"Best Rate" Sites - What You Need To Know
May 3, 2013 | Posted by: Mike Garganis
“I JUST WANT THE BEST RATE”
You say you want the ‘best rate’. Really? Or do you want to pay the least amount of money on your mortgage? I’ll bet it’s the latter. Make no mistake, these two things are very different and I’ll prove it. Let’s face it, the rate gets everyone’s attention. Most people don’t want to hear anything beyond that. Until they get burned for $$thousands in hidden fees and penalties.
Now what if I told you, during 2008, my clients were in a Variable Rate mortgage based on my recommendations and almost all of them didn’t panic and lock into a fixed rate (like the BIG SIX BANKS wanted them to). They stayed in those products based on my specific advice recommending they not lock into a fixed rate. That’s called being in the right product at the right time. My average client saved $6,000 during that time.
Today, fixed rates have our attention due to the rates being at all-time record lows. So once again, I’m seeing consumers flock to the internet to see who’s got the ‘Best Rate’. Hey, the strategy hasn’t changed, we still want to be in the right product at the right time. The products have become more complicated and we are seeing some poor product recommendations. It’s time put these sites to the test.
SOME QUESTIONS AND ANSWERS
How do these sites work?
These sites advertise all over the internet using ad words and other SEO forms of paid advertising. Consumers click their ads and get directed to their sites….the consumer then notices the ‘so-called’ lowest broker rate for various terms. Fill out the form, send your contact info and that broker will call you.
Do these sites really compare all mortgage broker rates?
NO, not even close! This is the part that surprised me! After a month of reviewing the sites daily and checking to see which brokers were promoted, we could only find 4 different brokers on one site and 6 on another. That’s it! That got me even more curious, considering there are over 15,000 brokers in Canada… 15,000!!… And only 4 to 6 brokers are being advertised? That doesn’t sound like a rate comparison site.
Are new brokers being added and compared?
Here again, I was extremely surprised. I inquired about signing on as a participating broker only to be told the territories I was interested in were all full. By the way, I inquired about several locations… they were all ‘full’? So if I, or any other broker, had a great product to promote, we can’t. These sites only allow a very small number of PAYING broker access in each Province. That’s right…PAYING brokers. This explains why the same brokers keep popping up day after day, week after week. It’s almost like they were selling franchises?? This was starting to sound less of rate shopping sites and more like a business with limited partners.
What’s it cost to get on these sites?
Well, assuming you were a broker that signed on a few years ago and you did get access to the sites. You must agree to pay a fee for each and every lead or inquiry. Cost varies from site to site but it’s around $50 to $70 per lead. A lead is anyone that filled out that ‘contact info section’ looking for more info on the advertised rate.
But are these rates legit?
Yes and no. Yes, the rates are available for qualified applicants that fit very specific circumstances. Does that make them legit? Well, technically, yes, but just barely in my mind. Is it a bait and switch? In some cases, probably, but I’m not sure how widespread this is yet. I’ll be watching, but I have my suspicions.
Do you meet the requirements? Or should I ask, do you want to meet the requirements?
- Some products are only for hi-ratio mortgages (less than 20% down payment)
- Some are for quick closings…30, 45 or 60 days
- Some have limited prepayment privileges or exit options or no exit options
- Some aren’t available for mortgage transfers or switches or refinances.
- Some have inflated penalty calculations (that can work out to $10k, $15k $20k, $30k or higher) with inflated discharge statement fees ($350, $500 or higher) or the new reinvestment fee as high as $1,000 and more.
And then we get into product features that can and do cost you big money. Most ‘best rate quotes’ weren’t available for rentals or preapprovals, just real purchases, etc., etc… The list goes on and on….
Would I recommend these products?
No. I don’t and I never will. Too many restrictions and limitations. Too much buried in the fine print. A $300k mortgage with a 0.10% rate difference saves you $15/mth. But the exit costs down the road, will FAR EXCEED any savings.. Stick to the AAA products in the market.. A broker can get you a great rate today… Rates as good but usually better than your Bank but with BETTER terms and conditions…You’ll thank me later or you’ll wish you had listened to my warnings.
Don’t forget the spam emails!
Almost forgot this one. You can expect an endless trail of spam marketing emails. I counted 16 emails in 30 days offering various other products and services. It really did become quite annoying. Yes, you can unsubscribe, but if you’re like most people that read emails on their phones, it’s not so easy to unsubscribe, so they keep coming over and over again.
If you're not working with a broker or you're not satisfied with your current mortgage specialist, give me a call. I would be more than happy to discuss your options and answer your questions.