Budgeting is a core ingredient that helps alleviate the stress associated with money issues that can sometimes arise if you purchase a home without knowing all of the associated costs – including down payment, closing expenses, ongoing maintenance, taxes and utilities.

The trouble is, many first-time homeowners fail to carefully think about their finances, plan a budget or set savings aside. And in this society of instant gratification, money problems can quickly escalate.

The key is to create a realistic budget based on your goals. Track your spending and make your dollars go further by sticking to your budget once it’s in place. Budgeting offers a step-by-step formula for figuring out how to best save your hard-earned money to invest in homeownership.

Following are three top tips to help you prepare for the purchase of your first home:

1. Set up a savings account. You can deposit a predetermined amount into this account each pay period that you won’t touch unless it’s absolutely necessary. This will enable you to put money aside for a down payment and cover closing costs, as well as address ongoing homeownership expenses such as maintenance, taxes and utilities.

2. Save up for big-ticket items. As you accumulate money in your savings account, you will be able to also save for specific purchases to help furnish your home – avoiding the buy now, pay later mentality, which can have a negative impact on your credit when you’re seeking mortgage financing.

3. Surround yourself with a team of professionals. When you’re getting ready to make your first home purchase, enlist my services as a licensed mortgage professional and find a trusted real estate agent. Experts are invaluable as you set out on the road to homeownership because we help first-time buyers through the home purchase and financing processes every day. Experts can answer all of your questions and set your mind at ease. I have access to multiple lenders, and can help you get pre-approved for a mortgage so you know exactly what you can afford to spend on a home before you head out house hunting, while a real estate agent will be able to match your needs with a house you can afford. Both parties will negotiate on your behalf to ensure you get the best bang for your buck. And, best of all, these services are typically free. Experts will also be able to refer you to other reputable professionals you may need for your home purchase, including a real estate lawyer and home appraiser.

The Canadian Association of Accredited Mortgage Professionals (CAAMP) released a new report in mid-February on employment impacts of housing and related mortgage activity that describes the impact of jobs in Canada related to the housing and mortgage sector.

The Canadian housing economy is safe and stable. At the peak of the US housing boom, approximately 20% to 25% of all US housing sales were for investment purposes. In contrast, CAAMP estimates that only 2% to 3% of Canadian home sales nationally are investment properties. The reason why this is important is that lenders assume borrowers will pay the mortgage on their primary residence ahead of any investment properties.

The latest CAAMP report also shows that home equity is growing rapidly, and Canadian mortgage holders are repaying their mortgages more quickly than is required. This is great news as, not only are Canadians paying less overall interest throughout their courses as mortgage holders, but they’re also becoming mortgage-free faster as a direct result.

The biggest threat to the health of the Canadian housing and mortgage industry is a recession that results in job losses. The best way to

support the housing and mortgage industry, and to sustain its positive impact, is to pursue policies that continue to create jobs.

At the same time, it’s important that qualified buyers have choice when seeking mortgages to finance or refinance their homes. The mortgage brokering industry offers more choice to borrowers than any other channel – including bank branches and bank mobile mortgage specialists – as brokers have access to multiple lenders (banks, credit unions, trust companies, etc) and can truly match each borrower with the ideal mortgage product and rate catered to their unique needs.

Housing sector major economic driver
There’s no doubt that the Canadian housing sector is a significant economic driver for our country. In fact, housing and mortgage activities create significant employment in Canada. They could account for more than 1.35 million direct and indirect jobs (about 8% of total Canadian employment).

The housing and mortgage industry has been particularly important to job creation over the past five years. From 2006 to 2011, it’s estimated that 18% of all job creation occurred as a direct and indirect result of growth in the housing and mortgage sector.

Rising home values lead to greater consumer spending and, therefore, a stronger economy. CAAMP estimates that rising home values from 2006 to 2011 have led to $17 billion in additional economic activity, or about 1.2% of total gross domestic product (GDP) in Canada.

Click here to read the entire CAAMP report.

While “no-frills” mortgage products typically offer a lower – or more discounted – interest rate when compared with many other available products, the lower rate is really their only perk.

The biggest problem with looking at rate alone is that you may end up paying thousands of dollars in early payout penalties if you opt for a five-year fixed-rate mortgage, for instance, and then decide to move before the five years is up.

No-frills mortgage products won’t let you take your mortgage with you if you purchase another property before your mortgage term is up – ie, portability is not an option with this product. Portability is an important option that could save you money over the long term if the home of your dreams is within your reach before your mortgage term is up and rates have risen, which they have a tendency to do over a five-year period.

This type of product is only plausible for those who have minimal plans to take advantage of benefits that will help pay off your mortgage faster – such as pre-payment privileges including lump-sum payments.

Essentially, this product is only ideal for: first-time homebuyers who want fixed payments and have limited opportunities to make lump-sum payments during the first five years of their mortgage; and property investors who need a low fixed rate and aren’t concerned with making lump-sum payments.

