Frankly, choosing a mortgage might be one of the most significant and trickiest financial decisions you might ever make. With a wide array of mortgages and loan repayment plans, picking out the right plan for you can be downright confusing, and it is pretty easy to find yourself in tight spots without proper care and assistance. This is where the right mortgage broker comes in.
Who is a Mortgage Broker?
A mortgage broker connects mortgage customers to lenders. An exceptional mortgage broker goes over your financial situation and statements to help you find the plans best suited to you.
They provide you with financial advice, help to improve your application, and sometimes lighten your burden by taking up the paperwork. However, please note that mortgage brokers do not originate loans themselves as they do not work for lenders.
Identifying a Good Mortgage Broker
Now there have been controversies in the market concerning the necessity for brokers. Some argue that having a middleman can sometimes bump up the costs of your overall loan. This then begs the question of how to identify a good broker and how to know if he’s right for you. Here are a few tips on what to look out for;
● Do your research;
As much as you plan to rely on a broker to find you the best loans, knowing the current market trends and practices goes a long way in choosing the right broker. It’ll be much harder to have the wool pulled over your eyes when you have a basic knowledge of current prices and interest rates. Do your research. Ask your bank. Check online for loans you think would be suitable for you, and then check with several brokers to see what they can offer you within that range.
● Fees and Commissions;
Most brokers are usually paid a commission on the loan you’re getting from the lender. You could also be charged either a flat rate or a commission on your borrowing amount. All brokers are obligated to clearly outline these charges and any commissions they might be getting from the lender before entering into any agreement or contract in your stead.
You should also enquire about the type of commission your broker would be getting. There are two types of commissions that they could be getting. First is an upfront commission where they receive a percentage of the total loan received. This means that they receive a larger payout on larger loans. This should make you cautious of brokers only offering large loans.
The second is a trail commission which is a percentage of the loan received by the broker over the entire life span of the mortgage. The problem with this kind of commission is that the brokers are under no obligation to provide you with any service during the loan’s life span. So sooner or later, they’d be getting paid for essentially doing nothing.
● Lender Panel;
It is quite essential to ask a broker if he is whole-of-market. Brokers are sometimes limited by the number of banks or lenders they can access. This means they can only offer you minimal options. A good broker should have a wide range of lenders on their panel as this allows them to access a broader range of options and thus are more equipped to find a plan that best suits you and your current financial situation.
You should note that there’s a difference between having a large number of lenders on your panel and having a wide range of lenders. This is because most brokers funnel most of their mortgages to a small group of banks despite claims of scanning the market. But, of course, you can always ask about the top 10 banks they work with and the percentage of the loans they send to each. This should give you a good idea of whether or not they are genuinely scanning the market.
● Qualifications, Experience, and Clientele;
Before you begin dealing with any broker, you should make sure they are qualified and licensed to provide you with a loan. Ask for their license. Ask how long they’ve been in the business and if you can speak with a previous client. You may not necessarily want to talk with a previous client; however, if the broker shows any sign of hesitation to answer any one of these questions, then that is a major red flag. You should refrain from working with that broker. However, if he readily provides you with a name, phone number, or email address, then you’re on the right track.
If you do speak with a former client, here are some questions that you can ask to help you get a sense of the kind of service you’d be getting from the broker;
● How was communication throughout the loan process?
● Do you feel the loan brokered was worth it?
● What were the fees like?
● Would you go with him/her again if you had the choice?
● Do you think you could have gotten a better offer elsewhere or with him/her?
Your mortgage broker should also be able to educate you on direct-only mortgages, whether or not a mortgage offers cash backs, the customer service and reputation of the lenders, and any hidden charges. He/she should explore your current financial situation in-depth and explain the different mortgages and plans available to you in layman’s terms. If you find one that also gives you clear, concise reasons why they recommend a particular offer to you, you’ve found yourself a right mortgage broker.