Mortgages are a very high responsibility, as they represent huge loans that will carry on for years, likely putting a high amount of stress on anyone who makes the decision of acquiring one. However, it is most often the only way the average person will ever own a house, which makes this decision a most important one and emphasizes the need to approach it carefully and consciously.
Most mortgage-seekers are not very familiar with home loans (with real estate in general, rather), and so they are bound to make mistakes if they decide to choose a lender on their own.
There are quite a few things to take into account when choosing a mortgage, the most important of which being the interest rate. There should be great care invested in choosing the most competitive rate, and mortgage-seekers should be especially willing to consider refinancing after a few years if the interest rate fluctuates and rises too dramatically.
These considerations involve many factors, which are often overlooked. In fact, Canada Mortgage and Housing Corporation statistics show that roughly 50% of home buyers decide on the first rate a bank (usually their own financial institution) offers, without further research into better offers. This statistic clearly indicates that people are reluctant to engage in a study of the market on their own. The main factor that determines this is the difficulty of getting and analyzing different rates from various lenders.
Another factor is the overlooking of time-effectiveness. Home buyers don't generally consider this important, although even if they get informed on their own, it will take considerably more time than in the case of seeking professional assistance. Moreover, cost-effectiveness will also be affected, as choosing an inappropriate rate may potentially cost significantly in the long run.
So what are mortgage brokers and what do they do?
A mortgage broker is a trained and certified professional who will go through the process of seeking the best mortgage terms for home buyers by accessing a network of lenders, which includes banks, trust companies, credit unions, finance companies, and also local lenders.
The most important value that a mortgage broker brings into the decision of choosing a certain home loan is the aspect of saving money. A broker's services generally have no fee, because mortgage brokers are paid in commissions by the lenders. Their commissions vary from 0.5% to 1.25% of the mortgage (sometimes even higher that those figures). In addition, their interest is to find the best offer so that the client is able to choose the best rate and ultimately save money.
A mortgage broker also eliminates the hassle of approaching various financial institutions to look for the best offer, a process that, as the aforementioned statistics show, is widely considered so grueling that people skip it altogether.
Perhaps one of the most important cases in which home buyers strongly require a mortgage broker, though, is when their financial circumstances are special - for instance if they are self-employed. In these situations, brokers can access specialized financial institutions or various private funds that can meet those needs.
Ultimately, it is the decision of the mortgage-seekers whether they use the services of a mortgage-broker or they embark on the journey of finding the perfect home loan on their own, but regarding cost- and time-effectiveness, as well as performance in special circumstances, brokers have proven to be the better choice in most cases, their services able to bring the customer a variety of advantages without a fee.
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