When it comes to a mortgage, the focus always seems to be on the rate.

But the part that the mortgage shopper often forgets is that the advice you receive today

can have long term implications for your financial life.

And when something unexpected happens, the right advice is more important than the rate.

Circumstances change sometimes. Unexpected events occur and the things you don’t consider can put you in a difficult position when you least expect it.

And when this happens the quality of the mortgage and financial advice you receive can have a significant impact on many aspects of your life.

Imagine a family with a few children who find themselves in an unexpected setback. Their two incomes drop to one and their debt is mounting. Putting them in a position where their choices are between bad and less bad.

They need help and the right advice.

The bad option turns out to be at the bank, where the representative flat out declines financing. And tells them to sell their home.

This recommendation fails to take into account their entire situation. Treats them like a product instead of real people.

And it also means they will lose their home and eat thousands of dollars in extra fees and commissions for real estate agents, lawyers and moving costs.

Then there is the stress, the disruption and the long term consequences for this family.

At the bank, the advice will move their situation from challenging to worse.

Why did the bank say this?

The bank looked at their situation today and saw no opportunity to cross sell more bank product. To make more money.

Exploring their entire situation however would have revealed an opportunity for a better solution.

One that would give the family some breathing room to deal with their temporary setback and get back on track.

Looking at their mortgage financing as a part of their overall financial plan, by seeing them as people with needs and dreams, they could have given more useful advice.

Negotiating with an alternative lender at a slightly higher rate for example, will keep them in their home and avoid all the additional costs and trauma of moving. This will help them work past their temporary setback.

In time and with some additional good financial planning advice, they will work their situation out. And be back at a lower rate.

Your mortgage in other words is part of a bigger picture. It is an important part of your financial plan. And far too many so called mortgage advisors fail to take the whole picture into account when they give you a quote.

The problem is that the rate is always the focus.

Even though seeing your mortgage as a part of your future plan is more important for your financial future.

Each option provides you with different advantages and disadvantages that you need to consider when you are thinking about where you will be getting your next mortgage from.

What makes me qualified to talk to you about this?

Good question.

I was in banking for more than 15 years. I started and built a successful bank branch as a Branch Manager. I know the bank and bank policy well.

I was also a licenced financial advisor and am well versed in the best practices in this area.

It was as a result of the changes in the bank in recent years that I decided to become an Independent Mortgage Broker. To help people get the advice they need on one of the most important financial decisions in their financial plan.

And the advice you need for a real estate transaction comes from many different places.

Let’s start by looking at the advisors you will need in a typical transaction:

• Mortgage Professional
• Realtor
• Lawyer
• Home Inspector
• Accountant
• Financial Advisor

That’s a lot of different people required to make your transaction as smooth as possible. These people will look after the contracts, inspections, various types of insurance and tax advice.

All of this advice should provide you with the best long term financial outcome with the lowest risks possible. But this isn’t always what happens.

What does your bank do for you?

That means they will be looking for any opportunity to cross sell you all kinds of bank credit products.

Their focus is expanding their reach into your financial life by adding as much product into your portfolio as the can get away with.

But if they are busy looking for ways to add product when you are looking for mortgage advice, are they focused on your long term financial needs and goals?

Are they really paying attention to the parts of the mortgage that will hurt you in the future?

Are they aware of all the options outside the bank that they are not allowed to advise you to explore?

You tell me.

The bank offers the advantage of convenience by offering all kinds of products under one roof. Which is great unless you don’t need these products in the first place.

Like when you go in to refinance your mortgage and they give you a line of credit instead.

They don’t give you the option to refinance because they want to “incentivize” you to take this other higher interest bearing product. Because they can add one more profitable bank product to their portfolio.

They want you to have a bank mortgage. A bank Visa. A bank line credit. And watch for it: insurance from the bank on the line of credit and all of your other credit products.

Because the bank needs to increase their revenue per client by shackling you to a daisy chain of debt based products that have higher interest rates to meet their earnings targets.

When dealing with the bank, there are other considerations as well:

• Less rigorous mortgage training and education
• Cross selling is common practice which leads to...
• Conflicts of interest
• You get no choices outside the bank products
• The bank is looking after: the bank. Not you
• They are not allowed to refer you outside the bank for independent advice
• They are not required to disclose their pay and incentive compensation
  

At the bank your choices are limited. The focus is on the bank and its interests. But it's one stop shopping if convenience is your priority.

