You are buying your next house. You ask your realtor what their role is in the process. 9 out of 10 realtors will give you these two standard responses; “My role is to find you a house that meets your requirements and negotiate the best price for you”. (Don’t take my word for this, ask them.)
This is of course the wrong answer. The correct answer is “My role is to find you a house that meets your needs, negotiate a price that fits your budget and find you the best financing to minimize the cost of purchasing the home.”
The average price of a home sold in London Ontario in April of 2020 was $423,143. This is the purchase price, not the cost of buying the house. Assuming you put 5% down and enter into a fixed rate mortgage, amortized over 25 years with a rate of 2.75% based on what the big 5 banks may offer, the cost of your house works out to $577,572, after 25 years or $1,925.24 per month.
Fortunately for you, there are professional mortgage brokers who work independently of the banks. My experience is that we can typically save clients at minimum a quarter point on any mortgage, using lenders you may have never heard of. They are companies that typically trade on the TSX exchange, and because they are virtual lenders with no bricks and mortar branches they need to build, they can pass those savings onto the consumer. Given a rate of 2.50% the total cost of your home would drop to $562,838 or $1872.70 per month. This is a savings of $15,734 or $52.45 per month. You have to remember that rates today are at historic low levels. The higher the rates, the greater the savings to you.
You might be thinking, so I save a quarter of a percent, so I save $50 per month, not a big deal. Well … your situation gets worse.
The $52.45 per month you lost, if it had been invested for the next 25 years at say a modest 5% return would have added $31,234 to your TFSA. If your return was 6%, 7% or more, your return is even greater. Your total savings now jumps to $46,968. (Do I have your attention now?)
If your realtor says he has a “guy” that works out of their office, or at one of the major banks, or initiates no financing discussion at all, you need to run, run fast. We don’t work for your realtor. We don’t work for a bank. We work for you, so that you obtain unbiased advice and the best mortgage option tailored to your individual needs. The nice part is it costs you nothing to use our service.
We welcome your comments and await your call.