How Interest Rates Are Impacting Mortgages and What to Do About It
with guest Mortgage Broker Carlin Poole
If you have a mortgage or are planning to get one, the rate environment of the last couple of years has probably given you pause. In this episode, mortgage agent Carlin Pool joins the podcast to cut through the noise and explain what's actually happening, what your options are, and how to make sure you're not leaving money on the table.
Carlin is an independent mortgage agent based in Prince Edward County, Eastern Ontario, working with clients across Ontario. Her brokerage has access to over 50 lenders, which means she can shop the market rather than being tied to a single bank's offerings.
In this episode:
What to consider if your mortgage is coming up for renewal at a much higher rate
Fixed vs. variable: how to think about it in the current environment
How physicians specifically can face unique challenges qualifying for a mortgage and what programs exist to help
What a free mortgage monitoring program is and how it works
What it looks like to work with a mortgage agent as a first-time buyer
If Your Mortgage Is Coming Up for Renewal
One of the most common situations right now is physicians renewing a mortgage they took out five years ago and being shocked to find rates have roughly doubled. That's a real challenge, and it's where being strategic about your mortgage term matters most.
Rather than automatically renewing into another five-year fixed mortgage, many people right now are opting for shorter two or three-year terms to ride out the current environment and revisit rates when things stabilize. The logic being that rates are not expected to stay at current levels indefinitely, though nobody has a crystal ball on exactly when or by how much they'll drop.
One real example from the episode: a couple in a variable rate mortgage that had been very low when they entered it saw their monthly payment nearly double as variable rates rose. Carlin was able to refinance them into a shorter-term fixed mortgage, resulting in savings of $36,000 over the following three years.
Fixed vs. Variable Right Now
Historically, variable rate mortgages have worked out better for borrowers about eight times out of ten. But that general rule deserves a closer look in the current environment. Given what has happened with rates over the last couple of years, variable rate mortgages carry more risk than they did when rates were stable or dropping. That doesn't mean variable is never the right answer, but it's a conversation worth having carefully based on your specific situation and what type of borrower you are.
How Physicians Qualify Differently
Physicians often face two specific challenges when it comes to mortgage qualification that a standard lender may not handle well.
The first is being new to practice. A physician coming out of residency may have strong income potential but limited income history, which can be a problem for traditional lenders. Specialized programs exist for exactly this situation, allowing qualification based on projected income rather than past T4s alone.
The second is incorporation. If a physician is incorporated and paying themselves largely through dividends rather than salary, their T4 income may appear low on paper even if the business is doing well. Stated income programs allow lenders to look at overall business income rather than just T4 income for qualification purposes.
One thing worth flagging: some physicians assume they need to pay themselves more T4 income to qualify for a mortgage. That may or may not be true, and it's worth talking to a mortgage specialist before making that decision, because increasing T4 income has tax implications. Ideally this kind of decision is made with input from both a mortgage specialist and a financial planner to make sure the net benefit is actually positive.
The Mortgage Monitoring Program
Carlin runs a free mortgage monitoring program where she tracks basic mortgage information and watches for opportunities to save money, such as when it makes sense to break and refinance based on changing rates.
Anyone with a mortgage can participate, not just existing clients. The information required is minimal: the rate, the amount owing, an approximate current home value, the term length, and the renewal date. She reviews this information every time there are relevant changes in the market and flags opportunities when they arise.
If someone has their mortgage with a lender she has access to, she can potentially work with them even while staying at the same lender. If not, she can explore options with other lenders.
To get access to Carlin's Mortgage Monitoring Program, click here. Once you do, she will check for opportunities for your mortgage or help you get your first one.
Working with a Mortgage Agent vs. Going Directly to a Bank
One thing worth clarifying: in most cases, working with a mortgage agent costs the client nothing. The agent is paid a commission by the lender once the mortgage closes. There is no fee added to the interest rate and nothing extra out of pocket. The exception is alternative lending situations, where a small fee may apply, but those clients are typically happy to pay it because they couldn't qualify elsewhere.
What to Do Next
If you'd like to have your mortgage monitored or talk through your mortgage situation, click here to join Carlin's Mortgage Monitoring Program.
And if your mortgage is part of a bigger picture of questions around your corporation, your investments, and whether you're on track for retirement, that's where a fee-based financial plan can help tie everything together. Book a free discovery call to find out if a plan makes sense for your situation.