Building Wealth Through Real Estate with Gareth Cahill

Get the Scoop on Mortgage Lending

When representing clients as their buyer’s agent, I always stress the importance of getting pre-approved for a mortgage as soon as possible. It can seem a little overwhelming when you first start looking into financing, so I’ve asked Gareth Cahill, a mortgage broker from Dominion Lending, to help me out with this article to bring you some insight into what this process entails and how to make it work to your advantage. You can check out the full interview at https://www.chriscucoch.com/videos/

Tell us briefly about your background as a mortgage broker.

I came from the banking world; I crawled up the corporate ladder, working at different institutions in a finance or lending role, but I always loved the mortgage side of the banking industry so I decided to get into it full-time for an independent brokerage. I’ve been a mortgage broker for several years now and I’ve spent a lot of time developing relationships with lenders. These relationships are the key to getting my clients into the right mortgage products for their specific situation.

My goal is always to keep our clients informed. We find that the average Canadian only asks three questions about their mortgage: Who is my lender? What’s my rate? What’s my payment? There is a lot more in the mortgage contract and it’s important to understand these items when managing a large debt on their homes, so it’s my promise that every buyer will be educated on the ins and outs of their contract before they commit to the loan.

As a Realtor, one of the first things I tell a first-time home buyer is to get a mortgage broker on their team NOW. Once I pass them off to you, what are the first steps you’re taking?

The first is always to find out more about the buyer and what’s important to them. Are they wanting to buy a condo or a house? What is their present financial situation and do they need to take steps to improve that to be better prepared to qualify? There are so many factors that go into the mortgage approval process so the first order of business is always just a conversation about their desires and their situation.

The next step is pre-approval. The difference between a pre-qualification and pre-approval is that the former is plugging numbers into a spreadsheet to figure out approximately how much an approval might be for. It doesn’t require a credit check and income hasn’t been verified, so it’s a very basic way of getting information from the buyer to estimate the final approval amount. With a pre-approval, we will verify income, run credit, get an underwriter involved. This will determine the maximum amount of money that can actually be lent to you once all is said and done. We want to make sure these buyers are well-informed about what is in that mortgage contract so we will discuss that as we go, too.

Ultimately, the pre-approval will allow clients to bid on properties that are in their price range without experiencing any disappointment of assuming they will qualify for a certain amount, only to find out they actually do not.

What is the one tip you could give for the average first-time home buyer?

Know your options. When a client or a first-time buyer goes in and looks at their lending options, they ask about the rate. Rate is hugely important and not to be discounted, but know what you're giving up to get that rate.

If a rate is really, really low, and it seems like it's too good to be true, most of the time, it is. There could be some clauses in the background that you might not notice, but if a life event happens down the line, you could be faced with some expensive problems because they dangle that rate carrot in front of you and you accept it. The best rate is not necessarily the best mortgage.

When we tailor a mortgage solution for somebody, it's created just them - their needs and their goals. Whether it's a starter home, whether they're going to be in there for only a couple of years or for the rest of their lives. We want to make sure that the solution we're giving a client suits their needs with regard to rate, potential future life events, movements. Sometimes you just have to keep these in the back of your mind since you don't know if it's going to happen until it actually happens. It’s good to have certain clauses in there, but on the flip side, some clauses could be detrimental for you.

The biggest takeaway? Know what you're signing. A mortgage contract is a contract between you and the lender. Know all your options and know all the clauses that are in that contract. Don't just be blinded by the fact that it's the lowest rate.

What does a mortgage broker actually do?

We work on your behalf. As a mortgage broker or mortgage advisor, mortgage expert - the terms get thrown around - we're here to basically hold that client's hand throughout the whole process. To make sure they are well-informed with all their buying options. And make sure they know the ins and outs of that mortgage contract. We're going to help the client manage, a lot of times, a half-million-dollar debt. We can help them determine how to pay that debt as quickly as possible.

What's the difference between a client going to you versus going into the bank branch?

The main difference, and I can speak this from experience as a branch manager, is that the person who's giving you advice at the branch is giving you the advice that the bank wants you to get. I'm in no way anti-bank; the banks are huge supporters of our industry. Because the brand recognition is there, there's a comfort level with going straight to a bank. But we just have to be careful that the advice we're receiving is what's good for the client and not what's good for the bank.

We can provide many more options for the buyer. We can work with an infinite number of lenders; for 2018, we worked with 46 different lenders actually. Banks can’t do that; they only have their own products to offer. Lenders come in all different shapes and sizes so finding the right one for any given buyer will be easier for me to do as a mortgage broker. Again, it goes back to tailoring the right product for the client’s situation. For example, what’s right for a retired couple isn’t going to be right for the young couple just starting out. We can offer more flexibility since we have more access.

What is the difference between, say, one of those big six banks and a different bank or the other options out there?

Again, the difference is in the fine print. The big banks, as they're known, are brands. They’ve worked hard to build a brand up. There's a comfort level associated with that, and if that's what's important to a client, then that's the solution we're going to recommend.

