When you picture yourself getting a mortgage, you perhaps imagine heading to your local bank branch to deliberate down with a mortgage specialist to discuss your choices. This was once the standard process, but today it might be a mistake. Mortgage brokers are becoming very popular than ever, and are often a fine choice. Of course, whether you’re buying your first home or you’re a long-serving property owner, the emphasis on securing the lowest possible mortgage price can’t be overstated. But are mortgage brokers better? Keep reading to find out everything you need to know about using a mortgage broker.
Who is a mortgage broker?
A mortgage broker is a one-stop for mortgages. Unlike your local bank, which can only offer you a mortgage and mortgage rate from their suite of products, Mortgage brokers have access to many lenders When you make an appointment with a mortgage broker, it’s just like you’re making an appointment with the major banks, except you only need to meet with one person. A mortgage broker has access to products from multiple lenders.
Pros and cons of using a mortgage broker
So, should you use a mortgage broker? While we think that working with a broker is generally a good option for most people, its better to weight the pros and cons yourself.
Advantages
A Broker May save You Legal work
Mortgage brokers have contact with a variety of lenders, some of whom you may not even know about. They can also steer you away from certain lenders by finding out the inconvenient payment terms hidden in the contracts. For a better knowledge of the mortgage rates, it is better to do a good research online and use the mortgage calculator further. Such tools will enable you to make a comparison in the rates and will act as additional knowledge while assessing the credibility of a mortgage broker.
Mortgage Brokers Have Better Access
Brokers act as gatekeepers to bring in clients, thus when it comes to getting some good clients, several lenders team up with the brokers. Moreover, it is difficult to contact the lenders directly to get information about retail mortgages. Moreover, the mortgage brokers can also manage to get you the best and most suitable price from the lenders due to their reach and their credibility. Thus, you can sometimes expect to get good rates as compared to what you would have got without their assistance.
Expert assistance
Brokers are experts at what they do and are accustomed to working with borrowers who may have unique needs; they have the best deals suitable to you such as freelancers or those with poor credit ratings. As they offer impartial advice on a broad range of lenders, they will also advise you on the best. Working with the mortgage broker will save your time and energy.
Disadvantages
A Broker's Interests May Not Align With Your Own
Your goal in looking for a mortgage is to find one with an affordable interest rate and with affordable fees. A broker's goal, therefore, is to get you into a mortgage that maximizes their compensation also. The 2008 market crash revealed that many brokers were getting their clients into mortgages that they could not afford over time.
Broker May Owe a Fee
Mortgage brokers are paid either by the lender or by you. If the mortgage lender covers the fee, then it might include the broker's commission as well, which might be a good deal for the broker but a bad one for you. Moreover, if the mortgage broker has chosen a specific lender for you, then the mortgage rates might not be quite suitable as well. Often they put their needs above the needs of the clients.
Lack of familiarity and experience
If you’ve never used a broker before, you’ll need to establish a relationship with a new one. It may take a few tries before you find a good fit. A lot of mortgage offices hire inexperienced mortgage brokers who might lack the inside knowledge much needed for this profession. Thus, an inexperienced mortgage broker will not be able to get the best deal for you.
More documents may be needed
If you do not have a good relationship with the mortgage broker, it might cost you some extra efforts. Moreover, you will be required to provide an extra set of documentation, as there are a lot of lenders who avoid working with mortgage brokers. According to some lenders, the mortgage rates initiated by the broker can encourage problems when compared to those obtained from direct lending.
