Whether it be a new home purchase or you’re looking to refinance your home, getting a new mortgage requires is usually a simple process. That said, with so many mortgage products and different rates available, many people use a mortgage broker to help them with their needs.
Many people don’t realize that bank mortgage brokers may not get them the best rates since they can only offer what their employer has available. Working with a mortgage broker that’s not tied to one single bank usually benefits you since they can shop around for you. However, just because they have access to the wholesale mortgage market doesn’t mean they’ll get the best rate.
Do mortgage brokers actually get the best rate?
Generally speaking, mortgage brokers do get the best rates. To be clear, I’m referring to mortgage brokers who don’t work for a single bank. As mentioned, mortgage brokers have access to more lenders, including the big banks and monoline lenders. Since they typically work with 30+ lenders, they should be able to get you the best rate.
In most cases, mortgage brokers will give you a quote based on recent deals they’ve closed or the marketing materials they’ve been provided with. They’re not going to call every lender they work with to determine the current rates. There really is no need to since they have the information. I wouldn’t call this lazy; this is just the way it works.
If you’re about to get a mortgage, it doesn’t hurt you to make a few calls yourself. Start with your own bank and find out what their rates are. Then call a few more. If you’re offered something lower by chance, get it in writing and take it to your broker to see if they can beat it.
Not all mortgages are the same
Banks, mortgage comparison websites, and mortgage brokers typically display rates saying “as low as.” It’s important to understand that while it’s possible to get a really low rate, it may not be available to everyone.
Most of the lowest rates apply to mortgages that require insurance. That may seem odd, but that’s because the mortgage insurance cost makes up the spread vs. uninsured mortgages. If you’re refinancing, e.g. you want to get a home equity line of credit (HELOC), you usually won’t get the lowest rates). There’s also your credit score to consider. Someone with a less than ideal credit history will likely end up paying more.
Then there’s the mortgage itself. If the terms favour the bank, e.g. no prepayments, high fees for breaking the terms, then you’ll get the lowest rates. In most cases, homeowners will want some terms that benefit them. Having the ability to make extra payments is more important than you may realize.
When comparing mortgages, you need to make sure the terms are identical for a fair assessment.
How do mortgage brokers get paid?
Mortgage brokers get paid by the lender or their employer. There’s no cost to you, which is why using a mortgage broker benefits you. Even if you find a better rate on your own, you don’t have to pay the broker anything, so it never hurts to use one.
Unfortunately, there are a few bad apples out there. A small minority of brokers may ask you for a cash fee to help you process your application. For example, they may say that they can increase the income on your application, which would allow you to get a bigger mortgage. You should decline right away as this is usually a sign of fraud.
Should you use a mortgage broker?
In my opinion, you should always enlist the services of a mortgage broker. You’re basically getting help from a professional at no cost to you. If you happen to find a better rate on your own, see if your broker can beat it or have it matched. If they can’t match it, a good broker will tell you to take the better offer you’ve found.
Another benefit of using a mortgage broker is if you have a complicated situation. You could be self-employed, you might have multiple properties, or you might have different assets that are tied up right now. This could make securing financing difficult, but a mortgage broker may be able to assist you. They can also explain all the different things that affect your mortgage including the mortgage stress test.
Major banks typically look for clients that have simple financing needs. Since mortgage brokers work with multiple lenders, they likely know which ones would be willing to provide you with the funds you need based on your situation.
Where to find a mortgage broker?
Using an online mortgage broker such as Breezeful is one of the easiest ways to find the lowest mortgage rates. Everything is done online, so there’s no need to meet anyone in person. That’s right, from pre-approval to closing, you can complete everything virtually with Breezeful.
Since they work with 30+ lenders (big and small), they can search for the best rates on your behalf. When it comes to all the actual paperwork, they have secure servers, so you don’t need to worry about any of your personal information being compromised.
You can get started with Breezeful right away after answering a few questions. A real mortgage broker will then review your answers and email you the best rates currently available.