Who Should Use a Mortgage Broker? Everyone!
What is a mortgage broker?
There are still a lot of misconceptions and misunderstandings out there when it comes to mortgage brokers and what they do.
A mortgage broker is a professional who is licensed with the Real Estate Council of Alberta (RECA). In order to obtain this credential, a mortgage broker is required to meet educational and professional conduct requirements, and complete background security checks.
How is a mortgage broker different from a bank?
A mortgage broker should never be compared to your local financial institution. The purpose and function of each is very different. An independent mortgage broker is just that-independent-meaning they have no association with any one lender. That means it's their job to offer you unbiased advice.
Essentially, they're experts who are trained and licensed in the business of mortgage financing. Their primary function is to work for you-not the lender! They shop the mortgage market for the best rate, term, and product for the consumer, but they also offer more than this-providing debt consolidation solutions and credit recovery strategies.
Best of all, a mortgage through a broker operates in the same way as the one you would get through your local financing institution. Online banking, accelerated payments, and pre-payment options are all available. It's hassle-free and easy.
MYTH # 1: Interest rates through a mortgage broker are high.
TRUTH: The industry's lowest interest rates are only available through a mortgage broker.
Why should I use an independent mortgage broker?
It pays to work with a broker who will represent your interests and ensure the mortgage you get is the one that's best suited to your needs. Mortgage brokers have direct access to every major lender across Canada. Whether it's a chartered bank, trust or insurance company, or private lender, each offers different rates and product features. Most important for you to know is that many of these lenders are only accessible through a mortgage broker. You will want to ensure you get the one that's right for you.
Obtaining mortgage approval is often dependent on the way your application is presented and who it gets sent to once you have decided where to apply. A mortgage broker is trained to present your application so it will get an immediate, positive result. The turnaround time for a broker to get a response from a lender and secure you financing can be within just 1-3 days, depending on the workload of the lender.
Who pays the mortgage broker?
Mortgage brokers get paid a "finder's fee" for residential mortgages from the lender once the deal has been completed and funded. Therefore, most brokers do not charge clients for their services. To ensure there are no misunderstandings, make sure you ask your mortgage broker upfront if the lender will be paying their fee.
MYTH # 2: A mortgage broker only deals with people who have bruised credit
TRUTH: Whether you have good credit or poor credit, a broker can be a valuable asset.
Independent statistics tell the story ... the use of mortgages brokers continues to grow in leaps and bounds each year as people get a better understanding of what they do.
If you're considering using a broker, ask your neighbors or friends who they have or know dealt with in the past. Get to know the broker you've selected. Are they affiliated with a lender? How do they go about finding a mortgage? Ask if they will come to your office or home to talk about a lender's offer if you're a busy person. Most importantly, ask to review your credit bureau with the broker.
Remember, going through a big bank that offers you only one "posted" rate could cost you thousands of dollars. Why shell out extra money when you don't have to?
For those of you that are totally fresh on the mortgage scene, let's cover the basics. A mortgage is when you charge property to a creditor as security for a debt. What that means in plain English is you give a portion of your property's ownership to a bank for money. Mortgages are one of the biggest loans in banking today, making your interest rate all the more important. Mortgages typically take thirty or more years to pay off, and are a good percentage of many people's monthly payments.
Now, what is a mortgage broker? They are someone who facilitates this exchange of property ownership for money. They can be a part of a bank, credit union, or other lender's paid staff, or they can be independent after they gain some years of experience. For our purposes, we're going to call private mortgage brokers just "mortgage brokers" and mortgage brokers who work for a bank or other lender "bank staff."
How are mortgage brokers paid? There are a number of differing methods, they are mostly paid through the lender they give the loan to. Of course, that means that the service they provide to you is potentially free of charge. Some also charge the person seeking a mortgage a lump sum of a few hundred dollars or so, though every mortgage broker is free to choose their own prices and form of payment since they are an independent business. When speaking to mortgage brokers, make sure to inquire about the method of payment.
Are there downsides to using a mortgage broker? Yes. The major downside of using them as opposed to bank staff is that they themselves do not have access to the funds you're requesting. Approaching a bank or lender's staff directly is probably the best option if funding is required as an emergency. Still this is not necessarily the case. Bank staff have, on average, less experience and may have a large number of clients and other work to deal with as well as a long chain of hierarchy and bureaucracy to work through. Mortgage brokers, on the other hand, prepare everything for the bank ahead of time and present it directly to a bank official, allowing them to skip certain members of the bank hierarchy and get to a simple decision.
If mortgage brokers don't have the funds themselves, then why choose one over a bank? The benefit of using their services over those of bank staff is that they will make the lenders compete for your business and often have special deals set up through the lenders that only they have access to. Typically, they have an arsenal of somewhere around thirty different lenders to choose from and make compete for their business, giving you a wide range of options. This makes their service worth potentially thousands or millions of dollars depending on the value of the property you're seeking a mortgage for. Check this out: a mortgage of $50,000 at just a %1 lower interest rate over the standard 30 years saves around $15,000 depending on when interest on the principle amount is recalculated.
A serious concern when approaching mortgage brokers is mortgage fraud, so how do you know that a mortgage broker is credible? Within the United States of America, the Better Business Bureau gives accreditation to mortgage brokers that can prove their experience in the field and swear to uphold a code of ethical practices, much like the one doctors are sworn to uphold. Still, there are many, many different business organizations that offer similar accreditation, so make sure to investigate the agency beforehand. In most modern nations today there is an organization that gives this type of accreditation, so ask mortgage brokers in your own nation what accreditation they have and what it means to them.
What would good mortgage brokers read more do for you? Good mortgage brokers would ask how much money you need to have lent, the amount you can afford to pay each month, and the time you 'd like to have the mortgage paid off within. Good mortgage brokers would appear professional and be cordial and hospitable while sticking to business and not wasting your time. They may present several different options to you to include your own reason and decision-making abilities in the mortgage acquisition process while simultaneously recommending what is probably the best option for you. They would always offer you greater savings than the price of their own services. Above all, good mortgage brokers would keep in mind what's best for you and your loved ones above any private concerns in their own interest.
The Final Word ...
A mortgage broker independent from a bank or lender should always be able to offer you more savings than the cost of their services. Otherwise, their profession would be worthless to people since it would contain no real value. Although it's not always the case, they are more likely to have their clients' best interests in mind over those of the banks and corporations they serve. Always ask if they follow a code of ethical business practices as a part of their certification.
Mortgage brokers get paid a "finder's fee" for residential mortgages from the lender once the deal has been completed and funded. For our purposes, we're going to call private mortgage brokers just "mortgage brokers" and mortgage brokers who work for a bank or other lender "bank staff."
Some also charge the person seeking a mortgage a lump sum of a few hundred dollars or so, though every mortgage broker is free to choose their own prices and form of payment since they are an independent business. A serious concern when approaching mortgage brokers is mortgage fraud, so how do you know that a mortgage broker is credible? Good mortgage brokers would ask how much money you need to have lent, the amount you can afford to pay each month, and the time you 'd like to have the mortgage paid off within.