Mortgage brokers provide a good game plan when beginning home buying process

by Todd Lewys

These are heady times for prospective homeowners in Manitoba.

With interest rates low and plenty of homes to choose from, it’s all too easy to take a carefree attitude toward purchasing a home. With everything seemingly going their way, home buyers, especially first-time buyers, can get lulled into a false sense of security.

That’s why it’s important to work with an accredited mortgage professional to establish a well-thought-out game plan, said accredited mortgage broker Daryl Harris.

“I often use this analogy when I sit down with first-time buyers for the first time,” he said. “If you have a good game plan, chances are you’re going to have a good game. On the other hand, if you’re unprepared, who knows what will happen.”

Which is why it’s essential to educate first-time buyers right from the get-go, said accredited mortgage broker Denis Brunet.

“On average, I’ll spend one to two hours educating people,” he said. “People will often come into my office all happy and excited, saying ‘I want to buy, this is what I want.’ It’s my job to slow them down and make them aware of what they’re getting in to.”

In many cases, said Brunet, first-time buyers aren’t fully aware of the financial magnitude of purchasing a home.

“Many first-time buyers will tell me, ‘We’ve got the five-per-cent down payment,’ but there’s more to buying a home than that. After your five-per-cent down payment, you have closing costs, then you’ll need to buy other things for the home.”

That list of “things” can be a long one. Often, new homeowners will have to purchase furniture, appliances, rakes, shovels, a lawn mower, snow blower or other items.

“I make a point of discussing all these things up front,” said Brunet. “You have to make sure you have enough money to close after you make your down payment, and to buy the items you’ll need to make your home a real, functional home.”

At the same time, Harris said it’s essential to look at two key components: a couple’s current situation and their future.

“For example, I often ask couples if they’re considering buying a car. If they are, I add the car payments into the mix. There’s no magic formula to good money management. It’s all about knowing your situation, and knowing how to budget.”

That said, people often take a live-for-the-moment approach that can backfire down the line in the not-so-distant future.

“Taking on a car loan is where people can run into trouble, which is why you have to look at both your current and future situations. Future increases to your debt load can really get you into a financial pickle, which is why understanding that is so critical.

“Sure, you can qualify to purchase a home up to 44 per cent of your gross income, but do you want to go that high,” said Harris. “You can’t worry about the car loan later; you have to consider it and add it in to your expenses now.”

The whole idea is to make sure clients don’t need to work to live, said Brunet.

“As brokers, we’re here to work with clients to put them into the right product (mortgage). A thorough assessment of their situation will often show that an ultra-low rate mortgage isn’t the best fit for them. There will often be stiff penalties if they want to break that type of mortgage down the line. The good news is as brokers, we have access to more products (than banks), so we’ll be able to find the right fit for you.”

If you’re an existing homeowner and are looking to renew your mortgage, Harris said there’s good news.

“The latest statistics are showing that 83 per cent of consumers had a rate decrease when they renewed their mortgage,” he said. “It’s allowing people to keep their payments the same, while putting the money they’ve saved on principal payments to accelerate their amortization schedule. It’s a great time to renew, or buy a home. I don’t foresee any major increases to rates any time soon.”

Brunet said the key to keeping the stress associated with owning a home at the lowest possible level is simple.

 “It’s all about education,” he said. “The more informed consumers are, the better. As mortgage brokers, we’re here to help people come out ahead, whether they’re first-time buyers or existing buyers.”