All lenders are all in the same tier, they're all fully regulated, they all have to answer to the same financial regulators. But when we look outside the big six, there could be more value. For example, if you look at the credit unions, they can offer some terrific rates and also some wonderful options for different financial situations and housing types.

So again, I go back to that initial point - the average Canadian asked those three questions: Lender, rate, payment. You also have to look at the fine print. There are a lot of terms people don’t even know are in there. “Buyer beware” comes to mind. And as a mortgage broker, I can help you understand these things to make sure that particular product is the right one for you.

What's the difference between a fixed and adjustable or variable rate?

With a fixed rate, you've got a certain comfort level knowing what your payment will be each month over the long term. Variable can adjust depending on what's going on in the economy and what the Bank of Canada does. Which one is right depends on our buyers and their goals. The lowest rate may not be the cheapest; you want to look at the whole mortgage contract. Sometimes the fixed rate option isn’t the best for your life plan.

Out of curiosity, what's five-year money going for these days?

That’s one of the most common questions we get. What is the five-year fixed rate? The good news is the five-year fixed rate is extremely low. We're talking 2.39. Practically free money. There are savings accounts offering higher interest on your savings.

At this rate, just over half is going to your principal from day one. You can think of the interest portion like paying rent; the rest is going straight to principal and building equity in the home.

How important is my credit score in getting a mortgage?

Credit is so essential in this country for anything you want to do. Even if you're looking to rent, they're doing credit checks on you. The bank is going to lend you anywhere from $300,000 to $500,000 for a property, so they're going to want to make sure that you're creditworthy.

A general rule of thumb is to try to keep your credit above the 680 region. If we were to give a tip about credit, when it comes to revolving credit, like your credit cards and your lines of credit, one thing just to keep on your mind so that your credit does stay strong, is try not go to over 50% of your limits. For example, you have a credit card with a $10,000 limit. Try and keep your spending to about $5,000. The reason being, once you start going above that 50%, it starts looking like you're a little bit stretched, you're relying on credit too much, and it does start pulling your score down. Just be mindful of that.

You host seminars for buyers, can you tell us more about those?

As I mentioned at the beginning, our goal is to educate our buyers on the mortgage process and what their responsibilities are once they enter the contract, so we host these seminars to ensure our clients are understanding all the ins and outs. It’s the biggest purchase most people make in their lives, and it could be the first of many if they want to start expanding their real estate portfolios.

First-Time Buyers Seminar, Wednesday, October 2 and the first Wednesday of each month moving forwards

The purpose of the first of our upcoming seminars is to help that first-time home buyer who’s just taking that first step on the ladder. They need to know as much as they can from an impartial view – not just what the bank wants them to know, but exactly what they’re signing in the mortgage contract. We’ll have a guest speaker, Joel Kadish from Kadish Law, who will cover legal questions that tend to come up during the lending process. One thing that tends to come up is how it works when parents are involved in a purchase or when the buyers are in different kinds of relationships. It’s not as simple as in the olden days when people generally got married and then bought a house to live in till the kids left the nest. Nowadays people are buying a home just to get into the market and then they find their dream home later. Joel and I will be addressing concerns such as these, and much more (how to get prepared for financing, the role of credit, how debt impacts the loan, etc.) at the first-time buyers seminar.

A Brighter Future (Investment and Wealth Building), Wednesday, October 16 and the third Wednesday of each month moving forwards

We also do another seminar for investors, people who want to grow their real estate portfolios. I have a financial planning background, as I mentioned, so I can use that to help clients with questions that may be keeping them up at night. These questions are more along the lines of, “How can I get rid of my mortgage as quickly as possible?” or “How am I going to pay for my kids’ university education?” Another important concern we hear is, “How am I going to pay for retirement?” These seminars are geared toward answering these questions in terms of how real estate can provide for a family and grow overall wealth. Ultimately, people do not grow wealth through slow savings; often the people who are best prepared for life’s circumstances gained wealth through real estate, so that’s what we’re wanting to teach people about. It’s all about leveraging your money to work harder for you. We factor in both short- and long-term goals. We call the seminar “A Brighter Future” because that's what we help people achieve.

Our seminars in the past have been very well received and end up with full rooms spilling into the hallways, so we decided to put a cap on these and they’re filling up, so if someone wants to sign up, they’ll need to do it soon. We will be available to chat individually after the seminars and we’ll also follow up later to see if we can help in any way.

Both seminars will be held at Royal LePage Signature in Mississauga, 30 Eglinton Avenue West. We plan to kick off around 6:30 with light refreshments and then begin the seminars around 7pm. I’ll see you there and hopefully some of your readers will join us. We really have a lot of great information to share.

Gareth Cahill is a mortgage broker with Dominion Lending. You can contact him at [email protected]. For more information about his seminars, you can check out his website https://cahillmortgageteam.ca/