Choosing a mortgage can be one the largest financial decisions you will ever make and finding the right one can save you thousands of dollars. But mortgage shopping can be a daunting task for a first-time homebuyer. How do you know if you are getting the best rate? Which terms and conditions are best suited for your specific situation?
Finding the best person to work with to find the mortgage that meets your needs is all about asking the right questions. Let us will guide you in the right direction and get you the answers and information you need to find your perfect mortgage solution.
It should be all about you
A mortgage broker is a licensed mortgage agent who protects you, the borrower, from having to deal directly with the lender. In fact, your mortgage broker’s responsibilities lie in finding the best mortgage for your specific situation. When you work with a mortgage broker, you get the benefit of their knowledge to ensure this, and because they work with over 50 lenders, your mortgage broker can find the lender that will offer you the best options that meet your needs to save you as much as possible.
Determining the best rate and terms for you can be difficult on your own, but a mortgage broker knows what you can and cannot do without and just how much you should be paying. If there is no real reason to buy into add-ons and other costly products, your broker will make sure you don’t waste your money. But remember, it is not just about the interest rate; sometimes the options and benefits of your mortgage can outweigh the lower interest rate and your mortgage broker can guide you in the right direction.
How your mortgage broker works
Your broker works for you and gets paid by the lender. They follow a proven 4 step process:
Step #1) Complete a thorough needs analysis of your current and future needs.
Step #2) Build a mortgage strategy based on your specific needs.
Step #3) Use software to shop over 50 lenders and hundreds of products to find the ones that fit you.
Step #4) Guide you through the approval process and help you decide on the best mortgage terms and options, making buying your home stress-free and easy at no additional cost to you — and during what can be a costly process, this is an added bonus.
Don’t forget, banks are businesses
Banks and lenders, on the other hand, are businesses who report to shareholders, so the higher your rate, the more money they make and the more you save the less they make. Banks have their own army of loans officers trained to sell their products at the highest price possible. They don’t have access to other lender’s mortgage products so getting advice on the best mortgage for you can be difficult, if not impossible. Asking a lender who has the best mortgage is like asking the Ford dealer who has the best car. They only sell Fords and a bank only sells their mortgages.
Large financial institutions make record profits by dealing directly with the client. So, while you are working with them to negotiate your mortgage, you can expect to get sales pitches for other services that may not be a necessity for you. The lenders will also include “extras” such as appraislas, cash back or teaser rates. All these are extras are priced into the mortgage rate, which will add to your total rate and cost you more in interest than the add-ons are worth. This is called “selling through confusion.” Without the knowledge and experience of a professional, you can end up paying thousands more than you should, with no one to help guide you through a more affordable process.
Who is best to work with?
When it comes time to make a decision – and if you are looking at buying a home, the decision-making process has to move quickly – there are a 3 key questions to ask:
Question #1) Who do you represent in the transaction? Only work with advisors that represent you, not the lender.
Question #2) Do you shop the market? Only take advice from someone who shops the market not just sells 1 product for a bank.
Question #3) What experience do you have to advise me? Only take advice from a licensed broker that has the experience and knowledge to advise you.
According to the Spring 2014 Survey conducted by Canadian Association of Accredited Mortgage Professionals (CAAMP), last year, banks and large financial institutions only saw a 65% funding rate. In comparison, mortgage brokers saw a 95% close rate with their consultations. Clearly, Canadians who reached out to a mortgage broker for assistance realized the benefits of a broker and took advantage of their services, making their mortgage and home buying processes easier and stress-free.
