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Join former CBC radio host Mark Connolly as he sits down with real estate insiders to bring you behind-the-scenes perspectives that answer your questions about home ownership.
With topics that matter whether you’re buying, selling, or staying put, this is the place to get the latest market updates for the Edmonton housing market, hear conversations about housing affordability, learn about mortgage options, and so much more.
Join us twice a month for episodes that cover local trends with context you won’t find in the national news, and get actionable insights that give you confidence for your next move.
The RAEdio podcast is presented by the REALTORS® Association of Edmonton.
Mark Connolly (00:04.6)
Joining us now is Heather Bowie, a mortgage broker with Flair Mortgage Group. Hello, Heather, and welcome.
Heather Bowie (00:11.078)
Thank you, Mark. Great to be here.
Mark Connolly (00:13.592)
Well, this is an important thing to talk about, obviously, when you talk about realtors buying and selling homes, that sort of thing. Almost all of us are going to have a mortgage because houses are expensive and you can't get away, most people can't get away with paying cash. So when you're preparing yourself, when you're thinking about buying a home, from the perspective of a mortgage, what should people think about at the beginning of that?
Heather Bowie (00:39.26)
You know, I think the biggest thing that people should think about, and it's often overlooked, is the planning. And that really, talking to it with your mortgage broker needs to come first. Often, I think people go to their realtor first because they get all excited. In the heat of the moment, they start thinking, like, what's the kitchen going to look like? What's the living room going to look like? But they don't do the first step and understand really what the numbers look like before that. And so talking with your mortgage broker first and having that plan in place.
And one of the first questions that I really love to ask is, what does that monthly budget feel like to you? Because I think that's really at the heart of it is you can talk about kind of maybe what that big number looks like, but what does it actually look like or what does it feel like for your monthly budget? I know when I'm working with clients, I don't want them to kind of have that house poor feeling each month. I want to set them up for success.
And so it's building that plan for them with their mortgage that they're going to feel successful every month.
Mark Connolly (01:42.242)
Now you're a mortgage broker. What is the difference between a mortgage broker and just sort of walking into the bank to talk about a mortgage?
Heather Bowie (01:51.494)
Great question. I think when you're trying to make a decision, when you're just going to your bank, you're dealing with somebody that's just a mortgage specialist. So they know their products at the bank. And when you're dealing with a mortgage broker, you're dealing with a licensed professional. So we're licensed under RECA. And so we've taken our courses to get our license. And we then have access to multiple different lenders.
And so we have to learn the different products that these different lenders have. And we have to understand the different ways to look at clients' income, how to review their credit, how to understand different sources of down payment, and really understand the whole big picture, kind of like putting together the puzzle. And it's not just the one product that maybe the bank might offer, but it's all of the different products that are available in the market.
And so I think it's a really robust, I guess, source and like robust products that we're able to offer our clients then because we have the licensing behind us.
Mark Connolly (03:00.898)
And I guess the difference there too is that, I mean the bank, obviously if you have a good relationship with your bank, you hope they're gonna do the right thing. But when you hire a mortgage broker, that's somebody that's working for you. They're looking out for you, they're looking for the best deal for you.
Heather Bowie (03:12.07)
kind of
Yes, yeah, we are actually working for our clients where the bank is working for the bank. Yeah.
Mark Connolly (03:18.338)
Right. Yeah, fair enough. So when people, we talked about that affordability sort of thing and that, that,
looking at what you can expect to pay month to month. often, you know, people look at income and they say, okay, we can, this is the most expensive house we can afford. This is the mortgage we can get. can qualify for that. That might not always be the best idea though, right? How do you decide what that is?
Heather Bowie (03:47.643)
No.
Yeah, so I mean, they can determine, you know, here's what their maximum amount that they can be pre approved for. And that's based on looking at what their debt servicing ratio is. So what their total debt servicing ratio is, and that's great. And we want to keep that under 44 % of their income levels. Perfect. But then you need to look at what they can actually feel comfortable with. That's what it kind of I kind of alluded to at the beginning is
Mark Connolly (04:04.504)
Mm-hmm.
Heather Bowie (04:19.28)
What did they actually feel comfortable paying each month? And that's when I go into a little bit more into budgets with them of looking at, okay, when you start adding in what your property tax are, taxes are utilities, insurance, that kind of thing. That's more than just your mortgage payment. Do you have other costs that are part of owning a home? Even thinking about setting aside costs for repairs that are going to come up down the line so that really you want to set yourself up for success, not just now.
but in the future as well.
Mark Connolly (04:51.574)
Right, I guess also the stability of your job. You want to know that if you were to lose your income for a couple of months, that's not going to put you in a really, really bad situation, right? That you've got to be adjustable.
