Working with a mortgage broker

This issue’s article is a little different. I want to discuss mortgage brokers and their role in the home purchase process.

Who is and why use a mortgage broker?

Just as an insurance broker finds the best deal on insurance, a mortgage broker finds the best deal on a mortgage. Mortgage brokers are licensed by the Province of Ontario and carry insurance. The mortgage broker of today strives for excellence, and many have obtained an Accredited Mortgage Professional (AMP) designation. In order to obtain the designation, mortgage brokers must meet very strict requirements of education, ethics, experience and professionalism. AMPs are committed to the highest ethical, moral and educational standards. For more information on AMPs, see The Canadian Institute of Mortgage Brokers and Lenders website.

Mortgage brokers, unless directly under a single bank or lender’s control, are independent and deal with several different financial institutions, including the five big banks. This means a mortgage broker’s advice is impartial and based on whatever is in the client’s best interest. Mortgage brokers study mortgage rate markets and have direct access to several different lenders. In addition, while some consumers may not enjoy negotiating with financial institutions, this is the broker’s best skill. Brokers will make sure their client obtains the most attractive rate currently on offer along with the most flexible options suited for their situation. They are able to shop dozens of lenders in the time it would take a consumer to book an appointment at their bank.

Who pays the mortgage broker?

Even though mortgage brokers work for their client and not the financial institution, brokers get paid by the financial institution. The bank’s finder’s fees reimburse brokers for bringing them creditworthy customers. Since these fees are similar across most lenders, there is no incentive for brokers to favour one lender over another. In rare instances, such as a client with non-standard credit or inability to prove income, a broker may charge a fee, but in the vast majority of cases, there is absolutely no charge of any kind!

When do I need a mortgage broker?

The best time to meet with a mortgage professional is before you start your search for a new home. Arm yourself with a pre-approval so that you know exactly how much you can afford to spend in the marketplace. This will save you time, and puts you in a much stronger negotiating position as you have firm limits and can readily identify property you can and cannot afford.

Perhaps the most difficult part of writing these articles relates not the actual writing, but thinking of a topic to address. So help us! Mail, deliver or email letters to the magazine or to us via schwarzlaw.ca or by email to info@schwarzlaw.ca and give us your questions, concerns, critiques and quandaries. We will try to deal with them in print or electronic form.

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