How does a mortgage broker work?


Buying a home can be very exciting but also a little overwhelming. It can be overwhelming as it may be the largest and most expensive purchase you will make. When it comes to getting a mortgage there are so many options. It’s important to do your research to find the best deal out there. If you are unsure if you are getting the best lender, options and rates, a mortgage broker can help.

How Can Using a Mortgage Broker Get me a Lower Rate Than my Bank?

Think of this as how can Amazon sell you the same product for a lower price then a store? Removing the staff, building, advertising and other overhead means less costs for the company. By using a mortgage broker, you are access to these savings in way of a lower rate.
A bank works with 120 day rate hold where mortgage brokers can operate with 30, 45, 60, 90 and 120 day rate holds. Usually the less time a rate needs to the held, the lower the rate can be. Think of this as last minute seat sales for a flight for a trip versus booking months in advance. As time progresses closer to your closing date, more possible savings may be possible.
Also, even after you are approved and have signed a mortgage commitment, I can still shop around your mortgage rate up until 10 business days before your closing date. While you may have moved on to other tasks like preparing for the move and shopping for furniture, I am there in the background working to save you more. Plus, in a decreasing rate environment, it’s important to keep watching for more rate decreases.
Lastly, there are more options with a mortgage broker then just your bank and more options mean the possibility of finding a lower rate. When your bank has looked at one option, being their own, I have explored dozens of lenders including most likely your bank as well. Think of Trivago, Booking.com and Expedia but for mortgages. Tons of selection, discounted prices, a free service and more convenience to you. Without these websites, you would need to contact hotel after hotel to find out their price and hear their own opinion on if they are the best hotel for you. Just liking asking a bank if their rates or mortgage options are the best for you.
Learn more: Best Mortgage Rates Ottawa Ontario

What if the Bank Matches the Mortgage Broker Rate?

Please let me know as that can be great ammunition with the lenders I have to save you more. Banks work off a reactive mode. They will offer a rate and only lower it if you show them a more competitive rate you have found. This is a great profit building strategy for banks and assists them in making billions of dollars of annual profits. Sadly, these profits come out of your pocket in rates and fees.
You may hear from your bank, “Here is your rate it’s the best offer we have at this time however if you find something lower, come back and we can match it.” This translates to, “Here is a rate that helps the bank shareholders and my bonus. We have lower rates, but I will only show you them if you find out for yourself what the lower rates are first.” Not a very proactive and client focused unfortunately.
At each renewal with the matching strategy, you will have to talk to your bank, then a mortgage broker to find out the real rates you should be offered and then back to your bank again to have them match. This may get tiring at each renewal with the extra work needed to assure a low rate.
An Ottawa mortgage broker works for you not the bank and their shareholders. The more money saved and in your pocket is my goal.
Learn more: Mortgage Renewal

What Contract do I Have to Sign With a Mortgage Broker?

A mortgage broker is there merely to show you a mortgage option for your consideration.  Just like a clerk at a store can show you a product off the shelf. You do not have a sign a contact with me.  Just like you do not have to sign a contract a the clerk at the store.
You are signing the lender’s mortgage commitment and will then be a client of that lender. The mortgage would be subject to the terms and conditions of that lender’s mortgage commitment.

Do I Pay a Fee to a Mortgage Broker?

As with the previous example with the clerk, you do not have to sign a contact with the store clerk. You also do not have to pay them to hand you the product. For a mortgage, you do not have to pay me to bring you a mortgage option for your consideration. My services are free to you. Similar to how you do not have to pay Expedia to use their service to book a hotel room.
When you are shopping for a house, you do not need to pay your realtor, the seller pays them. You do not need to pay me, the lender does.
Read on to learn more about ‘How does a mortgage broker work?’.

Do I Have to Take a Mortgage With a Mortgage Broker Once I Have Started the Process With Them?

Just like when shopping from bank to bank, you do not have to use one bank, even if you have an approval with that bank. You do not have to use my services if you find another solution elsewhere.

What if the Lender I Choose Goes Bankrupt?

This would be very rare in Canada. Mortgage lending and mortgage lenders in Canada are highly regulated. It would be more likely that a larger lender would buy the smaller lender. This could be seen when Scotiabank bought ING and changed it to Tangerine. The clients however during this time were not left stranded. They were able to live our their mortgage contract and then renew with Tangerine, Scotiabank or any other lender of their choice. Many of the smaller lenders are associated with larger lenders and banks such as the previous example of Tangerine and Scotiabank.

What if You Leave the Industry During the Mortgage Term?

I have been in the industry for over 14 years and look forward to many more to come. However if things change, not to worry. The mortgage is not tied to me in anyway. You are the lender’s client now. At renewal you can renew with them, your own bank, another lender, call another mortgage broker to assist and so on. Just like if your real estate agent left the industry while you are living in your house. If needing an agent’s services again, you are welcome to call upon another real estate agent.

Is it Best to Just Stay With my Own Bank?

Banks are business, that like many business sell products and services and make profits.
In life to have the most amount of options and savings, sometimes you need more then one company. This is true for mortgages as not every company will have a mortgage on sale at the same time. Just like not every grocery store will have chicken breast on sale at the same time. The more grocery stores to choose from, the more options you have and therefore more savings. Staying loyal to one bank can be comparable to staying loyal one grocery store, clothing brand, hotel chain or car company. You would start to feel limitations if you could only ever shop at one clothing store or drive one brand of car for the next 25 years.
I may have access to your very own bank and can explore unadvertised rates and exclusive offers with them so you can stay there if you prefer but enjoy a better rate.
With your credit card, personal loans and day to day banking, it’s great to be with one bank. This would be for convenience and having everything on one smartphone app. However, it may cost you more if you don’t expand past just one bank for your mortgage shopping. A mortgage holder usually visits their mortgage a mortgage every 5 years at renewal. It doesn’t need to be like your credit card where having one company forever is best. For example, when collecting travel points.
How does a mortgage broker work? You can be loyal to your mortgage broker, just like you may to your stock broker, or company like Booking.com. That broker can be your one stop shop, but within that one stop shop you can use all different companies. Therefore, whoever has the best rate and options for your needs at the time.
A stock broker will look to put you in the most profitable stocks. Usually this means more then one company in your portfolio. For convenience however, you have the one person to call. That is the stock broker and they can manage all the options to save you more. If only allowed to invest your money in one company your whole life, you may not see the gains possible from having access to different companies.
If you would like to learn more about how does a mortgage broker work, I invite you to contact me anytime.

About Andrew Thake

"My name is Andrew Thake. I’ve been a mortgage broker and agent for over 15 years, and in that time I’ve helped over 2200 happy clients find the right mortgage solution for them and their situation."

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