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Pro and Cons of using a Mortgage Broker

October 2017

Mortgages are tricky things to get right. Should I or shouldn’t I use a broker? Here’s a few tips.

Deciding on a home loan can be overwhelming, even for the experienced home buyer. Therefore, having someone who is an expert in this area is often as important as finding your qualified home builder. But there are pros and cons to consider, so we’ve put together a list to help you choose your best option.

PROS

A good Mortgage Broker deals with dozens of various lenders and options, which will allow you to shop and compare the loan that best suits your financial needs. Their job is to know the latest offerings from each lending institution, along with the fine print, so you don’t go in blind.

They can be a huge time saver. A smart and experienced broker has ongoing relationships with lenders and therefore has direct dialog with those making the decisions. This allows you to have all the information you need, often within days. Even better, they do all the information gathering so you don’t have to!

If they don’t find the right loan, they don’t get paid. This is a huge incentive for your broker to find the correct loan with the best rates, and experienced brokers can often work magic in terms of interest rates, terms and closing costs.

CONS

All Mortgage Brokers are not the same. Many brokers are working directly for a single bank or lender, and therefore will be working in the lender’s favour, not yours. Sadly, there are some unscrupulous brokers who are looking at their own pay check more than your interest rate, so make sure you find one that has a good track record.

They aren’t free. Because their work is paid for once the loan is signed, their broker fees may become part of your loan. While the lender often pays broker fees directly, make sure you look at the closing costs to see where and from whom they are getting paid.

Brokers are not the final decision makers. Despite their best efforts and connections, a broker is still the middle man in your negotiations. Therefore, if you have a good, existing relationship with your bank, you may be able to arrange a better deal.

QUESTIONS TO ASK

The best way to find if a mortgage broker is right for you is to know the answers to these questions:

How many lenders do they actively work with? You will want as many options as possible, so make sure they can offer these to you.

What are their fees and/or commission rates? Law requires all brokers, lenders, and banks to disclose their fees prior to finalising any contracts.

Ask your friends! Word of mouth and personal experiences are always your best guides.