Heather Bowie (05:05.944)
Yeah, we want to be able to set clients up for success now, but in the future as well. So it's like talking to them about having that little bit of buffer there and some what we call fallback income so that they have a little bit of that extra savings because a lot of times people just want to really push that envelope and want to really go to their maximum all the time. And that's great. But is that really setting them up for?
the success that they need to have to really have that comfort down the line because what if something happens? You we always go into it with the best intentions, but there's always that unexpected, you know, that might happen. And so it's having that little bit of buffer or, you know, maybe we look at building a plan that keeps back a little bit of the down payment so that they have that little bit of savings, you know, in case something happens, you know, the roof goes or you need a new furnace or something like that.
happens and so then they're a little bit, they have that they're built for success.
Mark Connolly (06:06.86)
Now I've heard about pre-approval, and this is where you go and you know what your mortgage is going to be and what you can afford, right? Why is that an important step?
Heather Bowie (06:18.502)
Well, that's where you really are setting up the plan. So you're not just going in blindly. You're able to understand here's what you can afford when you start shopping. One thing I do is we do what's called a fully underwritten pre-approval where we are looking at your income documents upfront. So we're getting those job letters. We are reviewing the T4s beforehand. We're looking at pay stubs and making sure that everything lines up.
The next thing we do is at our pre-approval stages, we're also pulling credit up front. And the reason we pull credit up front is because we want to know if there's going to be any surprises. Those surprises might be like, is there something showing up on your credit history that maybe you don't know about? Often people don't review their credit regularly. There's some tips that maybe if we do it up front that we can build up a plan even over the next three months that can help you get in a position from
you know, that maybe right now it would be tough to get an approval, but if you do these certain things over the next three months, we can get an approval in place. We also are reviewing down payment documents at that pre-approval stage as well. And by doing that, reviewing those upfront, again, we're trying to avoid any surprises so that then when you go and put in an offer, we've kind of mitigated those things that are, could be a potential risk and it helps you to have a solid offer.
By doing that, then when you're working with your realtor, you know, okay, I'm able to put in that offer letter and you like, you have more confidence when you're doing it. You also are not shopping at homes that are above your budget. So you're not kind of, you're managing your expectations upfront instead of, you know, kind of wishing and dreaming that you're at this level and then know you're actually at this level.
Mark Connolly (07:54.06)
Right.
Mark Connolly (08:05.272)
Yeah.
And often, of course, people put an offer on a house and they'll say it's conditional on this. So it might be an inspection, something like that. Even if you had pre-approval, would you put a condition on the financing as well? because you have pre-approval, you still would? OK.
Heather Bowie (08:20.922)
Yes, yes, yeah, yeah, I still wouldn't. Here's why I still recommend that you do it. Getting an approval for financing, you can kind of think it's like sitting in a chair. There are four legs to a chair, and your four legs to a chair is your income, your credit, your down payment, and the property. And so when we do our pre-approval, we are able to pre-approve you for three of those legs. So we can look at your income, we can look at your credit.
and we can look at your down payment source. The one leg that we can't look at when we're doing a pre-approval is that property type. And so when lenders are doing the final approval to approve you for your mortgage, that's what they still need to look at is that property type. And so I still recommend to all of my clients that we've done that pre-approval for, even though I've pre-approved you for three of those things, we still don't know what that property is going to look like. And so it's in their best interest and my job is to protect them.
And so I say, still put that pre-approval, that financing condition on there because I still want to protect you because we don't know what that property is going to be. And there could be a surprise on the property that we just don't know about when we've done that pre-approval. And so that's why I still recommend it.
Mark Connolly (09:32.238)
So once you have the pre-approval in hand, how much time do you have to go shopping? Is there an expiry date on that?
Heather Bowie (09:42.704)
Yeah, so Ari, I see we have 120 days. So when we do that pre-approval, it's valid for 120 days, as long as there's been no changes in your income. So let's say I do a pre-approval and somebody goes out and gets a new job. Well, then that pre-approval is now that's changed because their income has changed. Or let's say they go and they go and buy a new truck or something like that. Again, it's no longer valid because there's a change in their credit.
because they've now taken on new credit. Or if they've gone and they, you know, let's say they told me they had 50,000 in their down payment and then they went and spent 20 of it because they bought, you know, something else. Again, it's not valid. So as long as nothing has changed in the information that they've told me, perfect. It's still valid for that 120 days. But if something has changed, then we need to update those numbers and make an update to that pre-approval number. So it gives them
Mark Connolly (10:21.002)
Yeah.
Mark Connolly (10:39.672)
So.
Heather Bowie (10:40.438)
lots of time to go shopping with the realtor and kind of see what's out there and put in an offer.
Mark Connolly (10:47.246)
Something tells me you've had clients who went out and bought a truck in the middle of a pre-approval. No, no, that's maybe a warning update. I think one of the things that people are concerned about, obviously, is the rate on the mortgage you're going to pay. But there's also, whether it's a variable or a fixed rate, maybe explain what those two things are and how you decide which is best for you.
