Why are more and more Canadians using Mortgage Brokers?

By: laura0 comments

Buying your first home is an exciting and critical step in securing your financial future and should not be taken lightly. You should consider several factors before settling on a decision. This article aims to enlighten you on why you should opt for a mortgage broker and why many Canadians are doing the same. Understanding the advantages and disadvantages and why you should consider utilizing a mortgage broker could save you thousands of dollars when you buy a home or refinance your mortgage.

What is a Mortgage Broker?

A mortgage broker is a licensed professional, highly skilled, and trained to procure mortgages for their clients through banks, credit unions, and trust companies. A mortgage broker acts as an intermediary between a home buyer and mortgage lenders. Mortgage brokers aim to stand as your representative or advocate when dealing with lenders and negotiate the best mortgage rates for your dream home.

Why Do People Use Mortgage Brokers?

A few reasons why people use mortgage brokers include:

  1. Mortgage brokers have access to a broader range of lenders for all types of mortgages.
  2. They have access to lenders for home buyers with the very best credit to borrowers with the most precarious situations.
  3. They have access to rates lower than banks due to special promos from lenders not offered to the general public.
  4. They are available outside regular banking hours and are available after work and on weekends for more convenience.
  5. Just like some lawyers, mortgage brokers only get paid when you get a mortgage.
  6. They are in the system and can therefore recognize and identify helpful information. It will save you a lot of money, time, and stress compared to if you were to do it yourself.
  7. They give you advice that pertains to your situation, helping you complete your financial goals.
  8. It makes the mortgage application a lot easier as they will do the research and all the work for you.

Advantages of using a mortgage broker

  • Proficiency in the Market

A vital advantage of working with a mortgage broker is their experience and proficiency in the market. For example, in the refinance process, mortgage brokers offer valuable knowledge. They are well adapted to the market and provide mortgage solutions for years or decades.

  • Lower Mortgage Rates

Prospective Canadian homeowners prefer mortgage brokers because they have access to lower mortgage rates than traditional lenders. They are privy to better rates due to the vast volumes of mortgages they refer to lenders, enabling them to get rate discounts regularly to pass mon to their clients.

  • One-time Mortgage application

A borrower only has to submit one mortgage application and one credit bureau check to apply for a mortgage. Even if the mortgage broker applies to multiple mortgage lenders, there only needs to be one application.

Disadvantages of using a mortgage broker

  • Commission

Mortgage brokers are paid based on the work they do by the lenders, depending on the deals they can close. They are paid commission on each mortgage by the lender. Some lenders pay more commission than others, which may inadvertently make your broker biased and place more attention on that lender at the expense of a few others. Trust goes a long way when using the correct mortgage broker.

  • Losing out on great deals

Though many brokers have different mortgage lenders they can access, not every lender works with brokers. Some of them decide they should lend out directly. Often, it means that the borrower may not necessarily receive the cheapest rate because a mortgage broker doesn’t have access to all the lenders. Not all of them may choose to function via a broker.

  • Brokers Fee

Mortgage brokers may charge a fee on a small percentage of mortgages. These mortgages are usually more difficult to place with a lender and may have to be placed with a private lender. Private lenders do not pay a finders fee or a broker’s fee so your mortgage agent charges the borrower to get paid.

Why do mortgage brokers offer lower mortgage rates than banks?

Mortgage brokers have access to lower mortgage rates than banks.  Banks often only lend their proprietary solutions while mortgage brokers have access to different mortgage options and special discounts by their lenders.

In essence, the mortgage broker finds the best rates for you based on your credit rating, income, marketability of the property, and a few other attributes. They can find a deal specifically tailored to your mortgage needs.

Is it better to use a mortgage broker or a bank?

Over the years, the amount of mortgages that Canadians get through mortgage brokers has consistently increased for the reasons mentioned above. Mortgage brokers are involved in all different kinds of mortgages -residential, commercial, industrial, land for development. They work with borrowers that banks will not work with, and the list goes on. This is not to say that the mortgage representatives at the bank aren’t as knowledgeable. The bank employees are working a regular job, and they get paid a salary. Some get a salary and a commission on sales, just like mortgage brokers. They are under more pressure to meet targets by their employer, and they might end up pressuring their clients. Be aware of tied selling, i.e. offering a HELOC with a mortgage or offering products that provide better retention for the bank, which isn’t necessarily the best thing for the client in the long run.

Conclusion

It is becoming increasingly evident why Canadians are taking advantage of using a mortgage broker. It is more convenient, more efficient, and a personalized experience set to get you the best deals and lead you on the path to finding the perfect home.

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