Mortgage 101 – Importance of Advice over Rate

Todd Veinotte and Clinton Wilkins discuss the role of a mortgage broker, emphasizing their ability to offer tailored mortgage advice and access to multiple lenders.

Todd Veinotte
All right. Welcome back to mortgage 101. Your guide to home ownership. I am Todd Veinotte. This is Clinton Wilkins, our mortgage guru. I should have done this when we kicked off the show, but I’m going to do it now. For those just tuning in, what is a mortgage broker? Because we get new listeners all the time, new people to the country all the time. What exactly is the difference between a broker and just another avenue for getting a mortgage?

Understanding the Role of a Mortgage Broker

Clinton Wilkins
So there’s lots of ways to get a mortgage. We believe that the best mortgage and the best mortgage advice come from a mortgage broker. So, the real difference is we deal with a variety of different lenders. We’re doing the due diligence. We are getting your application, we’re pulling your credit, we’re reviewing your income, and we’re reviewing your assets, and then making a plan on what the best way to move forward is. Everybody’s situation is different. Every mortgage is like a snowflake. It’s not a one size fits all. The other thing is, I’ve been doing this a long time, coming up on $2 billion worth of mortgage fund. That’s a lot of freaking mortgages and compacts. We’re still around people at the branches. They change all the time. And, I think some people are loyal to their bank branch, but the bank is not so much loyal to you. It’s not just about rate, Todd, if it was just about rate, I don’t think I’d have a job. The people who are looking for the lowest rate, they don’t want the advice, and the lowest rate isn’t always the best rate. We want to be competitive. We want to be in the marketplace. But when we’re talking about 5, 10, 15, 20 basis points and the difference in the rate, it doesn’t make a difference. You need to get the advice, where you’re going to trust the people that you’re working with, and for me, I have a vested interest. I don’t get paid unless I do a mortgage. I also want to make sure I put my client in the best possible product, to make sure their finances are protected, and we put them in the best possible financing for their needs. So, then when their mortgage comes up for renewal, they feel they got good advice and they come back to and don’t have to pay. You were paid by the lender, the lender pays as long as it’s prime lending. We are paid by the lender anytime that we do alternative lending, private lending, commercial, sometimes the client does pay. 90% plus of what we do every day is prime lending. And a lot of the business that we deal with every day is with banks you do business with as well, bank branches right from the corner. Why does the bank pay me when they have employees in these branches to do mortgages? They pay me because it’s a lot cheaper and more efficient to deal with me than it is with their employees. Mortgage lending is a complex widget, and they want to make sure that their customers are getting the very best advice, and we are bringing a lot of new customers into the bank. I started 20 years ago, it’s hard to believe it feels like yesterday, and I love it every day. And hopefully our listeners can feel that and hear that from our show. It’s all about education. But when I started 20 years ago, 60% of mortgages were still being done in the branch, and 40% were being done by brokers. I heard a stat the other day of first-time homebuyers. 90% are happening with brokers, and 10% in the branch. Eventually, bank branches will not do mortgages. That’s just reality, and some banks already, they’re not doing mortgages in the branch. If you want a mortgage specifically from that bank, you have to go see a mortgage specialist. But the difference between even a mortgage specialist and us, they only have one lender, we have 40 plus. And again, everybody’s situation is different, and if it doesn’t work with one lender, it could work with another. We’re able to package it up and give it its best foot forward.

Shift in Mortgage Practices Over the Years

Todd Veinotte
I met with a client of yours this week, when I was doing business, and he said that he bought a condo. He was able to buy a condo in a nice part of the city, not far from here. He said that he got nowhere and you told him: I’m going to get you this mortgage.

Clinton Wilkins
I think sometimes people just think they get no once and no one can do it, specifically self-employed people. So many of our clients are self-employed because they’ve had a bad experience with a bank branch and the banks in general, they don’t necessarily understand self-employment. And there are different types of self-employment, and different lenders have different appetites. That’s just the reality of the situation. And I think a lot of our self-employed transactions we do, sometimes our stated income, and the banks don’t do that type. So that may be, you have your income that’s on your income tax, and then there’s income where you state what your income is. And sometimes that may be backing out some expenses. It may be looking at maybe income that’s in a corporation, or maybe the income that’s on your income tax, the last two years aren’t representative of the income that is today. So maybe there’s a big change. But you can’t qualify on your normal process. So we have to do a stated income program where you say, “my income is 50,000 or my income is 150,000 and then we still have to justify it.” Typically, with those programs, we still would get like, 12 months of your bank statements. And we need to justify the income, and how that income is supported by maybe invoices and bank statements and things like that, but it’s not income that we would traditionally use from your income tax.

