If you are in the market for your first property or new property and are feeling overwhelmed by all the different mortgage companies, rates and terms involved, you may be considering using a mortgage broker, but is it a good idea?
For many people, mortgage brokers are the go-to professionals when they want to buy a property and secure the best deal on the finance side of things.
However, over the last decade or so, their practices have come under scrutiny, because there are many questions over whether they have your best interest in mind, as a homebuyer, when providing their services.
In a perfect world, it would be a simple case of yes or no, but we don’t live in a simple world and there are several advantages and disadvantages to utilizing the services of a Vancouver mortgage broker. We have highlighted the most important below.
Some Lenders Don’t Work with Brokers
Since the problems came to light in 2008 with the real estate crash and their practices coming under fire, many lenders won’t work with mortgage brokers. This is often because it has been the lender’s experience that mortgages that were arranged through a brokerage were more likely to default than the ones they sourced directly.
From a homebuyer’s point of view, that puts you at a disadvantage, as some of those lenders may offer better deals and rates.
Brokers Don’t or Can’t Always Offer Guaranteed Estimates
When you choose to go through a mortgage broker, you will find that one of the terms they often use is “good faith estimates”. This means, when they are presenting you with an offer from a particular lender, that the broker is confident the offer will be the same when the deal is finalized. However, this is not always a guarantee.
It is often the case, rather, that the lender makes changes to the deal terms based on your mortgage application and this may mean your mortgage incurs extra charges or a higher rate.
The Interests of Brokers and Your Own Rarely Match Up
Obviously, when you are searching for a mortgage and using a broker to find one, you are looking for the most affordable for your budget and property, that offers the lowest fees and best interest rates possible. You are concerned with the long-term.
For a broker, as they often get fees from the lender for bringing them business, they are more interested in getting the best compensation possible from a deal. Although brokers are more accountable following the events of 2008, they still may not be fully focused on getting you the best deal.
Time-Saving and Convenient
One of the biggest advantages of working with a mortgage broker is the time it potentially saves and convenience. Remember, brokers often have regular contact with numerous lenders, even ones you are not aware of.
This means you may potentially have access to excellent deals that are not known by the public.
Part of a broker’s job is also to help guide you away from lenders who have onerous payment terms hidden in their contracts.
Opening this a little more, another benefit of working with a mortgage broker is that often brokers operate as exclusive gatekeepers for lenders bringing them the most suitable clients.
These lenders are unlikely to field direct calls from you but may accept your custom if you work through a broker.
As you can see, there are a lot of great benefits and just as many downsides to working with mortgage brokers. It is best, therefore, to give it some serious thought and even if you engage the services of a broker, there is no harm in also looking around for great mortgage deals directly.