Will You Be Subject To Mortgage Broker’s Fees? | |
You can either use the services of a mortgage broker or you can bypass the broker and go directly to a lender.
Banks, mortgage bankers and lenders make loans to consumers. They have the money to lend. If you go to one of these institutions to get a mortgage, you will be dealing directly with the money source.
In this case, a loan agent, who is employed by the lender, takes your mortgage application and helps process your loan. The lender's underwriters evaluate your financial documents to determine your credit-worthiness. Lenders either have their own appraisers, or they hire outside appraisers. But, your mortgage is processed in-house. The lender usually collects fees at closing to cover the cost of originating and processing your mortgage.
A mortgage broker, on the other hand, usually does not have money to lend. A broker acts as an intermediary between the borrower and the lender. You submit a loan application and all of your supporting financial documentation to your broker, rather than directly to a lender. The broker hires a lender-approved appraiser to appraise the property for you.
Brokers shop the mortgage market for their customers to find the best interest rate and terms possible. When the borrower decides on a mortgage product, the broker assembles the loan package, which consists of the borrower's application, financial documents and the appraisal, and submits it to the lender for approval. The lender's underwriters grant final approval.
Mortgage brokers work on commission. They charge borrowers a fee (called points) for their loan brokering services. (One point is equal to one percent of the loan amount.) The broker's fees may be in addition to fees charged by the lender. Mortgage brokers need to disclose these fees to you.
Discuss and clarify with the mortgage broker if you will be charged any fees before signing an agreement with them. Depending on your qualification or financial situation, you may be subject to broker’s fees. However, if you are qualified and has good crediting rating, most mortgage brokers will not charge you fees as they are paid by the lenders directly. Again, discuss and clarify before you commit with the mortgage broker.
Tip: Why would you want to pay two loan origination fees when you can pay one if you go directly to the lender? One reason is that mortgage brokers can arrange financing that wouldn't otherwise be available to you.
Some lenders work only with mortgage brokers. They do not accept loan applications directly from individual borrowers. These lenders are called wholesale lenders. Some of these loans have the best rates and terms available.
A lender that deals directly with borrowers is called a retail lender. Some lenders have both retail and wholesale divisions, which often charge different fees. For example, if you go directly to Bank "A" for a mortgage, you'll be charged one point. If you use a mortgage broker who brokers your loan through the wholesale division of Bank "A", the mortgage broker will charge you one-half point and Bank "A" will charge one-half point for a total of one point.
Make sure that you don't use a mortgage broker who charges excessive fees for his or her services. You shouldn't pay more for a mortgage through a broker than you would if you went directly to the same lender.
As in any profession, there are people who do an outstanding job. They value your repeat business and referrals. Unfortunately, there are a few less-than-scrupulous people who take unfair advantage of any situation. So you should ask for referrals from acquaintances you trust. And check for rates and fees with competitors before choosing a broker.
The Closing: A big benefit in using a broker is that he or she can quickly move you from one lender to another if for some reason you have difficulty qualifying. Also a broker may have access to a larger array of mortgage products than might be available from an individual lender.
Advantages:
A mortgage broker can help you create a down payment even if you have zero saved right now.
With today's lowest rates, it doesn't make sense to rent. If you don't have the down payment, check with us how our mortgage brokers can help you.
If you need assistance in arranging your pre-approval or mortgage financing, please forward your request.
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Terms Used in Mortgages: Conventional Mortgage - a mortgage where the down payment is equal to 25% or more of the property's value. A conventional mortgage does not normally require mortgage loan insurance.
High-Ratio Mortgage - a mortgage where the borrower is contributing less than 25% of the value of the property as the down payment. High-ratio mortgagesmust be insured through Canada Mortgage and Housing Corporation (CMHC) or GE Mortgage Insurance Canada (GE), the two mortgage insurance companies in Canada.
Open Mortgage - an open mortgage allows the mortgagor to prepay all or part of the principal amount at any time with or without notice or bonus. Open mortgages usually have short terms of six months to one year. Interest rates on open mortgages are higher than on closed mortgages with similar terms.
Closed Mortgage - Closed mortgages are mortgages that do not allow any prepayment or early repayment except on the sale of the property, in which case penalties are required.
Fixed Rate Mortgage - the interest rate is derermined and locked in for the term of the mortgage. Lenders often offer different prepayment options allowing for quicker repayment of the mortgage and for partial or full repayment of the mortgage.
Variable Rate Mortgage (VRM) / Adjustable Rate Mortgage (ARM) - this type of loan differs from a fixed payment mortgage in that the interest rate charged on the loan may be changed during the term of the mortgage. Generally, these loans are initially set up like a standard loan, based on the current interest rate.
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