With stricter mortgage guidelines suppressing volumes and competition squeezing margins, mortgage brokers are increasingly on the lookout for new business generators.
Mortgage Perks Plus is a service that TMG pitches to companies. It lets those companies offer employees the benefit of lower mortgage rates.
Essentially a firm pays to “buy down” the interest costs of its personnel. These subsidies help the company attract and retain good employees, while helping employees slash their amortization and interest costs.
Here’s a rundown on how it works:
- Employers are able to subsidize any amount—up to the full interest payment on a mortgage.
- Interest subsidies can be capped, if desired, to limit the cost on big mortgages.
- Rate subsidies are typically 100% tax deductible for the employer.
- Mortgage subsidies can also potentially be non-taxable benefits to employees, but here’s where it gets complicated. Specific requirements must be met for this to happen. One requirement, according to TMG’s Ming Wong, Head of Group Mortgages, is meeting section 80.4 of the tax code. That’s something we won’t even attempt to interpret. Professional tax advice is mandatory. For what it’s worth, CIBC states this in its group mortgage program:
- “If [the] net interest rate (actual mortgage rate minus mortgage subsidy) stays at or above [the] Prescribed Rate…, then [the] subsidy is potentially a tax-free benefit.”(The prescribed rate is currently 2% and is set each quarter.)This is one of multiple tax-related criteria a company must consider.
- On relocations over 40 kilometres, employers can subsidize the full interest amount on the first $25,000, for a maximum of five years.
- TMG provides the employer with a customized website, marketing collateral (e.g. pay stub inserts and brochures), and information guides for employees. The basic program can be set up in just a few weeks.
Programs like this have been around a while, but TMG’s is one of the more comprehensive at the broker level. And, unlike similar bank programs, TMG’s Mortgage Perks Plus plan isn’t limited to one lender. Since it’s broker-driven, employees who get this benefit deal with agents who shop multiple lenders for the best terms.
Here are similar plans for those wanting to research this niche further:
Rob McLister, CMT