep the above in mind. If you understand everybodies bias it may actually be more beneficial to you in using them over not using them as you can possibly gain more information and understand more from reactions or the things that they say.


All that being said, I used a realtor when buying a house and a mortgage broker. While I did not like all the three realtors that we went through (in approx 2 years) and the first mortgage broker that we tried to use, I do see the benefits of using both.

The mortgage broker (even the one we did not like) was albe to get us a much better rate that we fel we would ever have been able to get on our own.

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Sticky The Stickman

portereight

We used a broker for our last mortgage and he got us a lower rate from our own bank than they would offer us as long term customers with both personal and business accounts, lines of credit, the whole lot. It seems that when the banks deal with brokers they are made aware that they are bidding on your business. Funny thing is that out of six bids meeting our minimum requirements own bank offered the best deal via the broker. We actually got to choose who to tender the mortgage with, so if the broker had a hidden agenda, it was well hidden.
When we went back to our branch to sign the papers we were greeted with the most apologetic excuse making, bs I've ever heard as to why we couldn't possibly have been offered that deal directly. Then our banker starts congratulating us on the rate and terms we received. She was the one who made the offer to the broker. I just stared at her dumbfounded for a moment.
If you are concerned about fees, the winning lender actually pays the broker.
A little competition never hurt anyone.

as for using a realtor, we used our own. I appreciated that she had no conflict of interest in the deal, and told us what things were worth, what we could expect, how long things have been on the market, how many if any offers were made on the property, comparisons with the other houses in the same area (even some not officially listed, but open to offers), prices for the neighboring homes if they traded hands recently etc. It was this attention to detail and unbiased information that we used to put in a fair offer well below asking, with the knowledge of the likelihood of her realtor recommending she accept it as fair. In the end I am sure we did better than if all we could do was have them reduce the price by less than half of their brokerage fee.
Our realtor never once tried to get us to pay more. In fact she suggested that we have the vendor reduce the price by the cost of a new gas fireplace insert, as the had damaged the existing fireplace.

Sticky

portereight, It looks like you were served very well.
I feel that using a broker and a realtor are probalby the best options, however, that does not mean that they are perfect options.

Just becuase you had a good experience and benefited from the work that these people did does not mean that they did not have their own agenda. In fact, we know that they had their own agenda - to make money for themselves.

What I was trying to say is that these people are in business to make money. If they are smart (like it seems your broker and realtor were) then they understand the long-term benefit of keeping their customers happy.

That long-term benefit is: more money for them in the long run.

If they are not smart then they do not think of the long-term and their decisions are based on the short-term - how can I make the most money off of this deal.

In both scenarios these people are thinking of themselves. They are not in business becuase they are altruistic, they want to make money.

That being said (and as I said in my last post) if you understand that and take that into account when making your decisions (on which mortgage to choose and which house to buy for what amount) you can benefit from the work of these professionals.

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Sticky The Stickman

canuckguy

Thank you for all the info! I did contact a mortgage broker today and got some more info as well. I think I'll go with a realtor as well, since I am rookie it might be best to get a ringer in the mix.
I have a second part to add to the equation. Now when it comes to fix/variable..rates. I have no idea what a good rate should be to be honest. I know that low is better but I am very niave when it comes to what a good rate is..etc.

And when it comes to the home inspection fee's,title insurance, legal fee's and other assorted taxes..etc can these be included in the mortgage? like sticky suggested for the mortgage broker, I did not mention these things when speaking with them today. It was a very general meeting, did the credit check..etc gave me the same max level of mortgage I qualify for (which is $40,00 more than i would like to spend on a house).
thanks again for any tips and suggests.

i feel like a guy standing on the street with his wallet open waiting to get robbed!

Sticky

Fix vs. Variable depends on a few things.
The largest factor affecting this decision is which direction you feel mortgage rates are going to go and for how long.

For example, if you feel that mortgage rates are going to increase over the number of years then a fixed rate may be better than a variable rate.

Conversely, if you feel that mortgage rates will drop over the next number of years then a variable rate may be better than a fixed rate.

In these scenarios the rates that are available to you may look like the following:
Variable: 3.5%
5yr Fixed: 5%

So if rates are going to go up over the next five years the variable rate may at some point be higher than the fixed rate that you could have signed up for.
The variable rate may allow you (depending on the institution) to lock in at a fixed rate at any time but if a year has passed and the variable rate that you are currently at is 4.5% and you want to lock in before it goes higher the orignal 5yr 5% won't be available anymore. The new 5yr rate will be something like 6%.

