Mortgage brokers have gained popularity across Canada and now offer a great alternative to the traditional mortgage application process. In the same way that a Realtor works in the best interest of the buyer in negotiating a purchase agreement, a mortgage broker works on behalf of the applicant to secure the best possible terms by shopping around to a variety of lending institutions on behalf of the borrower. A list of the most frequently asked questions is below.
Are there fees associated with obtaining my mortgage through a broker?
Mortgage brokers do not charge the consumer a fee for the services that they provide. The lending institutions compensate them on a referral basis. At the branch level, the cost of processing a mortgage is much higher than it is through a broker. Lending institutions can easily justify the referral fee and a reduced interest rate for the borrower based on the savings from using a mortgage broker in the process of a mortgage application.
Who holds my mortgage once I get approved through a mortgage broker?
Contrary to popular belief mortgage brokers do not hold your mortgage. Your mortgage is placed with a lending company; it may be a bank, a credit union, a trust company, a life insurance company, or even a private lender in instances where the applicant does not meet the stricter requirements of an institutional lender. Mortgage brokers simply arrange the mortgage financing through a particular lender. Ultimately, you will enjoy all of the same benefits of dealing directly with the lender after the mortgage is negotiated by the mortgage broker.
Why are the rates discounted if the mortgage broker deals with the same institutions that I can deal with myself?
It is typically less expensive for lenders to obtain mortgages for their mortgage portfolio through a broker than it is for them to process a mortgage directly through their institutions using employees. Mortgage brokers collect all of the necessary documentation required to complete the application and package it for the lender. Once the file is submitted, the financial institution simply approves it and processes the application immediately. With less overhead involved in processing the mortgage, they are able to offer the consumer a discounted rate on the same mortgage product. Additionally, the volume of simple, clean business that a mortgage broker can bring to the lender encourages lower rates. It is simply less expensive to use a mortgage broker than have bank employees doing the same work.
What do I need to bring to an interview if I go ahead with an application with a mortgage broker?
Mortgage brokers prepare a basic credit application outlining general information like your name, birth date, assets and liabilities, etc. Once a credit report is obtained, the broker sends the information to the lender for approval. Simply be prepared to answer basic personal questions and the mortgage broker let you know what’s required from there.
How do mortgage brokers decide which institution or lender to send my mortgage application to?
Some clients have specific preferences for a particular lender. In cases like that the broker will usually make every effort to accommodate such wishes. In some cases, the client may be seeking certain mortgage options that are only available through certain lenders. Brokers are very familiar with each lenders policy regarding pre-payment privileges and payment options. In other cases, certain lenders might be offering incentives that would prove beneficial to the mortgage applicant. The broker may place the mortgage with such a company if the incentive adds value and makes sense for your own set of circumstances. A mortgage broker is generally familiar with the incentives being offered at various institutions.
What can a mortgage broker do for me that I can’t do myself?
Mortgage brokers act on behalf of the borrower. They put together a package outlining your specific needs and present it to the mortgage underwriting staff of the lending institution. Their relationships with these underwriters and the sheer volume of business that they bring the lenders enables them to mitigate certain credit and employment concerns that a lender may have when looking at a basic paper application. Strong relationships with these lenders also allow brokers to negotiate better rates, terms, and conditions for you.