This is a very common question and one I love to answer because it is very important. Obviously I want my clients to do as much research as possible and these sites pay prime money (10s of 1000s of dollars) to get on top of the searches so that is a reason it comes up a lot but in the end they are always happy they ended up going with a professional.
There are many reasons why these would put a rate that low. Here are some answers:
– Some of these sites fail to update their rates on a daily basis in an industry that has changes on a daily basis. But if they have them so low, why would they want to? This will get active leads for them that they can then upsell and just say sorry and hope for the best. I get all the same rate email updates from all the same lenders that they use.
– They put artificially low rates to get potential clients to email and fill out applications, only to tell them they do not qualify for it based on factors such as closing date (quick close rates are common (less than 45 days for example could warrant a lower rate), down payment (some lenders have lower rates for high ratio mortgages versus conventional mortgages (higher than 20%)) and location of home. They then will put them with the much higher rate, but they know they have the customer.
– Lower rate mortgages like that sometimes come with very restrictive pre-payment conditions (less than 10% annually), transferability issues (prohibited), and increased penalties if you do need to sell the home (sometimes 3% of the value). For a couple dollars savings a month with no coach and those issues, they are not worth it and I advise against a lot of restrictive mortgages.
These companies are solely transactional (like many banks) and do not offer any coaching strategies, on going support, quick responsiveness, and help throughout the years like I offer. If you deal with companies like this you will be frustrated by telling your situation to many people, never meeting them and most likely a troubling experience down the road in your life if there are any material changes during the duration of your mortgage term. You also lose out on many long term strategies that I work with you throughout your mortgage.
Rates are very low right now, you will see more value from the caring brokers in the coming years when we work with the strategies that combat increasing rates.
My idea is that if you had your amount for a mortgage (say $250,000 or more) and you gave it to a financial advisor, would you only want to hear from them once every 5 years? I know I wouldn’t. Debt is a key part of a financial portfolio and I pride myself on waking up every single morning and reading every possible article regarding real estate and real estate finance to be ahead of any questions and be able to guide my clients.
I am an old school business guy, I am not a fan of faceless corporations. I believe in good business and integrity and becoming a part of my clients life. I do not need to lie about rates to get business. It is what I love and value my role as a professional mortgage advisor.
I hope this article helped and please feel free to text or call me at 613-294-4475 or email me anytime at nick@mortgageinottawa.com