In the reverse situation, where you think the rates are going to go down. After a year if you choose the variable rate you may be paying 3% whereas if you chose the fixed you will still be at 5%.

I hope that I am helping.

With the home inspection and legal/notarial fees, I was not suggesting that the bank include them in the mortgage. I was suggesting that the mortgage broker get the bank to pay them for you.

If I remeber corectly I did not pay for either of those fees.
These fees can easily add up to another $2000.

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Sticky The Stickman

Sticky

OH, and another thing about buying a house.

Many communities have what they call a Welcome Fee.

This is a fee that they charge based on the value of the house (for tax purposes) when you take ownership of the house. They claim that it is to cover the processing of the deed and other but processing fees should only e a nominal amount. The amount of welcome fees can be in the low thousands depending on the value of the house.

Some "Welcome"

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Sticky The Stickman

canuckguy

cheers sticky for the info, I feel a bit more confident in my ability to not get robbed at gun point now. I am going to make sure that I will get my bank to cover the extra's instead of having them tacked on to my mortgage. Damn I never would have though there would be so many fee's when buying a house. I read that there is one fee where they check to make sure there are no other debts agains the property! come on now. i am not paying for that!

Sticky

Actually that is a very important thing to check.

If there is other debt against the house (not aginst the current owner, but against the actual property) that remains even after the current owner sells the house. Unless the wner clears it.

You want to make sure that these are cleared otherwise someone can come for your house one day for debt that you did not cause.

For example, let's say a builder took out a lien (I think that is the right spelling) against the house becuse the owner owed him some money for some extra work that was done outside of the sale price of the house.

When the owner sells the house to you, any liens stay with the house. This means that the builder can sue you for your house one day even though you did not owe the guy anything.

I hope I am explaining it well.

Make sure you do that check. The notary (or lawyer) should do that check for you. Hopefully you can get the financial institution to pay for the notary as I mentioned earlier.

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Sticky The Stickman

portereight

Your lawyer should verify that there are no liens or other debts attached to the property and absolve you of responsibility. Thats one of those little things that quickly add up to fair sized legal bill.
I guess what you are really paying for is peace of mind (and your lawyers summer place).

canuckguy

Just read some more info on this subject, now my head hurts. thanks for all the info again everyone. I am going to view two houses this saturday, should be interesting experience. btw can you take pictures while your in the house for reference later on?

Sticky

This answer will be too late, but you could ask to take pictures.


How did the house hunting go?

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Sticky The Stickman

canuckguy

The viewings were okay, I think next time though I will have my father inlaw come with us to help give my wife and I a third party opinion as we go through places. all in all it was fun, but were going to pass on both places. ah the look continues...

canuckguy

just an update, went and viewed a house last night......the listing stated it had 1.5 baths....yes the effing .5 bath was just a effing toilet with no walls and a sink just outside the laundry room. nice.....

Charlatan

Get used to that...

That said, if you felt you could make that work (i.e. build some walls, etc.) you could offer less than the asking price by 10 or 20K and see what they say...

__________________
"My hands are on fire. Hands are on fire. Ain't got no more time for all you charlatans and liars."
- Old Man Luedecke

canuckguy

oh yes, it had the space and to make it a full bathroom with a shower..etc, still was a bit of a laugh at first sight. the house was very big, private yard, the attic loft was nice, it needs to be finished but could make an excellent play room for the kido. the basement was just classic. it had a bar.........with a freaking linoleum top....the same as the stairs going down into the basement. haha, the basement was finished as well so it would make a nice home theatre room. ah the look continues. but that house will need to come down in price to justify what they wanted for it.

james t kirk

I will tell you why.

Because when she was making you the offer, it was in her interest to "get" you for as much as possible.

I noticed that my little hot piece of ass banker used to always try to dig me for just that little bit more. Whether it was a line of credit (unsecured), or my mortgage, or later my secured line of credit, she always tried to ding me for an extra half point.

I was told that they are under pressure to produce higher revenues, as well as paid a commission. (I don't know if they commission part is true).

