Canada's Condominium Magazine

What are the benefits of using a mortgage broker?

Mortgage brokers are paid by the lender with whom they arrange the mortgage. 

Almost a third of Canadians who took out a new mortgage in 2011 used the services of a mortgage broker. This is according to a new report from the Canadian Association of Accredited Mortgage Professionals (CAAMP) called Confidence in the Canadian Mortgage Market.

What are the benefits of using a mortgage broker? Isn’t it just as easy to go through your bank’s mortgage department, as most people do?

In fact, there are certain advantages to using a mortgage broker. What if you are turned down by your bank because you have a poor credit rating, or a bankruptcy in your history? In a case like that, an experienced broker might be able to find you a lender who’s willing to take a bit of a risk. Having someone with negotiating skills and some powers of persuasion arguing your case can make the difference between success and failure in getting the mortgage you need.

But mortgage brokers do more than service the difficult cases. They will tell you that their role is broader than that, including a strong educational component. Basically, mortgage brokers are there to give consumers the best, impartial advice about mortgage products on the market, help you find the best interest rate and terms possible, and even review your mortgage periodically to see if you can pay it off faster.

Banks, as will be obvious, are not necessarily motivated to give you a deal that’s best for you, though they market their mortgage products as if they had only your interests in mind. Neither do banks, despite their public relations campaigns to the contrary, have any reason to want you to pay off your mortgage sooner than later. That’s why they charge penalties when you do so. Mortgage brokers, however, have nothing to gain or lose by your getting out of debt, and so they can advise you how to do it and help find you a mortgage with more favourable pre-payment terms.

Mortgage brokers also perform a lobbying function. Recently the government regulator responsible for financial institutions suggested that in future, banks should reassess a mortgage applicant’s financial and employment status when renewing an existing mortgage. Renewal of a mortgage has traditionally been almost automatic at maturity, as long as the mortgagor has made all the payments. Now, however, CAAMP warns that tightening regulations so that borrowers have to, in effect, re-qualify when they renew could actually result in disqualifying some homeowners.

Investors in the real estate market are also more likely to use the services of a mortgage broker than to deal directly with a bank.

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