A mortgage broker helps to facilitate the negotiations that take place between you and the bank when you apply for a home loan. They will research, compare options and also provide guidance from application to settlement.
Typically, brokers are paid on commission by the lender, i.e. the bank, when the mortgage settles. This means that you do not actually need to pay for their services.
What are the Benefits of Using a Broker?
Brokers are a free service that comes with many benefits, such as:
You Get the Best Products for You
Because brokers have a lot of experience and expertise, they will be able to recommend you the best possible loan and lender according to your current financial situation.
They Can Save You Time
If you were to talk to each bank, negotiate terms and send documents back and forth, it would take you forever. And this isn’t even accounting for the fact that every bank has their own set of procedures. Missing a step could cause major problems, and working with a broker will make sure this doesn’t happen.
What are the Disadvantages of Using a Broker?
Just because brokers don’t charge fees doesn’t mean they won’t end up costing you more money. Make sure you keep the following in mind before working with a broker.
It’s Not Their Money
Since brokers work on commission, they have an incentive to encourage you to take a larger mortgage. This could lead them to push you towards a mortgage you really cannot afford, leaving you with lots of financial stress. These types of shady practices were one of the major drivers of the 2008 Global Financial Crisis, which resulted in an unprecedented number of defaults.
All brokers have relationships with lenders, which could lead them to give you an incomplete comparison of products that pushes you towards one product over another, even if it’s not the best deal for you.
How Do You Find the Best Mortgage Broker for You?
All of these problems can be avoided if you manage to find the right broker for you. Follow these tips to find the ideal broker:
Know What You Need
Everyone needs something different from their broker. First home buyers may need advice and guidance, whereas investors need efficiency, due diligence and prompt communication. Make sure you’re working with a broker who’s sensitive to what you need.
Get a Referral
Ask your real estate agent, friends, family, coworkers, etc. to see if they know any good brokers. Going off a trusted recommendation is a great way to make sure you get a good broker.
Look at Reviews and Ratings
Look on broker sites, such as MyLocalBrokers. They allow you to search for and compare different brokers. Other ways to learn about brokers include onto property forums and searching for the names of those you are considering. Additionally, brokers will have their own website where people leave reviews and write comments, and these can be a great way to learn if a broker is right for you.