Buying a home is most likely the single biggest purchase of your lifetime, so you’ll want to make sure it’s done right. With all the rule changes and fine print, shopping for a mortgage has become more complicated than ever. That’s why it helps to have an independent mortgage broker negotiating on your behalf to make sure you come out ahead. But, what exactly does a mortgage broker do, and what do you, the buyer, get out of working with one?
We’re answering all your burning mortgage questions, and outlining important considerations when working with a mortgage broker.
What exactly is a mortgage broker?
Unless you can afford to pay for your home in cash, you’ll need to take out a mortgage – that’s a loan with either a fixed or variable interest rate to help you buy a home. There are two main places to shop for a mortgage: at a bank or credit union, or with a mortgage broker. Brokers are actually quite popular in Canada—about half of new mortgages are obtained through brokers. Basically, a broker acts like a mortgage matchmaker, pairing you, the borrower, with a lender that offers the mortgage that’s best suited for your needs. That could be the interest rate, the amortization period, or the length of the mortgage repayment terms, or whatever other considerations you might have.
Is your mortgage broker independent, or nah?
Before deciding to work with a broker, you’ll want to find out if they’re an independent mortgage broker. Start by asking the broker how many lender he or she works with. An independent mortgage broker typically works with dozens of lenders and can pair you with the lender that offers a mortgage that’s best suited to your needs. They’re able to provide you with truly unbiased mortgage advice.
Keep in mind that not all mortgage brokers are independent. There are some brokers (often referred to as “mobile mortgage brokers”) that work directly with a bank or credit union. Since these brokers are tied to one lender, you’re not getting the same unbiased mortgage advice that you’d get with an independent broker. For instance, a mortgage broker that works directly with TD Bank can only offer mortgages from TD. If there’s a better mortgage product with another lender, they aren’t likely to tell you to shop elsewhere, but an independent mortgage broker can and will.
How do mortgage brokers get paid?
It may surprise you, but most mortgage brokers don’t earn a steady pay cheque. Quite often they’re paid 100% on commission. The good news is that most of the time working with a mortgage broker won’t cost you a dime. That’s because, most often, brokers are compensated directly by the lender.
A top-notch broker will do what’s in your best interest, even if he isn’t making any commission. For example, sometimes a broker will tell you to stay put with your current lender. Even though he isn’t earning a finder’s fee, he or she is doing what’s in your best interest. In turn, you’re more likely to recommend his services to family, friends and coworkers. Everybody wins.
Mortgage brokers look beyond just the numbers
The home-buying process can happen at a breakneck pace. You want a broker who will return phone calls, texts, and emails in a timely manner. If your broker is MIA, you could miss out on a mortgage deal or worse, be unable to secure mortgage financing by your closing date.
For that reason, you’ll want to hire someone who’s a full-time broker. Although there are brokers who work on a part-time basis, but with so many changes going on in the industry, you need a broker who’s fully focused and willing to work hard on your behalf. After all, finding a mortgage isn’t just about finding the lowest rate. The lowest mortgage rate can help save you hundreds, but the wrong mortgage product can cost you thousands. Doing due diligence before working with a mortgage broker will make all the difference to your bottom line and your peace of mind.
GUEST POST written by Sean Cooper
Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians. He bought his first house in Toronto when he was only 27, and paid off his mortgage in just 3 years by age 30. Sean’s helping others burn their mortgage, too, as an independent mortgage broker. For information on mortgages, email SeanCooperWriter@gmail.com or call 647-867-3711.