Heather Bowie (10:50.416)
Yes. Yeah. I'm like, that doesn't help us. Yeah.
Heather Bowie (11:05.788)
Yeah.
Heather Bowie (11:12.443)
Mm-hmm.
Heather Bowie (11:15.964)
Yeah. You know, I think it's a very personal decision. And so I actually have a little tool that I've created for clients to help them decide. It's like a 10 questionnaire that helps them walk them through. But if we want to kind of look at it in easy terms to understand, fixed rates would be where your payment stays the same over the term of your mortgage because the interest rate is fixed for that whole term.
And so I find that that is often best for people that might be very sensitive to what their payment is going to be each month. So they want to be able to know for certain what their monthly mortgage payment's going to be. They might be first time home buyers and that they really like the consistency of what that payment's going to be. Maybe they are on a fixed income and so they really like to know exactly what their payment's going to be each month.
So that's who that might be really good for is a fixed rate because it's very consistent and very stable for them. Now then on the other side, we have a variable rate mortgage and that's where that rate is going to change when there is a change in the Bank of Canada rate. Now that change, sometimes it does change, sometimes it doesn't change. We can't predict what those rates are going to do. If we did,
That would be great. I would love to be able to predict what those rates are going to do. Yeah, exactly, exactly. That would be fantastic if we could. But if we look historically, where there's potential to save is if you were to compare a five-year fixed term to a five-year variable term, there is opportunity to potentially save by choosing that five-year variable term because as the rate fluctuates, your payments
Mark Connolly (12:44.558)
Yeah, you're a then.
Heather Bowie (13:11.804)
could fluctuate as well because if the rate goes down, your payments also going to go down. Now on the flip side of that, if the interest rate goes up, your payment will also go up. So you kind of have to ride the risk there and you have to choose between the fixed rate or the variable rate depending on, you know, if you want to have that stability or the risk of having the fluctuations in your payment there.
Mark Connolly (13:38.254)
All right, let's talk a few terminology things for mortgages because sometimes that can be confusing for people. Can you explain the difference between a mortgage term, the term of a mortgage, and the amortization?
Heather Bowie (13:46.641)
Mm-hmm.
Heather Bowie (13:51.62)
Yeah, amortization. Yeah, great. Okay, so the term of your mortgage, that is the period that you are making that agreement for. So if you, let's say, choose like a five-year term, you are making that mortgage agreement just for five years. And then when we flip it to amortization, that's how long you would be paying off your whole mortgage. typically right now, let's say you get
go out and get a brand new mortgage, you are going to be getting that mortgage for like a 25 year amortization. Meaning that if you were to just make a consistent payment on that mortgage, it would take you 25 years to pay off that mortgage. Now, we do have the opportunity if you're a first time home buyer or you are buying a brand new build, like from a home builder that you could choose to have a 30 year amortization.
So that helps to bring your payments down a little bit lower is option one or you could choose to have a little bit of a higher price point is option two with having that 30-year amortization. a couple things we can do with planning there of how you want to spread that up.
Mark Connolly (15:04.205)
And I guess once you get into a mortgage, have your home and you're going along, there are opportunities to reduce that amortization, which, and I guess the key to that is if you can, if you can make a payment, say in the middle of the year, you've got a little bit extra money, you pay down your mortgage just a little bit, reduce your amortization, that means you're paying less interest over the years, right?
Heather Bowie (15:11.473)
Mm-hmm.
Heather Bowie (15:26.524)
Yeah, yeah. So there's some strategies that we can look at. If for some people though, that's something that's really important to them is to pay as little interest as they can or to pay it off as soon as they can. And so we look at some products that have what's called prepayment ability. So some lenders offer where you can do 20 % prepayment per year. Some lenders only offer, let's say 10 % prepayment per year.
And so by doing these extra payments per year, those extra payments will go directly to the principle of your mortgage. And by going directly to the principle of your mortgage, you are shortening your mortgage significantly by doing it that way because you're reducing the interest that you're paying. So great features. If let's say you're somebody that maybe gets a bonus in a year or maybe you work a lot of overtime and so you have some extra funds that you
have each year, you can put that directly to your mortgage and pay it off a lot faster.
Mark Connolly (16:32.942)
Now, when we were talking about when you're pre-qualifying somebody, you go through all the different various things that the people might have that could impact what they qualify for. One of those must be your credit score, right? And I know you mentioned it a little bit. What kind of things, if you're preparing, say, a year down the road, you're saving up for a down payment, what kind of things can you do to improve your credit score that might affect the kind of mortgage you get and a better deal maybe?
