A new survey of Canadians across the country revealed that over half don’t shop their mortgages around for more competitive rates, indicating that they’re likely paying more than they have to.
The HOMEWISE poll showed that only 49.1% of the 750 respondents aged 25 to 44 sought out better rates, while 37.9% remained with their bank and 13.1% said they would go to one of Canada the Big Five.
According to Jesse Abrams, CEO and co-founder of HOMEWISE, Canadians are paying thousands of extra dollars during their amortizations.
“We were surprised by how many Canadians would only go to one bank for a mortgage. This is an outdated and inefficient way to finance one of the biggest commitments of a homebuyer’s life. By not shopping around, homebuyers can lose money on rates, but that’s only part of the story,” said Abrams.
“Mortgage-providers offer different features such as penalties if a mortgage is broken before the term is complete, which can be thousands of dollars more depending on the lender. It’s a case of comparing apples and apples before signing on the dotted line, and it can be complicated.”
Many of the poll’s respondents were first-time homebuyers, but according to mortgage broker Shawn Stillman, this cohort is overwhelmingly comprised of millennials who are tech-savvy and not averse to doing research for the purpose of shopping around.
“First-time homebuyers are a lot more likely to shop around and do their research. They do their research online and they usually go to one bank and one broker, “ said Stillman, principal broker at Mortgage Outlet. “If you’re going to have heart surgery, you’re probably going to do as much research as possible so that you can ask your surgeon all the right questions.”
Stillman added that first-time buyers are a lot more aloof towards financial institutions than their parents are.
“A lot of first-time buyers don’t have the same attachment to their bank that older people have. Banks don’t have relationships with people.”
Mortgage specialists who work for big banks are also far less likely to be forthright about borrowers’ options as their singular goal is to get the latter to sign on the dotted line. Stillman says mortgage brokers spend time educating borrowers in addition to securing them the best rate possible.
Moreover, he says that although alternative lenders charge higher rates, borrowers typically still come out ahead after at least a year.
“When you look back over the last 15 years, it makes sense to go with B channel mortgage because housing prices always go up by a minimum of 4% a year,” he said, “so it doesn’t hurt to go with B mortgage because you always come out ahead.”
Neil Sharma is the Editor-In-Chief of Canadian Real Estate Wealth and Real Estate Professional. As a journalist, he has covered Canada’s housing market for the Toronto Star, Toronto Sun, National Post, and other publications, specializing in everything from market trends to mortgage and investment advice. He can be reached at neil@crewmedia.ca.
As part of its response to Canada’s ongoing housing challenges, the federal government has added another 12 new properties to the Canada Public Land Bank,...
As part of its response to Canada’s ongoing housing challenges, the federal government has added another 12 new properties to the Canada Public Land Bank,...
