Friday, August 15, 2008

Consider using a mortgage broker

What can a mortgage broker do for me and why should I consider using one ? How much is it going to cost ? Why not just go to my bank instead of a mortgage broker ?

Well these and many more questions is what we'll try to answer today.

You've decided to buy your first house - hooray ! An exciting time. You've spent lots of time with a realtor looking at homes and comparing neighbourhoods etc and now an offer is in which is (hopefully) conditional on financing and time is ticking away to remove that condition and firm up your sale. Or maybe you're up for renewal of that mortgage after your intial term is due.

You could listen to a family member ... they're always willing to give advice. After all, Uncle Ernie says he got a mortgage for 2% interest rate so why shouldn't you ?

The problem with that is (most likely) your family members are not mortgage brokers or have any experience in the real estate and mortgage market except for ages ago when they bought their own home. So, its like going to a gas station to get your aching tooth looked at. What I mean by that is you're going to the wrong place for advice. As much as your Uncle Ernie loves you and wants to help, you're better off going to a trained and experienced professional who works in the field day in and day out. They and only they are in touch with the numerous lenders on a regular basis to get the latest product information to help guide you through to the right financing choice for you.

So what can a mortgage broker do for me ? Let me throw this at you: I recently heard someone say that time is the new currency. There are too many things to do in a day and not enough time - ever experience that ? I don't think anyone can argue with that. We wake up early for a long commute to the office, work long hours for people who take our efforts for granted, come home to a house full of chores and shopping or errands to be done and then all of a sudden you've got to get to bed just in time to get up and do it all again. You want to spend time with kids, parents, neighbours etc so how much time is left in your day to day life to do something as exciting as researching your financing options ? When do you have time to get to a bank, investigate their products and then comparison shop at another or several others to make sure you are getting the best deal and product for you ?

In a word ... never. I think that people today are finding that a service to save their time can be invaluable. You may have a cleaning lady or a lawn service ... a mortgage broker performs a diffent service but the end result is the same. You save your time and spend it on what is important to you. One difference being of course is that in the vast majority of cases, a mortgage broker will not charge you since they are paid by the lender.

OK so you get a free service from a licensed and trained professional. Need more reasons ?

Here's another. A mortgage broker can deal with many different lenders at the same time (I can deal with over 30) ... all from the comfort of their office and quite often with a single visit by you including one application and one credit bureau search. Why not use me as your personal shopper? Spend my time while saving yours.

So if your time dosn't have the same value as I think it does then let's look at the potential savings in interest. Bank posted rates for 5 year mortgages are currently in the 6.85% range. You walk in and that's what they offer you ... whether you're an existing client or not. Maybe a little negotiation goes on and after promising to bring them your other business to plead your case, the clerk visit the manager's office and they decide to give you .25% or maybe even .50% off. You feel that you've "beat them" and sign on for five years. Forget the fact that they will now service charge you to death on all other products, you just saved half a percent. Feel better ? Probably not because all the interest you've just saved is going right back out the window on service charges.

Now let's look at the same scenario by using a mortgage broker. You can call, email or fax the information needed for an application. The mortgage broker can send the application to 1, 5 or 30 different lenders at the same time. In effect, they will bid for your business. Since the lender doesn't have to pay overhead costs for having the broker as an employee, they can pass those savings along in the rate - no haggling required. The banks that have retail branches are pretty much the same ones who also accept applications from mortgage brokers. Remember the 5 year posted interest rate ? Well in today's market a 5 year interest rate to a mortgage broker is available at just 5.29%. That's over 1.5% less and you didn't even have to beg or promise to move all your other business there to sweeten the deal. You can maintain your RSP wherever it currently is ... your credit cards stay where they are ... chequing and savings etc - no changes required.

So we've saved you time and saved you money - enough reasons yet ?

How about that sinking feeling that maybe you didn't get the best deal ? Everyone has experienced buyers remorse of one kind or another. Well as previously mentioned, a mortgage broker does not work for one single lender - they only work for you and your best interests, not the lender. Obviously we have to protect the interests of the lenders against fraudulent transactions etc but a professional mortgage broker bank or lender will ask questions and complete a profile on you that leads to the best product for your situation and wishes. If you went to a lender on your own, do you really think their employee is going to know their competitor's product line and steer you towards it if it is the best deal for you ? Not if they like their paycheque they won't !

So as you can see the reasons are many and I've only just touched on 3 or 4 here in this post. Please check in next time for more valuable information about how using a mortgage broker can help you along the way. If you're looking for a mortgage brokerage website, try
RMA-Spencer Group Mortgages for more information and to contact the poster directly.

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