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A home on Delaney Crescent and Brock Ave. in Toronto is for sale on March 3 2014. (Fred Lum/Fred Lum/The Globe and Mail)
A home on Delaney Crescent and Brock Ave. in Toronto is for sale on March 3 2014. (Fred Lum/Fred Lum/The Globe and Mail)

mortgages

Survey suggests keys to happy borrowing are lots of time, no surprises Add to ...

People in the mortgage business are always trying to get inside borrowers’ heads. The more they know about debtor psychology, the more mortgages they can sell.

Financial services firm D+H dove into mortgage consumer behaviour in a recent survey. Below is what it discovered – and what it might mean for your next mortgage hunt.

Borrower Confidence is Growing

The Finding: About half (48 per cent) of recent mortgage applicants feel they could do “everything” themselves for their next mortgage, and all online.

What That Says: “This is one of the most interesting data points in the entire study,” said Monique Allen, vice-president and head of Canadian Mortgage Technology at D+H. “It’s a reflection of the era we’re in,” one in which mortgage shoppers are more informed than ever.

Much of those smarts come from the Internet. Almost one-third of people consider websites to be the single “best” source of mortgage information, says the study. That compares to 37 per cent who answered a “bank branch/credit union” and 21 per cent who said “mortgage broker.”

Growing trust in web sources isn’t news to Ms. Allen. “In most big purchasing decisions today, the first thing we do as consumers is do our research. We turn to online channels to do that.”

Fortunately the Internet has mortgage glossaries, because not everyone has it down pat. Roughly half of mortgage shoppers don’t grasp basic mortgage terms like “rate hold” (how long a rate is guaranteed for), “high-ratio mortgage” (a mortgage with less than a 20-per-cent down payment) and “portable” (the ability to move your mortgage to a new property and keep your rate, without a penalty).

What Matters Most?

The Finding: Respondents say the most important factors when choosing where to get a mortgage were (in order of importance): “mortgage rate,” “no unexpected charges” and “special mortgage features.”

What That Says: People are asking the right questions. Even a caveman could find the lowest mortgage rates online within seconds. What you can’t learn as easily are the hidden costs, including mind-blowing penalties, inflated blend and increase rates (the rates lenders charge on any new money you add to your mortgage), ridiculous rates to convert from a variable mortgage to a fixed, aggravating fees to switch lenders, restrictions when porting your mortgage, and so on.

While the Internet is an information cornucopia, a second informed opinion (from a human) can pay for itself. And the single best question you can ask that mortgage adviser is, “Is there any better mortgage at better rates, than the one you/I have selected?”

The mortgage expert you pick affects not only your borrowing cost but your experience. More than 20 per cent of borrowers say getting a mortgage is like “buying from a used car salesman.” Nine per cent say it’s like going for “a root canal at the dentist.”

It’s no surprise, then, that two out of three borrowers value the person arranging their mortgage more than the lender itself. And they should. Lender reputation is immaterial compared to proper guidance and mortgage flexibility.

What Else Satisfies Mortgage Shoppers?

The Finding: The happiest mortgage applicants, according to D+H’s survey, were those who didn’t feel time pressure, who completed their application verbally, submitted that application from home and who already knew the mortgage provider.

What That Says: When the clock is ticking and your dream home rests on a mortgage approval, preparation pays. If you’ve got a financing condition deadline, minimize stress by collecting the required documents beforehand, choosing a speedy lender and working with an experienced mortgage adviser.

Some of the biggest consumer complaints are triggered by “pressure from the bank or broker to sign documents and time pressure when trying to review all of the documents,” says Ms. Allen. You can alleviate that pressure by starting the mortgage process at least one to two months before your closing date.

Clearly, if you wait till the eleventh hour to get a mortgage, the ulcer factor intensifies. While the median time to get approved is one business day, 15 per cent of approvals take a week or more, says D+H.

You then must give lenders time to review your documents, call your employer if needed, process the appraisal report, receive discharge paperwork from your old lender (which outgoing lenders love to drag their feet on) and arrange your signing.

Then there’s the unexpected time spent ordering documents, resolving document issues, addressing property deficiencies, waiting for condominium disclosures, and so on.

By the way, if your back’s against the wall and you need a fast approval, don’t expect the lowest rates. The lenders with the lowest rates are also the busiest and often take the longest to issue approvals.

Besides time pressure, the survey found the biggest headaches for borrowers were paperwork, uncertainty about getting the best rate and finding the time to meet with a banker or broker.

Future mortgage technology will address several of these pain points, through video chat consultations, photographing documents from your smartphone, uploading documents online and e-signing (a technology drastically overdue in Canada’s mortgage industry).

The mortgage process can only get better. Right now, more than four in 10 borrowers experience emotional negatives at the start of the application process. First-time buyers, who know they’re about to make an enormous financial commitment, are especially anxiety-ridden. But people gain confidence throughout the process, and by the time the mortgage closes, only 16 per cent are left feeling negative.

Confidence comes from knowledge, of course, and each are vital traits for mortgage shoppers. When you’re armed with both, you don’t have to take everything a mortgage salesperson tells you at face value. That’s a big part of the secret to happier borrowing.

Robert McLister is a mortgage planner at intelliMortgage and founder of RateSpy.com. You can follow him on Twitter at @RateSpy

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