Heather Bowie (16:58.33)
Yeah, a couple of things. One, monitor your credit. So there's some great tools out there that people can monitor their credit on their own. One would be to track it on Borrowell or Credit Karma. So two tools that you can monitor yourself and it doesn't track it as a hit like or credit check if you're monitoring it yourself, if you check it there. The next thing is make sure that you aren't missing any payments or late on any of your payments because that's a huge factor.
The next thing is to keep your utilization. So what utilization is on your credit is let's say you have a credit card that has a thousand dollar limit. You want to keep your utilization between 30 and 50 percent of that. So between 300 and 500 of that thousand dollars. You don't want to go over $500 on that credit card. So you want to be making sure that you're paying it off regularly and not going above that $500.
because if you can keep that utilization low, that translates into a higher credit score. So if you're doing all of those things in advance, then you're preparing yourself and setting yourself up for success to keep your credit score higher for when you do want to apply for that mortgage.
Mark Connolly (18:13.826)
Now, interest rates get a lot of headlines, and obviously that has a big impact on how much you're paying in your mortgage. But how do you help clients deal with that, to tune out the noise that, you know, hey, things are gonna go higher, they're gonna go lower, they're gonna go here and there, that must be a difficult part of the job.
Heather Bowie (18:30.842)
Yeah, it is. And I think the best thing to kind of talk to clients about is to say that, you know, my job is to find you the right rate and the right product from the right lender. Because a lot of times, you know, what they might see on, you know, online or something like that, that might be a rate that's best suited for a totally different borrowing situation that's not even their situation.
And so it's providing a lot of education then for them about what that rate is versus the rates that they might be dealing with. And then understanding the situation that we're in. Like, let's say they need to move really quickly on their mortgage that, you know, they were in multiples and competing offers. And so we need to go to a lender that can get it done really fast, like two days or something like that. Well, then we might have to pay a little bit higher, have a little bit slightly higher rate.
but we're going to get it done in two days for them. And those are the different things that, you know, I have access to with different lenders, but we have to have those discussions upfront. And so it's all about managing expectations and I think providing the education to clients so that they understand, you know, what their trade-offs are. And again, it goes back to the right rate with the right lender and the right product.
Mark Connolly (19:51.694)
We're going have lot of realtors listening to this as well. What makes for the best relationship between an agent and a mortgage broker considering you're both working for the client, but you might work well together as well?
Heather Bowie (20:03.244)
Mm-hmm. I think the best part of that relationship is that it comes down to communication. Is understanding that you guys are both in it to serve your clients and so ensuring that you understand what the communication needs to look like and at what points you need to have that communication. So I know I have set points that I communicate with my clients realtors.
and I let them know, okay, here's when you're going to hear from me and here's the updates that you're going to get from me. And making sure that we're sharing that information because at the end of the day, we want to help our clients and we want to make sure that we're providing the best service to our clients. And so the more that we work together to make that happen, it's the best experience for our clients.
Mark Connolly (20:52.374)
Is there a timing situation? If I'm still a couple years away from affording a house, that's not when I want to engage a mortgage broker, I wouldn't think, right? It's more, say, in the six months to three months before I think I might want to buy?
Heather Bowie (21:08.902)
Yeah, you know, I do still work with some clients where we're a out because we want to come up with a plan. And that might look, that plan might look different because it's more like coming up either with a savings plan or a credit plan for them of here's what you need to do. But then the crunch time is really that six month mark, but you know, where we're really saying, okay, here's what we need to do. And then when we're like four months out.
then we do that pre-approval and we're reviewing all those documents and making sure that we have that set in place so they can put their search in with their realtor and start shopping for homes.
Mark Connolly (21:46.54)
If you had to say this is the one thing that I'm always telling clients, this is the one thing that maybe people don't understand about mortgages or about the house buying process, what would it be? Or are there so many that you couldn't nail it down to one?
Heather Bowie (21:58.03)
no, I think the things I always say is plan, plan first. I think people that they don't think of the plan upfront and then they just start doing and they realize, if I had done that first, it wouldn't be so hard.
and the ones that put the plan in place first and gather all the documents, then it's like, you're just making it so easy. And it's like, well, yeah, you actually made it easy for yourself because you have the plan in place first.
Mark Connolly (22:18.11)
That's a very good point.
Mark Connolly (22:30.636)
That's great. Well, this has been great, Heather. You know, one thing we ask everybody who comes on the podcast is, what makes a house a home? So for you, what would that be?
Heather Bowie (22:43.146)
I think the family is in it.
Mark Connolly (22:48.802)
That's very nice, very well said. Well, Heather, thanks so much for joining us to talk about this today. It's an important part of what people who are buying a home have to go through and for realtors as well to understand your role in it. thanks so much for coming on.
Heather Bowie (23:04.476)
Thank you so much, Mark. Really appreciate it.