Go back 10 to 15 years ago and the value proposition of a mortgage broker was a better rate. Today, a consumer is just as likely to get a low rate from their bank as they are from a broker, which makes sense given that he who holds the gold generally gets to make the rules. This shift in the mortgage landscape has the top mortgage brokers shifting their focus from rates to mortgage management.
Mortgage management is a simple concept. In the same way that a financial planner would manage your investment portfolio, a mortgage manager manages debt, helping you pay it off sooner and creating accountability.
Simple tweaks like adjusting your mortgage payment to match pay increases or increasing payments in line with changes in interest rates can save a client tens of thousands of dollars.
Take for example two newlyweds who came into our recently. While both the bank and one of our mortgage managers were offering the same 2.99% interest rate on their $400,000 mortgage, our specialist was able to set up a strategy for these first time home buyers that will save them $15,000 in the first five years of their mortgage. Furthermore, the strategy that was designed for this set of clients will prepare them for rising interest rates and help them pay their mortgage off before their first child turns 18.
While almost all mortgage holders in Canada intend to accelerate their mortgage payments, very few actually do. Having a mortgage professional there to help along the way is highly effective from both an accountability and a knowledge standpoint. Most borrowers who don’t follow through on their intention to pay off their mortgage do so because they either don’t take action or because they do not know how. A great mortgage manager will both remind their clients when to make mortgage changes, and help the client figure out which changes to make.
For example, something as simple as increasing your mortgage payment can go unnoticed from a monthly cash flow perspective, but can eliminate several years from your mortgage. A strategically timed refinance can save you thousands as well, however identifying that opportunity often takes the knowledge of a skilled professional – one how is looking at your specific circumstances on a regular basis.
Even though the banks would like you to believe that they are actively managing your mortgage, the reality is they make the most money off of the borrowers who take the longest to pay off their mortgages. The banks have an inherent incentive to let you take as long as you like to pay off your debt.
So, while it is still true that he who holds the gold gets to make the rules, letting the bank manage your mortgage is kind of like letting the monkeys watch your bananas. Who’s watching your bananas?
