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Finding a suitable and affordable mortgage is pretty tough if you don’t know where to look, especially around Canadian cities where housing costs are through the roof. If you’re struggling to find an affordable mortgage, your search may go easier if you hire a mortgage broker as working with one can come with some serious advantages.
What Is A Mortgage Broker?
A mortgage broker is a housing market professional who works for a mortgage brokerage. To become a certified broker, one of these specialists needs to go through a training program and obtain a license from their provincial or territorial government.
Most mortgage brokers have an extensive network of home financing providers that they do business with, such as banks, credit unions and alternative or private companies. In exchange for a percentage of the proceeds, otherwise called a commission, the broker helps these lending companies fish for new clients.
What Does A Mortgage Broker Do?
Here are some of the other common tasks a mortgage broker performs day-to-day:
- Directing potential clients toward various mortgage providers
- Assisting clients with the pre-approval and mortgage application process
- Contacting subprime lenders for people with less-than-perfect finances
- Negotiating (brokering) deals between mortgage providers and borrowers
- Locating interest rates and financing plans that work for specific clients
- Offering lower interest rates to make mortgage deals more appealing
The Mortgage Broker’s Most Important Tasks
Basically, a mortgage broker’s job is to connect you with a mortgage provider and financing program that suits your particular financial and personal preferences:
- Specialty Lenders – If you have bad credit, many prime lenders will deny your application or charge you a higher interest rate because you’re considered as a riskier client. The same goes for people with low or inconsistent incomes. Luckily, a mortgage broker can connect you with providers who work specifically with high-risk clients.
- Good Interest Rates – As mentioned, some mortgage brokers snag clients by negotiating with mortgage providers for better interest rates. So, unlike a traditional lender, who can only offer their rates, a mortgage broker can look all over the country and find you a home financing rate that’s actually affordable.
- Applications & Approvals – Applying for a mortgage is complicated, especially if it’s your first home or you’re new to Canada. So, your broker will guide you through the pre-approval process and help you submit your application. They’ll also explain any costs, terms and conditions prior to finalizing your mortgage.
Mortgage Brokers vs. Banks
One of the best things about mortgage brokers is that they can connect you with multiple mortgage lenders and rates. This will allow you to compare multiple offers and choose one that best meets your needs. On the other hand, traditional mortgage lenders, like banks, can only offer you their specific products and rates.
|Description||Licensed banking company offering a range of financial products (loans, accounts, credit cards, mortgages, etc.)||Licensed mortgage professional, partnered with numerous lenders. Paid a commission by the lender for brokering mortgage deals|
|Popular Examples||BMO, TD, RBC, Scotiabank, CIBC, Tangerine, EQ Bank||Dominion Lending, Safebridge Financial, CanWise Financial, The Mortgage Centre|
|Pros||Becoming a client can help you access preferred deals and dependable financial security||The ability to negotiate with multiple lenders for the best interest rates, mortgage plans and volume discounts|
|Cons||Can only offer their products and rates, which may be higher than other lenders. Plus, you have to broker the deal alone.||Some mortgage brokers aren’t as trustworthy as banks. Additionally, many first-time homebuyers don’t even consider them as a potential option|
Advantages And Disadvantages Of Using A Mortgage Broker
Hiring a mortgage broker can be the best option to find the mortgage you’re looking for, nonetheless, there are several important drawbacks to consider when working with a mortgage broker.
- Their Services Are Often Free – Generally speaking, most mortgage brokers get paid by the lenders they find clients for, rather than the clients themselves.
- They Do Most Of The Work For You – A good broker can make the mortgage application, pre-approval and finalization processes much less stressful overall.
- Access To Better Mortgage Deals – Since mortgage brokers partner with many lenders, you can view multiple rates and payment plans to find the deal for you.
- Access To More Lenders – If one lender denies you because of bad credit or lack of a full-time income, a mortgage broker can help you find another.
- They Work Independently – Mortgage brokers don’t really care which lender you pick, as long as they can find you the best deal and confirm you as a client.
- They May Get Your Fees Waived – Some brokers will ask lenders to waive certain mortgage fees (origination, appraisal, etc.), which are otherwise pricey.
- They May Not Be As Familiar – Applying for a mortgage with your bank is often easier and more comfortable than it is through an unfamiliar person or business.
- They May Not Have Access To All Lenders – While some mortgage brokers have large networks of lenders, they still might not find the best one for you.
- They Might Not Have Your Best Interests In Mind – Some mortgage brokers just want to get your business, so they may direct you to lenders who provide them with higher commissions rather than those who will be a good match.
- Extra Documents May Be Required – Although they’re supposed to make the process easier, some brokers ask for more paperwork than traditional lenders.
- Some Brokers Aren’t Free – Many mortgage brokers charge their clients fees. If not, they may direct you to pricier loans in exchange for payments from lenders. Moreover, in some cases, the fee isn’t paid through you directly but to the lender in the form of a loan origination fee.
- Not All Estimates Are Guaranteed – Sadly, the initial mortgage quote your broker provides may not be the true final price that the lender gives you.
How Are Mortgage Brokers Paid?
What Are Mortgage Buydowns?
How Can I Check if a Mortgage Broker is Licensed?
Can a Mortgage Broker Help Me if I Have Bad Credit?
Considering a Mortgage Broker For Your Next Home?
If so, think carefully and make sure to get some financial and legal advice before you sign or pay anything. While a good mortgage broker can connect you with the best lenders, rates and payment plans in your area, the unfortunate truth is that they may not have your best interests at heart. As a loyal client, you might even get treated more fairly by your bank. Then again, under the right circumstances, a mortgage broker could help you score a really great home financing plan, as long as you know where to look.
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