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Pros & Cons for Using a Mortgage Broker


Jonathan Bark 2017-03-25 15:00:00

No matter if you’ve decided you want to buy a small home in the country or a downtown loft in the city, a mortgage will probably be the biggest investment you have made or will make. Before you sign the paperwork, though, there’s a lot of steps to take, including securing financing. One way to go about that is to get help from a mortgage professional. When you use a mortgage broker, he or she will act as a liaison between you and the lender. A mortgage broker will negotiate the terms and rates and will usually work with different lenders in order to get you the financing options that work best for you. Here are some pros and cons to consider when you are trying to decide if you want to use a mortgage broker.

Pros

  1. They can help people secure a loan. People with poor credit or a low household income who can’t get a bank loan for an ideal interest rate might have better luck with a mortgage broker. A broker will work with the lenders to negotiate better rates, or may know some tricks to help you get financing when you otherwise wouldn’t be able to. One example of this would be for someone who is self-employed. A mortgage broker has access to specialized institutions and private funds that could meet that client’s needs, and have more success in securing a loan compared to a typical bank.
  2. They provide their services for free to borrowers. Mortgage brokers only get paid when a loan is approved and signed. Their advice and assistance will cost you nothing; they are paid a commission by the lending institution.
  3. They will save you time. A mortgage broker will do all of the legwork for you when it comes to contacting lenders, negotiating the deal, and the paperwork. He or she will be the point of contact for you regarding everything that is related to your mortgage financing. Instead of going to one, two, or three banks to deal with the lenders, you will deal only with your broker and let him or her do all the work.

Cons

  1. Some brokers will only compare rates from a few lenders. This may be because he or she has a better relationship with one or two lenders. This means that your broker might not search for all of the best possible deals for you from other institutions. Some brokers will work with a certain institution because it pays more, not because it offers the best rates.
  2. They don’t just work for you. Because a mortgage broker is paid by the lending institution that finances you, he or she technically also works for the lender. A mortgage broker’s fee is set based on the length of the term you take out. The longer your term, the more money the mortgage broker will earn. If your broker pushes for a five-year fixed term when a variable term might be a better deal, he might be trying to get a better payout for himself.

Tips:

  • Understand what rates are available.
  • Check mortgage rates online.
  • Use tools to compare rates offered by different lending institutions.
  • Approach your bank to find out what kind of deals they are offering.
  • Make sure your broker carries the title of accredited mortgage professional, or AMP. Check online at the Financial Services Commission of Ontario. This is the licensing body for mortgage brokers.
  • Do some research into a couple different brokers. Ask about qualifications and years of experience. Ask for referrals.

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