Mortgage 101 – Lender Transitions with FCT | December 4th, 2023

In a brand new edition of Mortgage 101 live from CityNews, Clinton Wilkins and Todd Veinotte welcome special guest Brenna Charles, Vice President – Sales, Broker Channel with FCT. They discuss the mechanics and benefits of changing mortgage lenders, and what to expect when you work with FCT. They also discuss the Canadian Mortgage Charter and the benefits of the stress test.

Todd Veinotte 00:05
This is the last more you join a one of the season it’s kind of sad, isn’t it?

Clinton Wilkins 00:09
I know you know, it’s just, you know, it’s coming to an end. It’s our last regular show of the season. I think it’s been a great year. For our show, we’ve had so many, you know, engage guests and questions and things like that it’s been really amazing. And November it’s just such an important month, as you know, Todd, Financial Literacy Month. And that’s really what we do here with the show. It’s really about educating our listeners. And, and it really motivates me to come in, you know, share as much information as we can. Alright, so

Todd Veinotte 00:35
And you brought with you guessed Brenna Charles, who I’ve been chatting with a bit here, Brenna, hello.

Brenna Charles 00:40
Hello, and thank you for having me. I’m kind of excited to be here on the, what I’ll call the season finale.

Todd Veinotte 00:45
Yeah this is the season finale.

Clinton Wilkins 00:47
You know, the last show, it’s almost like this selling sunset, we maybe can call this, you know, financing Halifax or whatever.

Todd Veinotte 00:53
And maybe like a reality show, maybe the interview is all separately after and I’ll kind of put run you down and your enemy will be like, I don’t know what’s going on with them. And it’ll be all like, drama.

Clinton Wilkins 01:05
Exactly. I like it. I’m here for it.

Todd Veinotte 01:08
Okay, Brenda, introduce yourself. What, what, what do you do?

Brenna Charles 01:12
Sure thing. So I’m actually in today from Toronto. I’m the Vice President nationally of FCT and really owning the strategy of what we do and how we partner in the broker originated mortgage space.

Mechanics and benefits of changing lenders

Todd Veinotte 01:24
Okay great. So Clinton, when it comes to financial literacy month, I mean, there’s just so many things we could talk about, what kind of percolates to the top of your mind when you’re, when you want to get that information out? What do you think people should really be thinking about right now?

Clinton Wilkins 01:39
Well, I think it’s just people not having a great time, Todd. I think we all know that the interest rates are high, and hopefully, you know, reducing in the future, I think, you know, the economists are thinking midway through next year, we’re gonna start seeing some rates soften, but people are coming up for renewal. And it’s very, very daunting. You know, we’ve said on the show that people are waiting to the very last minute to really start making some decisions. And I think at renewal, such a great time to look at all of your finances. And sometimes changing lenders makes a lot of sense. And sometimes even looking at a refinance, we’ve had so many people coming in, you know, looking to extend their amortizations. And sometimes, you know, borrower additional funds, likely and you know, luckily that if you bought a home prior than, you know, three years ago, at least here in Halifax, it’s worth a lot more money today than it was back then. So people are leveraging some equity in their properties. But even just at renewal and doing, you know, a straight renewal, sometimes existing lenders don’t treat their customers as good as a new lender would. And that’s really why we wanted to bring Brenna on today’s you know, talk a little bit about the mechanics of changing a lender. And you know, what does that look like from a consumers perspective?

Todd Veinotte 02:45
Okay, Brenna, what what are certainly your kind of 30,000 foot thoughts that you’d like to let people know about?

Mortgage renewals and debt consolidation in Canada

Brenna Charles 02:51
Well to Clinton’s point, I know FCT and myself, we’re tracking the sheer number of mortgages that are coming up for renewal in this next year, I think I’ve seen stats like 4.3 million Canadians are going to have their mortgage up for renewal.

Clinton Wilkins 03:05
That’s a lot.

Brenna Charles 03:06
And that is a lot.

