According to a 2011 survey by the Canada Mortgage & Housing Corporation, 81 per cent of recent buyers, at some point, will rely on a mortgage professional (either a mortgage lender or mortgage broker) for advice and consultation.
When you decide to use a mortgage broker to help you with your financing, they will act as a liaison between you and the lending institution. Mortgage brokers negotiate the best available terms and rates on your behalf, and will usually work with dozens of different lenders in order to secure the financing options that you are looking for.
Here are three reasons to use -- or not use -- a mortgage broker:
1. Mortgage brokers provide their services for free to borrowers.
Pro: Since mortgage brokers are only paid when a loan is approved and signed, their assistance will cost you nothing.
Con: Brokers are paid a commission by the lending institution, and don't work just for you.
2. Mortgage brokers help those with less-than-perfect finances secure a loan.
Pro: For those with blemishes on their credit report or a low household income, a broker might be able to negotiate better rates than if you approached the lending institutions yourself.
Con: If your finances are less than perfect, you might not be financially ready to become a homeowner, whether the bank will give you a mortgage or not.
3. Mortgage brokers will save you time.
Pro: Mortgage brokers will do all of the legwork for you in terms of paperwork and negotiating with lenders. They will also be your point of contact for everything related to your financing.
Con: Even though you will most likely save time by using a broker to do all of your negotiating, some brokers may compare the rates from only a handful of lenders. If you want to ensure that you're getting the best possible financing, you will have to do the research yourself. Because mortgage rates are so easily accessible by anyone online, it is a lot easier than it used to be to compare and negotiate with different lenders on your own.
When deciding which type of financing is right for you, here are a few details you need to make sure you share with your mortgage broker or the lending institution you decide to work with.
How often will you be able to make additional payments on your mortgage without being assessed a penalty, and how much will you be able to pay?
Frequency of payments
â€¨Whether it's weekly, biweekly, accelerated biweekly or monthly, make sure the lender offers the payment frequency you feel most comfortable with.
Penalties to breaking the mortgage
â€¨Make sure that you are fully aware of what the penalty would be should you decide to opt out of your mortgage term.
Whether you decide to use a mortgage broker to help you through the home-buying process or to secure your own financing, it is important that you do your research so that you are happy with your decision. Some banks or lenders might give you the runaround, while a mortgage broker might be able to hold your hand through the entire process, securing a great rate for you. Or vice versa. Don't be afraid to shop around and ask for references whenever possible.
Would you consider using a mortgage broker?
Krystal Yee is a marketing professional living in Vancouver. She writes about personal finance at Give Me Back My Five Bucks, and the Toronto Star's Moneyville.ca. You can reach her on Twitter (@krystalatwork).