Anyway, I just snapped at her over the secured line of credit once and threatened to take my business elsewhere. Only then did she match what all my friends were getting on their line of credit (i.e. at prime and wave the fee)

(Royal Bank by the way)

james t kirk

Well, I have a variable rate mortgage from the Royal at Prime less half a point. (Prime is 4.25 right now, so my mortgage is 3.75%) I have had a variable rate mortgage for 4 years and have been doing great by it. (Before that I had a 5 year fixed at 7.15% which was great at the time.)

Let me put it to you simple.

Every single percentage point that the rate increases costs you $1,000.00 per hundred thousand dollars of mortgage just in INTEREST. So, if you have a $200,000.00 mortgage and the rate differs by 1%, that's 2 grand in interest and so on, and so on.

Thing is, the interest rates will probably rise in the next six months (so the pros are saying.) David Dodge at the Bank of Canada had been trying to raise rates previously (and did so on a couple of occasions) but the damn Canadian Dollar took off like a rocket and was hitting the manufacturing sector HARD, so he has put the interest rate hike thing into neutral.

He's still itching at the trigger though to raise rates, but he CAN'T just yet because the dollar is hurting the manufacturing sector. If he raises rates, the Canadian dollar will soar to 90 cents or beyond. If the economy picks up though, he won't hesitate to raise rates.

Also, Allan Greenspan is raising interest rates in the states (for the first time in a long time, the Canadian overnight rate is less than the US overnight rate). As Greenspan raises, it will give Dodge some room to also raise.

So, it's a crap shoot as to whether or not to go variable or fixed.

If you can get a five year fixed at 5% or less, I would be tempted to go for that.

That being said, the pros say that Dodge when he raises rates will probably go about a 2% increase, so based on where rates are now, that would mean that my mortgage rate would rise to 5.75 (as a variable) which is still pretty good.

canuckguy

thank you very much, that really opened my eyes as I'm not a money type guy, i let a family friend handle my rsp's, taxes..etc. I think i understand the rates and such much better now. I feel a lot more confident for when I go into sign the mortgage and such.

still not have found a place yet, we have one place in mind that needs some work but still in the hunt.....i need a beer....

canuckguy

Just an update, I but a bid in for a house tonight. The house needs some TLC which is fine, felt like passing out while I signed the paper work. Crazy stuff, the realtor was a very nice that we signed up with, she explained everything to my wife and I and it seems like there real deal.



While I typed this message the realtor just called back with there counter offer, its good and I just told her well take it. sold. omfg. i need a drink again!

the final selling price was 12 grand less than what he wanted. not bad.

james t kirk

Congratulations on the purchase.

Now, wait till you have to sign the papers at the lawyers. You thought the deal making was dizzying. Ha, you haven't seen anything yet.

They will be putting 15 different documents in front of you you won't even be able to read the print is so fine.

Just make sure you check out the interest rate before you sign.

canuckguy

I feel a bit better today, thanks again for the info. now expect to see me most only in the "how to" section.haha

Sticky

When I wen to sign all the papers with the notary (lawyer) I annoyed everybody becuase I read every single thing.

I was not going to make such a big decision without reading.

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Sticky The Stickman

Sticky

Oh ya,

Congratulations brian1975

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Sticky The Stickman

canuckguy

haha, i might join you in reading all the paper work, but the one thing that puzzled me was the lawyer fee's, my realtor suggested two lawyers ranging from 700-1000 bucks. but i found one for 400 bucks. i know the phrase you get what you pay for, but not sure what the difference will be really at this point.

Sticky

let's put it this way.
We had our bank pay for the notary (lawyer). Which means they got to pick him (or suggest a few anyway).

The benefit:
We did not pay for it

The drawback:
We were not really happy with the guy

Like you said brian1975, you get what you pay for.

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Sticky The Stickman

james t kirk

His disbursements will be higher.

When they say 700 to a 1000, they mean his "fee" for just signing the damn papers. The reality is that one of his legal helpers will do all the leg work for him and you. You will get billed for their time and expenses ON TOP of his fee. You won't be out the door for 400 bucks I can assure you.

