Most of us have a vision of mortgages that comes from many years of dealing with traditional institutions offering traditional products. The impression that the mortgage broker is only there for people who have a bad credit score or have had their application refused by the bank is one of those beliefs that persists. Unfortunately, anyone who entertains these outdated ideas could lose thousands of dollars! All buyers and owners can save time and money by hiring the services of a mortgage broker.
The mortgage broker has access to many competing lending institutions, including banks, pension funds, trust companies and even individuals. Since the mortgage broker does not have to sell the products of a specific lender, he can recommend in a totally objective way the mortgage loan which offers the most interesting rate and characteristics for his clients. Although you can get a mortgage every five years, the mortgage broker and his company get thousands every year. This allows them to negotiate better interest rates based on that volume, which they can then offer to their customers.
There are other potential savings. There may be a day when a particular lender offers a special rate for a mortgage of a specific term. If you shop the rates yourself and don’t know who is offering this offer, you cannot take advantage of the special rate.
When time comes to renew, many homeowners accept the renewal offer and choose one of the terms and rates offered without realizing that a mortgage broker might be able to save them up to one percentage point on the posted rate. This can translate into thousands of dollars in savings over five years. To ensure you get the best possible rate, it’s best to contact a mortgage broker at least four months before your renewal date or planned purchase of a new home. Getting there early can save you money because your mortgage broker can usually guarantee an interest rate for 90 to 120 days. If the rates fall during this period, you will of course benefit from the reduced rate.
If your credit score is important to you, you should also consider that as you shop from one lender to another, inquiries accumulate in your credit report, which affects your credit rating, and therefore on the rate and terms of your mortgage loan. This is not the case when you use a mortgage broker, who makes only one application and yet can obtain the proposal of many competing lenders who want your clientele.
Finally, fees are the subject of misconceptions that need to be addressed. Some believe that the services of a mortgage broker are expensive and involve upfront fees. In most cases, the services are free because the lender who originates the mortgage pays the mortgage broker to arrange and negotiate the mortgage. As you might expect, a fee may still be charged for clients with impaired credit or when the funds come from the private sector, although these fees offset the time and effort required by the mortgage broker to negotiate the mortgage.