It’s understandable why these products may seem appealing. After all, not everyone feels they have the extra cash to put down a huge lump-sum payment. And who needs a portable mortgage if you’re not planning on moving any time soon?

But it’s important to remember that a lot can change over the course of five years – or whatever term you choose for your mortgage. You could get transferred, find a bigger house, have babies, change careers, etc. Five years is a long time to be anchored to something.

Many people won’t sign a cell phone contract for longer than three years that they can’t get out of, so why would they then sign a mortgage for five years that they can’t get out of?

The thing is, you can still obtain great mortgage savings without giving up the perks of traditional mortgages. For starters, many lenders are willing to offer significant discounts if you opt for a 30-day “quick” close.

And there are many other ways to earn your own discounts. For instance, by switching to weekly or bi-weekly mortgage payments, or by obtaining a variable-rate mortgage but increasing your payments to match those of the going five-year fixed rate, you’ll be ahead of the typical 0.1% discount of a no-frills product before you know it – and you won’t have to give up on options.

Banks don’t give anything away for free – they’re there to make money. That’s why it’s essential to discuss the full details surrounding the small print behind the low rates. It’s also important to take into account your longer-term goals and ensure your mortgage meets your unique needs.

As always, if you have questions about mortgage rates, or other mortgage-related questions, I’m here to help!

Scenario: Your client, who has had several credit cards for a number of years recently changed his name. When you tried to pull his credit bureau, the credit system reported that he had no active trade lines. The system failed to find his credit information despite the fact that you had entered his SIN (Social Insurance Number) and date of birth correctly. Eventually, you are able to get his credit score by making the request using his previous name.

The question to ask your Calgary mortgage broker is this: What’s going on and how would you proceed from here?

What’s going on?

When people apply for credit, they sometimes provide variations on their name. For me, Randy McGuire, Randy J. McGuire, Randolph McGuire and Randolph John McGuire are all names I’ve written on various forms in my lifetime. Normally, these variations are caught by the system and the variations show up as AKAs on the credit report. Sometimes, though, they are missed and separate files are created. I once worked with a client whose Equifax profile was split into 5 separate files!

What can be done?

If your broker replies that since the credit bureau has the wrong name on it, you’d need to qualify it with an official change of name certificate, then the broker knows what is required by the lender. However, if this is ALL they say they’d do, then you’re probably not dealing with a top broker in terms of customer service.

What I do: Given that it’s possible to pull two different versions of the same client’s credit information, I know that my client’s file is not properly organized with the credit agency. I then call either Equifax or TransUnion and ask them to combine all of my client’s different reports into one. Once this is done, I pull a single report with all of the client’s information and updated, legal name for submission to the lender. The next time I speak with my client, I let them know what I did and advise them to always use the exact same name when applying for credit in the future. It all takes less than 5 minutes and is something the client benefits from for the rest of their life.

Here are some of the reasons why every broker might not do this:

1. They don’t know how
2. It’s not required
3. It takes time
4. Keeping the credit report hard to pull might help with client retention

There’s never really any good reason not to do all you can to help your client. Not knowing is OK for a new broker who is just starting out, especially since helping a client in this way is not required. Going beyond requirements, though, is the very definition of great customer service. Not wanting to take the time is also acceptable, but only if you’re one of the “lowest rate in Calgary” kind of mortgage brokers who don’t go out of their way to advertise great customer service. The final reason is just malicious and in my opinion, constitutes a breach of the fiduciary duty owed by mortgage professionals to our clients.

Is your broker one of Calgary’s finest in terms of customer service?

Calgary Mortgage Mobile - Randy McGuire

When you go to a bank to get your mortgage, the relationship between you and the bank is strictly lender-borrower and “caveat emptor” (let the buyer beware) is in full force.

It is settled law [in Canada] that in the absence of “exceptional circumstances” or a “special relationship” …. the relationship between a financial institution lender and a customer borrower is, generally, a “purely commercial relationship of creditor and debtor” and does not give rise to any duty of care…. and in particular does not result in any duty which would require the bank to advise the customer not to undertake the loan…. (from: Canada: Duties (Not) Owed To Borrowers by Jeremy D. Burke, LLP )

The courts have determined that you should realize that the bank is a corporation whose sole purpose is to realize a profit and that appropriate measures to protect your personal interests should naturally arise from this realization.

A Calgary mortgage broker, on the other hand, works as an advisor or guide and has what is known as a fiduciary duty to you.  To me this means that in my dealings with you, your stated interests are paramount and every action I take will be in your best interests. To properly fulfill this role, the government requires Calgary mortgage brokers to be licensed (unlike bank employees). Licensing though, is a bare minimum and Calgary’s best mortgage brokers continually upgrade their education, voluntarily adhere to the CAAMP code of ethics, and otherwise provide their clients with the best service and guidance possible.

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