Weeeeeee, more fun.

canuckguy

We went for a home inspections today. Since we had already decided on the house we just had a family friend go through it with us. as we interested regardless of what is wrong. Everything looks good so far, we have not settled on the mortgage side yet, the broker is giving us the final rates tomorrow. As well my wifes grandparents just gave us a sizeable chuck of change for home renovations, god i love them!

canuckguy

Sold sign is going up tomorrow and I got a 4.70% rate on my mortgage, since I am only working part time at my office now it was the best they could do. Still very happy! thanks everyone for all your help!!!!!

canuckguy

oh yes, the fee for the lawyer is gonna be like 1400-1600. my ass hurts.

canuckguy

http://www.canoe.ca/NewsStand/London...07790-sun.html

A good bottom line at Canada's national housing agency means a $200-million annual break for first-time home buyers and for affordable housing in London and across the country, The Free Press has learned. Changes announced today by federal Housing Minister Joe Fontana could leave as much as $1,500 in the pockets of the average first-time homebuyer in London, one builder predicts.

Fontana will announce today he's converting a $1-billion surplus at the Canada Mortgage and Housing Corp. (CMHC) into a $200-million annual boost for affordability.

Reduced and waived mortgage loan insurance and free title protection are among the measures Fontana's introducing.

His moves were greeted with enthusiasm by housing activists in London who say Fontana's measures will prove helpful, but they are anxious to see details he will spell out today.

Major beneficiaries are:

- First-time buyers who will see a 15-per-cent cut in mortgage insurance, worth $600 on the average CMHC mortgage of $120,000.

- Not-for-profit and housing co-operatives will see mortgage insurance waived on new projects, creating savings of about $300,000 on mortgage loans of $5 million.

- Private developers who create new rental housing in partnerships with CMHC will also see a 15-per-cent reduction in mortgage insurance premiums.

- Homebuyers concerned about ensuring they have clear title will be given no-cost title insurance that would otherwise cost about $200 a year.

Carl DiNardo, president of London builder Covington Group, said combining the title insurance with the break on loan insurance will likely mean a saving of $1,500 for first-time buyers. "I think this is great. We hope this maintains the market, if not improve it."

Fontana told The Free Press he is anxious to continue his drive to improve the supply of affordable housing.

"The bottom line is CMHC had a very good year," Fontana, MP for London North Centre, said yesterday. "Home ownership is up. Home construction is up. People are buying homes like crazy because the economy is doing well."

In the year ended March 31, when CMHC racked up its $1 billion surplus, it approved mortgage loan insurance for more than 650,000 homes or rental apartments.

On the average loan of $120,000, mortgage insurance totalled about $3,900 before Fontana's 15-per-cent cut.

Insurance is required by some lenders who want protection in the event buyers default after making down payments of as little as five per cent or nothing in some cases.

Fontana said he will look at other ways to use CMHC to help people buy their first homes.

The housing minister highlighted as "pretty big" the help for non-profit groups who provide rental accommodation for those most in need. The groups won't have to pay mortgage insurance, leading to lower project costs and rents.

"That's who I want to help, those people who are most vulnerable," Fontana said.

Bob Sexsmith, a Londoner who is past chairperson of the London Homeless Coalition, said the moves by Fontana will be welcomed by the dozen or so groups in the early stages of planning non-profit or co-operative housing in the city.

"I'm optimistic because Joe understands the need and is frustrated by the provincial government has not yet signed onto his housing framework," he said.

Sexsmith hopes details in the plan allow operators of co-ops to pass along their savings in the form of rent reductions for tenants.

Coun. Susan Eagle, chairperson of city council's housing leadership committee, is also anxious to see details, but fears the new breaks won't occur until after Fontana reaches his much-delayed housing agreement with Ontario.

Giving developers a 15-per- cent break on insurance premiums will help them reduce costs and keep rents moderate, Fontana said.

He said he expects cheques of $600 will be issued to homebuyers whose deals have not yet closed and to other buyers in the six months it's likely to take for banks to update their practices and software.

Aside from free title protection that begins this fall, all measures kick in today and would be unaffected by any moves that might lead to the defeat of the government, Fontana said.

He said he is inching closer to the housing framework deal with Ontario that would unlock another $300 million for affordable housing.


Well looks like it may help a bit, nice break for first time buyers. I'll still have to pay effing title insurance cost but should get a break on other fee's. nice to see cmhc making such a huge profit...cough cough...

slimpi66y

you have no idea what you are getting yourself into kid, the housing market in canada is gonna crash any moment now, why do you think the guy wants to sell it to you $12G below listing?

Sticky

I hate Joe Fontana.

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Sticky The Stickman