Todd Veinotte 03:07
Is that abnormal, is it or is that just kind of happenstance?

Brenna Charles 03:11
It’s somewhat abnormal, because of the market we saw three, four or five years ago, so in COVID, and when funds and rates were super low, a lot of people move their mortgages or purchased homes. Now those mortgages are coming up for renewal. And to Clinton’s point, staying with your existing lender may or may not be in a homeowner’s best interest. So that’s where from our business perspective, we’re looking at how can we make it easy for our clients and for homeowners, to move to a lender that meets the needs and from FCT’s perspective, how we do that we have programs that really just seamlessly move that mortgage over and you know, as we looked at 2024, we’re trying to identify some best practices that can you know, for homeowners to keep in mind, as those mortgages come up for renewal. You know, keeping an eye out from those letters from your existing lender that let you know, your mortgage is coming up for renewal and leveraging that sort of initial contact from your current lender is almost like the prompt to reach out to you know, your mortgage broker or professional to sort of understand what are the options? And should you be looking to transfer? Should you be leveraging this opportunity for debt consolidation?

Clinton Wilkins 04:23
We’re seeing it every day. And I can tell you, there’s certainly a lot of people, and I think there’s been a big popularity in home equity lines of credit over the years. And there’s a lot of mortgage products that might have multiple components. And I think people’s situations change so often. And you know, at renewal, it’s a really good time to look at that. I can tell you popularity wise and you asked me like what are people doing, like what are the you know, transactions that we see every day. We’re seeing people coming out of some of what we call like a collateral charge type product. You know, not to name any names but like a home line plan or a flex line or step and you would know who your lenders are, going out of a product like that into a standalone mortgage certainly has been very, very popular. The reason being is, you know, with this rate environment and where the rates are with the Bank of Canada, if you have a home equity line of credit, you’re paying a lot of interest. And the interest rates are much lower in a mortgage. And I think sometimes Canadians really just want to pay down their debt. And we’re able to often offer a very aggressive pricing for clients at renewal, especially when they change from lender to lender. And maybe Brenna, you can talk to that a little bit like, how does FCT get involved in this process? Like how, how does a client even engage with FCT like, how does this even happen?

Working with First Canadian Title

Brenna Charles 05:34
Yeah, so from FCT’s perspective, what we do, and there’s a number of different mechanisms on how we can move your mortgage from your existing lender. And you know, it could be in a home equity line of credit type product, and how we move that into more of that sort of conventional standard mortgage. And we do that through, again, working with your new lender. So again, if you’re, you’d be working with your broker to provide all those documents that you might need to qualify your mortgage with a new lender. Then FCT we will coordinate sort of the legal and the back end with land titles to make sure that that mortgage that’s registered on your property. So it’s not just something that shows up on online banking, but there’s actual, you know, legal documents that get registered on title. So it shows the lenders interest in your property, FCT once we get instructions from your lender, we then essentially discharge that existing interest that’s registered on your legal property. And then we’re gonna register a brand new mortgage with your new lender under those more conventional and hopefully more favorable terms.

Todd Veinotte 06:42
Okay, I want to ask you guys about Chrystia Freeland and I know, you were on radio with Rob Snow talking about this.

Clinton Wilkins 06:49
Yeah, I was I was on his national show.

Canadian Mortgage Charter and clients best interests

Todd Veinotte 06:52
That’s right. Exactly. And I’m sure you’d be on with him many more times. The Canadian Mortgage Charter. A non-binding set of guidance and expectations that Ottawa laid out for banks in relations to mortgages. Is there any, any heft to this? Any substance to this at all, Clinton?

Clinton Wilkins 07:09
I personally have questions. I don’t have the clarity yet. I don’t know. Brenna, do you have any insight?

Brenna Charles 07:14
I mean, I’d suggest like, again, from 30,000, you know, low level view, I don’t know if there’s necessarily anything totally net new with –

Todd Veinotte 07:22
Yeah, he’s talking about extending amortization periods, you’re doing that already, are you not?

