How a Mortgage Broker Works: Answering Your Top Questions

How Mortgage Brokers Work: Answering Your Top Questions

Chances are, when your parents bought a home, they got their mortgage from their bank.  But since then, times have quickly changed the real estate market – from the cost of a home, to the different types of housing and mortgages available.

For one thing, when it comes to getting a mortgage, you have more options now than just getting it at the bank, such as using a mortgage broker. You’ve probably heard about mortgage brokers, but may be a little unclear about just what they are, what they do, and how they’re different from other mortgage lenders, like a bank.  We’ve answered your basic questions, here.

What is a mortgage broker?

A mortgage broker is a trained professional who has access to many different lenders with a variety of loans (some with exclusive interest rates). Mortgage brokers can essentially find the right mortgage for your needs.

When they receive your mortgage application, your mortgage broker will shop it around to their lenders to see which lender will give you the best interest rates, conditions, and terms. Brokers either work solo or within a larger broker network.

How is a mortgage broker different from a bank?

A bank is a lender. Their employees will always offer you their bank’s advertised mortgage, and negotiating the rate is up to you.  On the other hand, a mortgage broker is not a lender, but a middleman (middleperson?), who shops around for mortgages from different lenders on your behalf and presents you with the best rate that’s not always advertised. Kind of similar to RateSupermarket.ca, except this site goes one step above and compares both brokers as well as banks/lenders, presenting you with the best of the best.

Can I save money with a mortgage broker?

Yes, you can potentially save a lot of money with a broker for several reasons.  For one, a mortgage broker has more different types of mortgages to choose from than a bank.  They also have exclusive access to certain lenders that you may necessarily not (like smaller lenders, who don’t have the same overhead costs as big banks, and may have cheaper rates and fewer fees).  And finally, because mortgage brokers often represent a number of clients, they can take advantage of volume discounts and pass them on to you.

Does a mortgage broker charge a fee? 

Borrowers (that’s you) do not pay a fee for using a mortgage broker. Mortgage brokers are paid by the lender, but only once the deal is closed.

What are the other advantages to using a mortgage broker?

If your credit rating is less than stellar, you have a better chance at getting a mortgage through a mortgage broker than if you approached a lending institution on your own. Also, a mortgage broker will save you the time and effort of doing the legwork and negotiating on your own. In addition, they can help you find other professionals you’ll eventually need, such as real estate agents, professionals and lawyers. And lastly, mortgage brokers will typically come to you, so it’s a bit easier to fit meetings into your schedule.

How do I know if I get a good mortgage broker?

When it comes to getting a mortgage, you have a lot of choices to make. A good broker will not only get you the mortgage that’s right for you, but will also take the time to explain a lot of the fine print and confusing language that’s part of a mortgage.

It’s also wise to remember that the mortgage broker is paid by the lender and will have built up relationships with lenders over time. Therefore, it’s also a good idea to ensure your mortgage broker compares mortgages from the number of lenders you expect.

If you are concerned that a broker is not bringing you a fair range of rates, you will need to do your homework and be aware of current rates yourself, or at least, find another broker who does. If you’re not aware of the average range of rates available on the market today, a quick search of the best rates at RateSupermarket.ca can provide you with the peace of mind that your broker is doing his or her job.

This post has been updated.

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