Why don’t Canadians want ALL the options when shopping for a Mortgage?
When we wanted to go on vacation in Niagara falls we did not call up Mariott and ask what hotel we should stay at. We had stayed at the Mariott Fallsview before and had a great experience and we also knew they had another property in Niagara that we might like. Instead of calling that hotel chain we chose to contact a travel agent to find out about other hotel chains, if there were any specials and get some insider advice on where we might want to stay for our mid-week getaway. The travel agent had several options including a 50th floor penthouse with a spectacular view of all 3 falls on a special price because that particular hotel had a pool & fitness area under construction. This special was at a different hotel chain and we would have been totally unaware of it had we contacted only Mariott directly. We booked the special offer at the other chain and were so pleased with our stay and had the best vacation in Niagra with our children.
In the above case it seems like a no-brainer that we would want to know about what options were available for us to consider for our stay. It was also a huge time saver as I COULD sit down and call every hotel chain in Niagara and do all the research myself it costs me nothing to have the expert in that field do it for me. I would think that most people would agree that we got better options, more product awareness and great service from using a Travel Agent instead of booking myself. In the end when using the Travel Agent we still may have ended up at the Marriott should it have been the best fit for our vacation.
In general I am the type of person who likes to use experts in their fields when I am seeking out any product or service. I like to go to a full-time dentist and doctor. When we need a specialist I like to be referred to someone who is specialized in that area, such as an Orthopedic Surgeon for broken bones or an Orthodontist for braces consults. When having electrical work done in my home I use a full-time licensed Electrician, not a handyman that is part-time or unlicensed. My point is that I like experts because I give them my information and want to trust them to help guide me through the process, product or service that they are an expert in. I would assume that most people would also feel this way about the majority of services they use.
So here is my question, when it comes to our mortgage, likely the largest financial decision we will ever make in our lives, why don’t we treat the decision the same? CMHC fount that in 2017 only 39% of homeowners used a broker to arrange their mortgage, up from 33% in 2016. This would mean that the 61% of respondents would consult a bank directly. While I am a big fan of our Canadian banks and place several mortgages at banks each year I find it amazing that roughly 2/3 of Canadians are never asking for a second opinion from an independent and unbiased third party with insider mortgage market knowledge. Yet this is so typical behaviour in every other industry that we typically interact with. That is 61% of people calling up Mariott and saying what is the best hotel to stay at in all of Niagara Falls, Ontario…. And then they are blindly taking one of the 2 options they are presented. How disappointed would you be to show up for vacation and see all those other hotels with different specials, better views or maybe that dog-friendly room they didn’t have to offer you?
One of the biggest issues we see from clients in Canada is penalty remorse. Latest statistics show that 6-7 out of 10 Canadians break their mortgage early. At that time they will have a penalty they will need to pay and if they did not pay attention to this fine print when they signed up for their mortgage they may be facing huge penalties upwards of $30k that they did not expect. I will say it again, banks have great mortgage products, they really do. However, if you want a fixed rate mortgage for a longer term then you could be facing a large penalty to break down the road if you are placed with a lender that uses the posted rate in their penalty calculations. It is often that we hear people say these penalties were not clearly explained to them when they sign up for their mortgage. This isn’t the person you are dealing with trying to trick you, they only have 2-3 different mortgage products so you will need to fit into one of those if you want to have your mortgage transaction handled at a particular lending institution by their staff members. There may be other fixed rate mortgages with the same terms and lower penalties out there but if they aren’t that employees institution then that employee cannot offer them to you, nor should they because that really isn’t their job. Their job is to help you secure a mortgage from the options they have available at their employer that is best suited for your needs. Can you have a great experience and get awesome advice in this way? Absolutely. I know some brilliant people who are great advocates for their clients that work in the mortgage field for banks. Just like I said above, I have always had an amazing stay at the Mariott Fallsview…. But it didn’t negate that there were actually better options out there that I didn’t even know about.