What is a Mortgage Broker?
People often use the terms “mortgage broker” and “lender” interchangeably, but the two are really quite different, and knowing where those differences lie could make a huge difference in the actual mortgage payment that you make every month.
A lender is a person or a business such as a bank that directly loans money to a borrower. Generally, lenders have three or four different mortgage packages that they offer to home buyers. Once the buyer chooses a package, a mortgage contract will be drawn up stating which package or product was chosen, the total amount of the mortgage, the interest rates, and the monthly payment among other things. After signing the agreement, it will be that lender that directly supplies the mortgage to the homeowner, and the homeowner will make payments directly to that lender.
Mortgage brokers on the other hand, work with many different lenders. This isn’t to say that they work for many different lenders but rather, that they are part of an intricate network of the biggest (and sometimes smallest) lending companies and individuals in their area and know about a huge variety of different mortgage packages. If a mortgage broker represents anyone, they represent the homebuyer and are looking for the best mortgage package available for them. This can be a huge advantage when you’re looking for a mortgage because instead of having the choice of only a few different packages, you’ll have the choice of hundreds. And, because a mortgage broker is only working as a go-between, they aren’t “pushing” a certain mortgage package because really, they have nothing to gain in doing so.
Unlike lenders, mortgage brokers don’t actually loan the homebuyer the money for the mortgage, although they can be a great resource that can help guide homebuyers through the entire mortgage process. Once the mortgage application has been approved and the mortgage is in place, the homebuyer usually pays directly to the lender. This however, does not mean that is the end of the relationship between the mortgage broker and the homebuyer. Once a homeowner, mortgage brokers can still be an invaluable resource when it’s time to refinance or tap into home equity, as they will still have access to the best deals, even if it’s not with the homeowner’s current lender.
While the main role of a mortgage broker is to bring lenders and borrowers together, they can sometimes also provide credit counselling services to help borrowers who want to obtain a mortgage but have debt and credit issues standing in their way. When it comes to debt counselling and learning how to lower high interest debt, a mortgage broker can be a wealth of information.
The best way for any homebuyer to get the best deal on their mortgage is to shop around at many different lenders, see what different rates are being offered, and see which lender will be the best overall for their borrowing needs. When a mortgage broker steps in, they simply take on the arduous task of shopping around for a mortgage for the homebuyer and simply tap into their own network of lenders to pull out the best deals.
Bryan J is the author of this article. For more information about mortgage broker or Toronto Mortgage broker please visit canadianmortgagesinc.ca.
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