Broker: Don’t service yourself, service the client

Despite the CMHC’s premium hike on the horizon, one professional doesn’t believe brokers should necessarily advise clients to get ahead of it.

The deadline to submit deals before CMHC’s premium increase is quickly approaching, but that doesn’t mean brokers – and clients – should be worrying.

“We get multiple calls with clients asking how it will affect them and what they don’t realize is it’s just like rates: that five basis points that someone else is going to give you, what does that really equate to at the end of the day?” Geoff Lee of Dominion Lending Centres GLM Mortgage Group told MortgageBrokerNews.ca. “I think when you explain that and you really have your client’s best interest at mind, rather than push them into something they may or may not be ready for, or a property that they aren’t 100 per cent on … it’s really not servicing the client, it’s servicing the broker.”

CMHC announced in early April it will increase insurance premiums for those homeowners with less than 10 per cent down and players expect the move to impact one type of client in particular.

Effective June 1, the insurance premium will rise 45 basis points to 3.6 per cent for those mortgages with less than a 10 per cent down payment. The housing authority said the move, announced late last week, will only add about $5 per monthly payment.

“In order to be eligible for the current (lower) mortgage loan insurance premium your lender will need to submit a request for mortgage loan insurance to CMHC prior to June 1, 2015,” the Crown Corporation stated in its recently released fact sheet on the price change. “As is normal practice, complete borrower and property details must be submitted to CMHC when requesting mortgage loan insurance.”

And while many clients may be scrambling to purchase before the deadline, Lee has been advising some of them to hold off on purchasing until they are completely ready.

“Media does so many different things as far as putting the scare into people … and basically brokers will use that to push people into a transaction,” Lee said, noting it averages out to an extra $5 per month. “At the end of the day is it a deal breaker? No.”