Ten Things to Consider when Working with a Mortgage Broker
Mortgage brokers can act as a liaison between prospective homebuyers and a variety of lenders. However, this does not necessarily mean they are the best choice for every situation. In this article, we will look at the top ten factors to consider when deciding whether or not to work with a mortgage broker.
1. Access vs. Expertise
The primary difference between a Mortgage broker and a Mortgage Specialist is that a Mortgage Broker has access to work with multiple lenders and a specialist works for a single financial institution. While “More” often sounds better, this isn’t always the case for a couple of reasons.
- Product knowledge - Having access to work with multiple lenders with potentially dozens of solutions at each one can be tricky for a Mortgage Broker to gain the in-depth knowledge of each and every product that you’re going to find with a Mortgage Specialist.
- Given the current mortgage rate environment, more often than not, bigger better deals & rates are found in working with large institutions and their specialists.
2. Their Motivation
Mortgage brokers work on a commission basis, earning money for each loan they facilitate. It’s worth considering whether their recommendations are driven by your best interest or by the pursuit of higher commissions. In contrast, mortgage specialists, who also earn commissions, receive a base salary from their lending institution, which might align their interests more closely with yours.
3. Quality of Lenders
Access to a multitude of lenders might seem appealing initially, but the quality of these lenders can vary significantly. Some lenders that work with brokers may have less competitive rates or service standards. Therefore, it's important to thoroughly research any lender a broker recommends.
4. Lack of Exclusive Offers
Mortgage brokers offer products from various lenders, which can mean a wide selection. However, this also means they may not be privy to exclusive deals or loyalty benefits offered by specific lending institutions. This is where working with a mortgage specialist, who may have access to such benefits, can be advantageous.
5. Negotiation Limits
While brokers can negotiate on your behalf, their negotiation power is often limited to the terms set by the lenders in their network. In contrast, mortgage specialists, with their deep knowledge of their lender's flexibility, may have more room to negotiate on your behalf.
6. Additional Costs
In some cases, mortgage brokers may charge you a fee for their services, on top of the commission they receive from the lender. It’s important to be clear about all potential costs before engaging their services to avoid any unwelcome surprises.
7. Time Considerations
Although mortgage brokers can shop around on your behalf, saving you some time initially, the time you spend reviewing each option they present can quickly add up. If they don't fully understand your needs, you may find yourself spending more time than expected in evaluating unsuitable options.
8. One-time Service
Mortgage brokers are transaction-oriented – once you've secured your loan, their role is typically over. If you prefer a long-term relationship with ongoing advice and support, you might find a mortgage specialist, who can assist you even after your loan closes, a better fit.
9. Complexity of Your Situation
If your financial situation is complex, for instance, if you’re self-employed or have a mixed credit history, a broker's general knowledge of many lenders might not suffice. A mortgage specialist, who has a thorough understanding of their lender's policies, might be more adept at handling such scenarios.
10. Regulatory Differences
In Canada, mortgage specialists and their lending institutions are regulated by the Office of the Superintendent of Financial Institutions (OSFI). While brokers are also regulated, there may be differences in the extent and scope of these regulations.
Ultimately, the decision to work with a mortgage broker or a mortgage specialist comes down to your personal situation and preferences. While brokers offer access to various lenders and can save you some legwork, the considerations mentioned above might lead you to reconsider if they are truly the best choice. Remember
My name is Bonnie, and I am a mortgage specialist. I take pride in providing outstanding service to my clients by working one-on-one with them throughout the complete mortgage and lending process. Got questions? Have concerns? Interested in reviewing options & discuss possibilities? contact me to get started.