A piece of text.

But as we already know, the rate in many cases is less important than all the other factors that can impact your financial health.

They give you the “best” rate, which is more of a teaser.

What you don’t know is that after you add in all of the extra factors related to your situation and the property involved, your final rate is usually much higher.

It’s like going to buy a car.

You see the teaser price advertised and then when you get there you are told about all the add-ons.

Then after the salesman is done with you, the business manager tells you about all the other stuff you can add to your total. It’s only x amount a month she tells you.

So your real price is based on a number of other factors the advertised number didn’t reflect. Just like online mortgage rates.

Some online lenders will also tell you everything you need to know about your credit score. What they won't tell you is the score is the score, and all the really important stuff they can't help you with.

The truth is that the online rate is good for getting an idea of what rate you might get. In the absolute perfect scenario that few are actually in.

They won't help you with all the small details related to the final rate you are likely to receive.

They can't help you with the referrals you might need.

They can’t advise you on the terms of your mortgage that will hurt you.

The online rate is a teaser. Good for shopping. But not the final rate taking into account all the factors related to your situation and the particulars of the property involved.

You are not a number. Not a mark. Not someone to be fooled by teasers and false promises.

You are a human being with dreams, goals and needs. Independent advice is designed to address these needs.

I admit to being biased. I have worked in banking and understand all the things you go through when you meet with an advisor at the bank.

That is why I left the bank to become an Independent Mortgage Professional. To use my knowledge and experience as a personal financial planner and a banker to help you get an edge in this complex process.

To provide you with the kind of advice you deserve.

So what exactly does an Independent Mortgage Professional do that is different from a bank or online lender?

Independent Mortgage Professionals provide a number of benefits:

• Highly trained and certified
• A broader view of the products available, including bank products to help you meet your personal and financial goals
• No cross selling
• An effective source for second opinions on mortgage advice received elsewhere
• Will refer you to the bank if it meets your needs. Including advising you to stay with the bank where the conditions offer the best long term outcome
• An invaluable resource in difficult personal situations like a divorce or unexpected death
• A network of the top professional realtors, lawyers, inspectors and many other services available for referral. These referral services are often provided for at a better rate than you would find on your own
• And soon, Independent Mortgage Professionals will be required to disclose the compensation they receive from mortgage providers (not required for bank representatives)
  

Compensation and disclosure are hot topics right now. At the end of June the regulator of the mortgage industry in BC called FICOM, will be introducing new compensation disclosure rules for mortgage brokers.

What does this mean for you?

Well, not much actually.

Other than disclosing compensation, everything is business as usual.

Disclosure is an ongoing theme across all financial and investment products. Most recently IIROC, the body that regulates the financial industry, rolled out CRM2 including expanded disclosure rules for investment advisors.

These rules provide clients of investment products with more information about the decisions and advice provided to them and the costs associated with that advice.

For example with a mutual fund, disclosure means you are made aware of what the trailer fees you are going to pay out of your pocket are.

You will notice that your financial advisor is required to disclose what they are paid on a transaction. You pay for those fees as well.

In the case of mortgages, Independent Mortgage Professionals are compensated by the lender for what is essentially a risk assessment of your financial picture.

Meaning that the compensation we receive is coming out of the lenders pocket. Not yours.

Any additional incentives reflect the fact that 50 different lenders are competing for a bigger slice of the mortgages at their given risk level.

This competition provides you with choices, better rates and different terms to match your situation.

You have probably also noticed that as a consumer you have also been required to disclose more and more information to various financial professionals. Including Mortgage Professionals.

This disclosure helps us to give you better advice resulting in better financial decisions. It also improves the speed with which these decisions can be made.

By adding more disclosure for Independent Mortgage Professionals to the mix, the idea is to further enhance the accuracy and value of the advice you receive while making transactions faster and more effective.

Disclosure improves openness. And trust.

So the upcoming changes are not really changes but rather enhancements to the process.

A process that takes into account your entire financial picture. Your goals. Your dreams. Your needs.

Helping you get the right product. The advice that avoids financial surprises associated with your mortgage by giving you all the options.

Tailored for you.

So when you are thinking about your mortgage needs, remember the rate isn’t the future. Your goals, needs and financial plan are the future that your mortgage needs to fit into.

And to achieve your goals and dreams you need the right advice. A professional that sees you as a person with a plan to be better off tomorrow than today.