Benefits of Using a Mortgage Broker
Buying a home is generally the biggest expense any of us will have. Because you will be paying it off for years, you want to ensure you select the best home for you and get the best mortgage deal. Can a mortgage broker help you secure that deal? Let’s take a look.
What Does a Mortgage Broker Do?
A broker doesn’t work for one specific lender. They deal with multiple lenders so they can offer you multiple rates. Essentially, they do the shopping around for you. They are experts in explaining the different terms and conditions from the various lenders, as some are more restrictive than others. They can also explain how getting the best rate may mean sacrificing future flexibility (for example, costs of breaking your term can vary widely if you are thinking about selling your house).
How Does a Broker Benefit You?
A broker can save you research time by speaking to multiple lenders on your behalf. They may even know of lenders you’ve never heard of. Some lenders will only work through brokers, meaning your broker can get you access you would not have anywhere else. They might also be able to warn you away from troubled lenders. Therefore, a broker’s deep knowledge base can be an advantage for you.
Are There Any Drawbacks?
Before you get all excited and think a broker is the only way to go, understand they aren’t perfect. It’s important to know who is paying the broker. It isn’t you, which sounds like an advantage. Lenders pay brokers a commission for securing mortgages for their companies. Brokers sometimes get better commissions from certain lenders, so they might be inclined to recommend mortgages that get them more money. This means you might not always be offered the best possible rate for you. So, not an advantage.
Also, it’s not a guarantee that a broker will get you a better rate. If you go to Bank X yourself, they might offer you the exact same rate as they offer through a broker. You aren’t always going to save money.
And just because a broker can do research for you doesn’t mean you are off the hook from doing any work yourself. It’s still best to do a little research on your own, so you have an idea what rates a broker might offer you. (Online mortgage calculators are helpful for this.) Being an educated buyer is always a good idea. There are many wonderful brokers and lenders out there, but there will always be bad apples in any industry. Protect yourself by not going into your mortgage hunt blind.
There isn’t one right way to hunt for a mortgage. You can use a broker or deal directly with your preferred lender. Remember, your best bet is always going to be educating yourself before you make the biggest purchase of your life.