Clinton Wilkins 07:27
Well, it’s not prescribed necessarily that, you know, lenders need to do this. So what I found interesting, you know, as a professional and dealing with this every day, we certainly have lenders that have a fixed payment with a variable mortgage. And as interest rates have gone up, their amortization has gotten longer. We certainly have, you know, maybe midterm potentially switched, and we can talk about what a switch is with Brenna a little bit, from lender to lender to reduce that amortization. But what part of the charter is saying that lenders need to be able to accept a lump sum payment, maybe over and above your prepayment privilege, without penalty to bring that amortization back in line. And, you know, these banks are in business to make money for the shareholders. We get that. And I think that’s what’s so interesting about our business, is we are biased to our clients, not necessarily biased to the lender. And that’s why partnering with, you know, a company like First Canadian Title is so important. You can get your mortgage registered as a refinance, you know, with a lawyer, or you can go to a company like First Canadian Title. The nice thing with First Canadian Title, is, you know, it’s a national firm, and they’re also partnering directly with the lender to make sure that the client’s best interest is really at heart.

The benefits of the stress test

Todd Veinotte 08:41
Okay, ending the stress test when switching lenders at a time of renewal. What do you, what are your thoughts on that, Brenna?

Brenna Charles 08:48
I mean, I think, you know, certainly it helps. So the purpose of the stress test, if maybe we go back a little bit is to make sure that clients who are, you know, taking out new funds would be able to qualify at the time of maturity. If and, you know, looking at today as an example, they mature their mortgage, and then they have to renew in a higher rate environment like today. So, you know, I think it’s already done its job, as we’ve, you know, anticipated.

Clinton Wilkins 09:12
Well I think we’re at the peak.

Brenna Charles 09:13
Exactly, we’re at the peak. So I think removing that stress test, and maybe expanding, you know, so right now, to my understanding on insured switches, and they’ve, so again, if there was a default insurance premium paid by the borrower, and again, I know I’m getting into a little technical here.

Clinton Wilkins 09:31
But like CMHC, Sagen, Canada Guarantee, we talk about those guys on the show, like if they have a high ratio, insured mortgage.

Brenna Charles 09:36
So, now at renewal, there’s been clarification that’s like, okay, if you’re switching over to a new lender, again, more favorable terms, they no longer have to qualify at that higher amount, which should make it easier. So it’s a net benefit to homeowners, and it makes absolute sense. And to be honest, I think that should be expanded beyond just those sort of default those CMHC matured mortgages.

Todd Veinotte 09:57
So the stress test makes a lot of sense when rates are 2%.

Brenna Charles 10:00
Rock bottom.

Clinton Wilkins 10:01
But when we’re at 6 and 7%. We’re at the peak.

Todd Veinotte 10:04
We’re already at the peak, right?

Clinton Wilkins 10:05
We’re almost forcing some customers into alternative lending solutions, because this is a prime customer with great credit, but it just can’t qualify for the ratio. And I think what Brenna said, we see a lot of transfers, and part of our advice that we give customers sometimes is not to refinance. And sometimes it’s just to switch lenders to be able to get better terms, better rates, especially in this rate environment. Sometimes, we’re seeing a variance of, you know, 50 basis points up to 100 basis points of what a customer is offered at renewal compared to what we can get a client approved for with a transfer. And the nice thing with switching, the lender is usually paying the costs. So there’s no cost to the customer that’s incurred to change lenders, you’re getting the benefit of coming as a new customer. And I know I throw this adage that the banks are kinda like the cell phone companies, you know, they always have promos and you know, better deals for the new customers than maybe existing. And I think that’s a real reason kind of at renewal while you need to seek the advice of an unbiased mortgage professional.

Todd Veinotte 11:03
Okay, we’re gonna take a break. Mortgage 101 your guide to homeownership. Clinton Wilkins in studio here with Brenna Charles.