Here’s an interesting fact about people who get mortgages. Over 50% of people who buy homes accept the first rate their bank offers them. Who can blame them as the mortgage process using a bank is a tedious affair. Asides from filling out the forms, providing financial statements, you have to go through a series of stressful meetings. It can be a painful process.
But, are these people getting the best deal? Being too eager can cost you a lot of money down the road.
So, what is a mortgage broker and how can they help a home buyer? A mortgage broker uses a network of lenders including banks, credit unions, trust companies and other lending institutions to find Calgary homebuyers the most competitive mortgage rates. These lending institutions update the mortgage rates with the mortgage broker on a daily basis.
Mortgage brokers do not work for the lending institutions so there is no fear of preferential treatment of one mortgage lender over another. A mortgage broker works strictly for their clients – the home buyer.
If you use a mortgage broker, how much are they going to charge you for their services? The answer is not a penny. It costs you nothing to use a broker because they make their money through a commission from the lending institution you have chosen and help you get approved by a lender. The commissions they receive from the lender are uniformly based depending on the amount being borrowed and the term of the loan. Commissions range roughly from 0.5% to 1.5%.
Mortgage brokers research the mortgage market for you so you don’t have to perform this time consuming leg work. If you apply to several banks, you have to repeat the same laborious process over and over. You still have to do this with the mortgage broker, but you only have to fill out the paper work once, and it’s a much less painful process.
A mortgage broker offers you greater flexibility than banks. But, it’s not just about rates alone. There are other major factors that can influence your needs.
Mortgage Issues
The Term of the Mortgage – You also need to know whether the term (life of the mortgage such 5, 15 or more years) is going to be a fixed term (your mortgage rate is going to be locked in for the period of the term of the mortgage), or variable (interests rates fluctuate over the mortgage term).
Amortization – This determines how much you might pay over the term of the mortgage. Your monthly mortgage payments are more expensive for a shorter term, but you save on the amount of interest on the mortgage. The reverse is true for a longer amortization period as the costs are less per month but, as are you borrowing over a greater period of time, it costs more for the interest on the mortgage. It depends on both your current and your projected financial situation.
Payment Options – Mortgages can be paid in several different way. It can range from bi-weekly to monthly so have different payment options to choose from.
Prepayment Penalty – Mortgage lenders generally allow you to pre-pay down your mortgage above and beyond your regular payments. However, the amount may vary as to how much and whether you might have to pay a penalty over a set amount.
If you’re not sure about what’s the best route to take, a mortgage broker can help you make these very important decisions.
Photo by Ian Sane
