Talk to An Expert: Alexandru Matei, Mortgage Broker (Lending Specialist)

MUNERA speaks with expert Alexandru Matei, Mortgage Broker (Lending Specialist)

Interview by Munera Lawyers

1.Tell us a bit about yourself and your practice. Typical client base, area of expertise, etc.

Thank you for entrusting me to be your Trusted Mortgage Broker. I come from an Economics/ Finance Background. I have studied, worked and lived in Romania, USA, England and Canada. I received 2 scholarships related to Tourism within the Faculty of Economics in both US and England. I have been in the financial customer service business all my life. I have worked for over 30 years in the Hospitality Industry and currently own 2 small 5 star Hotels in Romania with my family. Finally, I have been a Mortgage Broker for almost 8 years now. I take much pride in assisting clients in the Hotel Industry or Finance.

2. Can you tell us what the difference is between a mortgage broker and a mortgage advisor?

Mortgage Brokers are considered independent contractors. Mortgage Advisors usually work in the Lender’s (Bank) branch. There is little difference between them regarding the kind of work that they do. The big difference is that when you work as an Independent Broker, you have access to many Lenders and you work for the client. When you work for a Branch as Advisor or Mortgage Specialist, you are working for the Bank where you only have access to that particular Bank’s products.

3. You specialize in residential real estate. For an Ontarian, what is the typical downpayment? Can you speak a bit about the cost of lending with a 10% downpayment? With a 20% downpayment? Do clients reveal the source of their downpayments?

Downpayment can vary from case to case but people can do 5% or more where they pay a mortgage insurance fee. Some clients choose to provide downpayment of up to 20% or more when they don’t pay any mortgage insurance and they have the option to pursue 30 years’ amortization period; even if the rates are higher, sometimes this combination makes it easier to qualify them and provide a better cash flow depending on the situation. All Lenders require for clients to show 3 months’ Bank Statements to prove the respective  down-payment regardless if it is 5%,  20% or more.

4. How do clients obtain pre-approvals? How can clients best preserve their Pre-Approvals?

Pre-Approvals can be obtained from a few Lenders or from Brokers directly: these are done based on Credit and/or Income checks together with verification of the client’s downpayment.

Note: a Pre-Approval doe not mean an automatic Approval. For the final Approval, Lenders will generally require the property information and they will review the Credit, Income and Downpayment once again.

5. What trends have you seen in the real estate market in Ontario since the pandemic began? Why do you think there has been such a surge in purchasing homes and where is the capital to fund these purchases coming from?

At beginning of the pandemic, people were afraid to buy or to do anything. The pandemic was an unknown factor. I think once Canadians realized that this unknown variable would not go away anytime soon, and that they needed to continue living their lives including continuing to make decisions regarding where they wanted to live, rates lowered and this gave many Canadians the opportunity to refinance and consolidate some of their debt.

6. Do you think that the prices of homes in Ontario will roughly stay the same or is there potential for a downward turn in the real estate market once the pandemic subsides?

Real estate prices in Ontario always have been on a steady increase trend. I believe that even if we may see a correction in the market, it will not be a considerable decline, unless something worse will happen to our economy. Let’s not forget that 50% of the Canadian economy is based on Real Estate.

7. Can you speak a little bit about the stress test which was introduced in 2018? How did it work?

The Stress Test was introduced to calm down the intense increases in prices that happened all throughout 2017 and the beginning of 2018. It definitely tempered the market but the cooling effect lasted only for a few months in 2018.

8. We are told that another stress test will be introduced in Canada in June 2021. Can you tell us a little bit about this secondary stress test? What will it entail?

From June, we have to qualify clients based on a 5.25% interest rate and not 4.79% interest rate as we did all last year and this year. It means that the purchasing power drops by  about 4% but it really depends on each client’s situation. Please keep in mind that the interest rates contained within this paragraph do not constitute the interest rate clients may be getting for their mortgages.

9. A lot of people have predicted a market crash coming with the third wave. However, spring 2021 was one of the best periods we have seen in a while for home sales. Why do you think that is?

I believe that we saw a slow down, not only because of the 3^rd wave, but I believe because the economy is not in recovery yet. Yes, some companies are doing fantastic but let’s not forget that we lost many businesses that probably won’t come back. Many people lost their jobs and even if they qualified for CERB, they cannot use those government benefits in order to qualify for a Mortgage.

10. Is there anything else you would like to share with me?

I’d like to share one fact that I have noticed and I’d like to caution clients regarding Pre Approvals: please use Financing Conditions when purchasing a home! I would like to see Realtors using Home Inspectors for all their purchases. Financing Conditions are used to protect their clients and this is in their best interest. Abiding by this practice, we can temper the purchase prices from infinitely going up. I often see Appraisals coming in lower and clients needing to come up with more money than they have; and this is why some clients may have to access B Lenders and even Private Lenders. On a positive note: we did well during this crisis so far and hope we will continue to do so!

ALEXANDRU MATEI