What exactly is a mortgage broker? Most people have a vague idea of what a mortgage broker is and what they do, i.e., help you get a mortgage. But there is a lot more to a mortgage broker than just getting you the best rates.
The real question is why would you choose a mortgage broker over a mortgage specialist at your bank when it’s time to finance your home purchase?
If you want to answer that question only, read our blog post called “Why Choose a Mortgage Broker over a Bank for Your Mortgage?”. However, if you want more information about what makes a great mortgage broker then continue reading.
A mortgage broker is an expert in the field of financing and especially financing home purchases. It’s good to remember that they are not just limited to houses and vacation properties. A mortgage broker can help with financing a variety of different large purchases.
Like your real estate lawyer and your Realtor, your mortgage broker is on your side. They work to help the buyer, not the seller. When you work with a broker you get access to all their financial tools and especially their access to mortgage products you might not be able to access without them.
Mortgage brokers have access to a whole network of lenders, including big banks, monoline lenders and more. Here are some examples:
Retail lenders – these are your big banks and credit unions, and they lend directly to consumers.
Direct lenders – also known as monoline lenders, these companies offer only mortgages and work through a mortgage broker.
Portfolio lenders – groups of investors who loan out their own money.
Wholesale lenders – some banks and other financial institutions that work only with brokers.
Warehouse lenders – lend money to other lenders for short-term funding
Without a broker, you will not be able to access a big chunk of the money lending market – which can help get you better terms and better rates. Even the big banks sell mortgages to brokers wholesale and that gives the broker the ability to offer you rates lower than the banks themselves.
A lot of people think that you go to a broker after you’ve been turned down at the bank. In fact, it’s better if you go to a mortgage broker straight away. Mortgage brokers get paid when the deal is done, so it doesn’t cost you anything to go in and see them. They work longer hours and make appointments outside of banking hours, so there to help when you are bidding on a house!
You might be surprised by their knowledge and friendliness, and by how many options they can provide for your financing. Mortgage brokers can help with self-employed income, bad credit, low down payments, secondary and tertiary mortgages, and other financial products. Plus they have access to lenders that will not qualify on government-regulated stress test, and that equates to more buying power.
A mortgage broker is a licensed expert on financing. They have a fiduciary responsibility to get their clients the best possible mortgage they can. That means that they can lose their license if they don’t always act in your best interest.
In Ontario, brokers are licensed under the Mortgage Brokerages, Lenders, and Administrators Act. Each year your broker must take continuing education courses and recertify to renew their license. This means that your mortgage broker is always up to date on the latest products and regulations.
Each province has its own set of regulations and they do vary from province to province. But overall, they must start as a mortgage agent, working under a broker’s tutelage, and then practice for a set period before they can even apply for their broker’s license. This process includes successfully completing training courses and passing final exams.
With the sheer number of variables involved in financing a home, you can see why it’s important that you work with an expert in the field.
Well, if you’re reading this blog post, then good news! You’ve already found an amazing brokerage. Bennett Capital has a long-standing reputation for excellence in providing financing to purchasers in the Waterloo Region. Tracy Bennett has been in the mortgage lending space for over 35 years and has the experience and contacts to get your deal done.
Ask your realtor or your real estate lawyer about Bennett Capital and they will tell you that you’re working with one of the top-tier mortgage brokers in the area.
And remember, since there isn’t any upfront cost to meeting with Tracy or her team, you literally have nothing to lose. If our team can’t get you the best product for your individual financial situation you can still shop around and she can do that for you with a quick consultation!
No matter how talented a mortgage broker is, you still need to provide a little information so that they can get you the best mortgage for your situation. Every individual has a different financial situation or specific mortgage features they need. Your mortgage broker will spend some time getting to know you and your financial situation.
Each brokerage has its own questions that they might ask you, but you should at least come prepared for your meeting with the following:
Property info – bring the details of the house that you want to purchase including the listing, address, property taxes, closing costs and land transfer fees.
Summary of your assets – bring your current balances for your chequing and savings accounts, retirement funds, other investments, or any other properties or equity you are bringing to the table.
Summary of your debt and liabilities – bring in current balances for credit cards, lines of credit, loans, or any other mortgages or debt.
Proof of income – Include your T4, T1 or Notice of Assessment (NOA), pay stubs and a letter of employment from your employer. If you’re self-employed, 2 years of personal T1s and NOAs.
Housing history – bring your current and previous addresses to show where you live. You can include paid rent and any other properties you might own.
Proof of down payment – you can bring three months of bank statements, RRSP investment statements, or a letter if the down payment is being gifted to you. If you’re borrowing for your down payment, bring the information, such as a line of credit, if qualified.
If you're unsure of what to bring, or if what you have is enough proof, don’t hesitate to call us and one of our staff will be more than pleased to advise you.
When you meet with a mortgage broker you don’t have to pay any fees or costs upfront. We know that bank specialists make their money off commissions and the bank makes money from the other non-mortgage products they sell you. So how does a mortgage broker get paid?
While it might seem that Mortgage brokers are offering their time and services for free it’s only because they receive compensation from the lender when the deal is closed. They get paid based on the lender, the term and the size of the mortgage.
So, the broker gets paid giving the lowest rate upfront, with no incentive to sell at a higher rate. Your bank specialist is paid on a commission and bonus structure where they can make more money by recommending a product that might not be as good for you or a higher rate for more commissions. Always remember that a bank specialist is just a commissioned salesperson and they work for the bank not the client, and that is in their employment agreement, the interests of the bank are first.
If you are unsure, ask your broker if they have any special reasons for recommending one product over another. Most of the time, they recommend lenders that are easy to work with, or for example, have less stringent qualification processes if you’re in a financial situation that needs some work.
For a full explanation please read our blog post called “Why Choose a Mortgage Broker over a Bank for Your Mortgage?”. Here is a quick summary of the pros and cons of each:
Pros
Peace of mind - because you know the institution.
Convenience - because all your banking is already there.
Familiarity - if you’ve worked with them before.
Cons
Lack of specialized knowledge – bank specialists are usually only familiar with their own products.
Not incentive to work in your best interest – most mortgage specialists are paid on commission, and they get bonuses if you select certain bank products or pay higher interest rates
Strict requirements – harder for self-employed or non-traditional applicants to get approved due to bank policies
Limited – bank reps cannot get you an offer from another bank even if their rates or terms are better.
Pros
Better rates – brokers have access to better rates, even at the same bank you use.
One-stop-shop – your broker will shop your loan to multiple banks and lenders for the best deal.
Expert knowledge – a broker has education and experience with a wide range of mortgage products.
More solutions – your broker can help with non-standard solutions if you need them.
Hours of service-your broker can represent you in a bidding war and those happen, in most cases, after 5 pm!
Cons
No History – you must meet with a new mortgage broker. But the team at Bennett Capital is friendly, and they really care about helping you and that is our history of service in KW!
More paperwork – you might need to provide more paperwork the first time you work with us compared to your bank. But once we get familiarized with your financial situation our team won’t bug you for all that info again unless necessary.
Hopefully, you have a better understanding of what a mortgage broker is and how they can help you. The best piece of advice we can give you is to not just go to your bank but to shop around at a couple of different lenders or at least meet with one mortgage broker, specifically one with experience and knowledge.
Reach out to the Mortgage Architects Bennett Capital Team and we can help get you the right mortgage product for you and get you the best rates possible at the same time!
