The benefits of flexibility

Merix financial recently launched a brand-new product, the Interest-Only Flex Mortgage, geared toward homeowners and investors looking to purchase or refinance up to 80% of the value of the home and take advantage of lower monthly payments during the term. The product offers clients an interest-only payment or a combination of an interest-only payment and an amortizing (principal and interest) payment with either fixed and ARM rates, giving clients choice and flexibility with their finances.

Boris Bozic, founder and CEO of MERIX Financial, sat down with CMP to share more about this significant opportunity for brokers and homeowners.

CMP: Why did MERIX Financial develop this product?
Boris Bozic: We felt there was a need for it. Affordability of homes is an issue, and cash flow is increasingly important. With the increased cost of carrying homes and interest rates on the rise, there was an opportunity to innovate and offer something new to the industry.

CMP: How do you see this meeting the needs of mortgage brokers and their clients?
BB: Brokers will have choice – or, at the very least, have more choice. It’s no longer required of them to just support one of the Big Five, and they can offer solutions where they may not have been able to previously.

For borrowers, it’s primarily about providing additional cash flow for those with other liabilities – for example, student loans. The monthly mortgage payments are comparatively lower than they would typically pay; therefore, they can dedicate those excess funds to other outstanding debts. It also speaks to borrowers whose circumstances may change over the next few years – for example, for maternity/paternity leaves, etc.

CMP: What other types of clients would this mortgage be suitable for?
BB: Well, in my estimation, it’s suitable to all borrowers. However, it could be for clients with seasonal work who would like to pay down their mortgage using the 20% repayment feature on a schedule that fits their irregular cash flow; clients who are living in markets with high real estate prices who want to purchase a home in their desired neighbourhood with manageable monthly payments; investors looking to improve wealth over the long-term, who can put that extra cash to better use through investment opportunities, rather than repaying the principal on a mortgage; clients looking for lower monthly payments to save for home renovations to improve property value; and property investors who own multiple rentals and want to keep mortgage expenses low.

I don’t want to pigeonhole this product – the possibilities really are endless. Adaptations are being provided by our customers, too; they are utilizing this product in ways and in scenarios that we didn’t even contemplate.

CMP: What are the main advantages of the Interest-Only Flex?
BB: The biggest one, of course, would be the monthly payments. That’s why someone would want this over a traditional mortgage – the cash flow. It’s extremely customizable and flexible to be exactly what you need in your financial situation.

Other advantages would be things like LTV up to 80% – maximum 65% in interest-only, and the remaining 15% can be in an amortizing loan. It also applies to all mortgages: purchases, refinances, switches and rentals.

CMP: How do you position this mortgage’s higher interest rate to brokers and borrowers?
BB: That is a challenge. Both brokers and borrowers are hardwired to look at interest rate only. This is not an interest rate mortgage. This is a cash flow mortgage. Therefore, sometime is required to educate the broker base as well as the borrower – but numbers speak for themselves, and the math should guide brokers and borrowers alike.

One of the education tools we’ve created is an Interest-Only Flex calculator that will demonstrate to your client which product mix will provide the best cash flow option for their specific situation.

CMP: Does it meet B-20 requirements?
BB: Absolutely. Obviously great effort was made to ensure that the mortgage features were B-20 compliant.

Also, the product speaks to the concerns that regulators and government officials had that a large portion of borrowers’ disposable income went towards mortgage payments. Because Canadians are predisposed to ensuring that their mortgage payments are up to date, the greater economy doesn’t benefit – those are the government’s words, not ours. Therefore, we created a product that allows Canadian borrowers to still provide shelter for their families, but with lower payments so that the excess funds can be applied to other market sectors.

CMP: Will this product be launched in Quebec in the future?
BB: Not for the foreseeable future, but we plan on other innovative products and launches solely for the Quebec marketplace.

CMP: How does the compensation on this mortgage work?
BB: It’s identical to our existing commission structure, whether it be trailer fees through MERIX or upfront compensation with our Lendwise model. Nothing changes.

CMP: What has the initial reaction to Interest-Only Flex been like?
BB: Extremely positive. We’ve received significant kudos for launching something new and being innovative. The response in larger urban centres – i.e. GTA and GVA – has been very positive, given that our loan limits can now be up to $2 million on an uninsured basis.

CMP: Are there any future innovations in the pipeline from MERIX Financial? What’s next?
BB: There’s always something that’s next. It’s what we do. A lot of our focus and attention is geared towards the digital experience for the broker and the borrower. Stay tuned.