Credit Importance and Monitoring

Todd Veinotte
Of course, and credit, we want to talk quickly about credit. Credit is key. I mean, it’s very important. It’s right up there with income, obviously, right?

Clinton Wilkins
Credit is so important. There are two credit reporting agencies in Canada, and this will be my quick hit here. There’s Equifax and there’s TransUnion. It’s made up of some key factors, one is your payment history. Pay your bills on time. So many times I see a $10 missed payment. Come on, people, come on. Get your payments automatic, and also monitor your limits. So the limit compared to the balance, is important. So they want high limits and low balances. You want to owe a very small percentage of your balance once you get up to a higher amount, that can bring your credit score down. And the other thing is being your lender mix. If all of your credit accounts are from subprime lenders, that’s going to be an issue. If all your credit accounts are from banks and credit unions, that will help. Car Loans are good. I think having a mix between car loans, leases and revolving is important. If you have all revolving, that’s not going to be great. If you have all the installments, that’s not going to be great. Revolving would be like credit card lines.

Todd Veinotte
So if you’re always catching up on a credit card every month, that’s revolving.

Clinton Wilkins
Revolving accounts are normal, but use it and pay it. Use it and pay it. And those accounts are meant to be paid off every month. Not everybody can, but get it paid down and keep it paid down and try to spend within that spending limit. Again, not everybody can. The lucky ones who have equity in their properties can refinance, and oftentimes get some of this higher cost credit paid down.

Todd Veinotte
And of course, to use the term that you’ve, I don’t know if you’ve coined it or not, but I’ll suggest that you have, you’ve made it popular is, “don’t ostrich.”

Clinton Wilkins
Don’t ostrich. If you need help, ask and open your mail. Know what your finances look like, and if you have a mortgage coming up for renewal, reach out to your unbiased mortgage professional, whoever that may be. 120 days prior, we want to hear from you early. Earlier, the better. We can make a plan and get your finances in order.

Todd Veinotte
How about as far as monitoring credit?

Clinton Wilkins
There are two really good ways to do it, and there are two free apps. Yeah, they might try to sell you some advertising, but who cares? There’s BorrowWell, and there’s CreditKarma. BorrowWell ties on to Equifax, and CreditKarma is tied on to TransUnion. These are both free apps that you can download from the Apple App Store or the Google Play store. You can certainly download these apps. You have to give them your personal information, but they’ll monitor your credit. They’ll monitor inquiries. They’ll give you advice on how you can improve your credit as well. I recommend everyone have them. There also are paid services, both from Equifax and TransUnion. If you don’t want to be sold, the ads, you can certainly pay. And they’re anywhere from 20 to 30 dollars a month per credit reporting.

Todd Veinotte
Well, in the era of security breaches that we’re living in as well, you just need to have information.

Clinton Wilkins
It may be worth it for people to pay the 20 or 30 if that’s further peace of mind. I like the free apps. I use them myself, but it’s not for everybody.

Automatic Payments and Financial Awareness

Todd Veinotte
So also, if you have a partner or somebody who you’re buying with, and you’re not sure what their credit situation is, get them to download the app. Have the uncomfortable conversation.

Clinton Wilkins
Have the conversations. So many times I have to be the bad guy, and I have to share the bad news. Sometimes people are like, “my credit’s kind of not so good” and it’s perfect. And some people are like, “my credit’s fine” and it’s terrible. So, I would have an idea of what your credit looks like. Get your payments to be automatic. Cell phones, student loans, credit cards, lines of credit, pretty much every creditor now will offer automatic payments. I’d get them set up automatically, then you never have to worry about it again.

Todd Veinotte
And I would think that the majority of people who have their act together do that, right?

Clinton Wilkins
Yeah, I agree. And they also know what they owe. They know when their due dates are. And if you do have a credit card and you’re high on the limit, pay it down before your statement generates because whatever shows on your statement is what’s going to show on your credit bureau.

Todd Veinotte
How do people get a hold of you?

Clinton Wilkins
They can check us out online at TeamClinton.ca/radio. We have hundreds of blog posts. We have a secure application on there, and there are links to our social accounts. You can see what Todd and I look like and we roll our show out all month long. But you can certainly check it out on our website as well as. And on the 95.7 website.

Todd Veinotte
As always a pleasure. Clinton. Mortgage 101, your guide to homeownership with Todd and Clinton Wilkins, thanks for listening everybody.