As a first-time home buyer, it’s intimidating even just thinking about stepping into the world of home ownership. It’s also a very rewarding experience, as well but, when it comes to house hunting the first place to start is really investigating your mortgage options to learn what you can and possibly can’t afford. I say what you “can’t afford” not to deter you from becoming a homeowner all together but to heed the warning of tightened mortgage rules and the new stress test that have been implemented. With these new rules in place, now more than ever is the time to work with a qualified mortgage broker to secure you the best rate, terms, and mortgage options before you start your hunt, and before interest rates increase as they’ve said they will in the coming year.
But, what’s the difference between getting a mortgage from the bank, VS getting a mortgage through a mortgage broker? Isn’t it the same thing?
Technically a mortgage is a mortgage but the difference of who you work with to secure it can mean saving thousands in the long run. Yes, you want a mortgage to buy a home this year, preferably sooner rather than later but as a mortgage broker, it’s my job to make sure that, that mortgage fits your needs now and 5 years down the road too.
Many first-time home buyers and even some seasoned real estate investors pop in to see their bank manager believing that their life-long relationship will in some way give them a leg up in the process. However, even though you’ve been working with the same bank for many years in the past, when it comes to a mortgage they’ll offer you the same rates and options they would anyone else.
Why wouldn’t you get a better deal from your bank on a mortgage?
Depending on your personal financial situation, and even which bank you deal with, there are only so many things they can offer you. To simplify the process they look into their box of options, pick out the file that says mortgages and from there they might have option 1 or option 2 for you. Then they’ll run your ‘numbers’ which can seem like a daunting process where they ask about your current employer, how long you’ve been employed, how much money you make… and from there they enter it into a system and say something along the lines of well Mr. and Mrs. Anderson, as a long-time customer of ours we value your business and can offer you this mortgage rate.
Isn’t that what you want though?
That’s the true question to ask yourself… Is what the bank tells me they can offer in terms of a mortgage the best option for me? To find out you might call up two other banks to see what kind of rates they can offer you for comparison. You’ll go through the same process, and they’ll say something along the lines of well Mr. and Mrs. Anderson, even though you’re not currently a customer of ours, we value your business and can offer you this mortgage loan rate.
If that’s how it works at the bank, isn’t it the same when you work with a mortgage broker?
To an extent, the process is the same. A mortgage broker will meet with you, ask similar questions but they’ll also ask a few more in-depth questions about your financial situation to see if there is any reason why you may or may not qualify for more than what the bank would typically offer you. They’ll even look at your overall income potential if you plan to rent or lease an apartment unit in the home you’re looking at buying. Another thing to know is that they evaluate risk a tad differently too. For example, from a banks perspective if you’re self-employed you almost have to prepare for battle in order to secure a mortgage, whereas a broker would have a solution specific to a business owners needs. On the other hand, if your financials aren’t as strong as you’d like, a mortgage broker can look to alternatives for you, to be able to secure that mortgage you want and need when the bank would have simply said no.
Another difference is that a mortgage broker works with many banks and lenders on your behalf. So unlike the banks offer when it comes to securing your new mortgage, a broker will be able to show you many solutions that the banks don’t have access to. Talk about efficient, when you think of how much time it would take to go here and there, setting up meetings, and collecting the details, not to mention having the same conversation over and over.
Most importantly though, working with a mortgage broker, the broker doesn’t get paid until your mortgage closes, and you don’t pay them a dime directly to use their services.
They get paid by the lender they secure your mortgage with on your behalf. That means that you can count on an experienced broker to do their best in order to win your business while also ensuring you find the best rate, and options specific to your needs.
I haven’t mentioned much in terms of options but most people don’t know the devil is in the details. There can be many hidden fees and charges if you need to make any changes to your mortgage down the line. For example, say you were gifted a large amount of money from an inheritance and you want to use that money to pay off your outstanding mortgage. Of course, you’ll be able to do this with most mortgages, but what it will cost you for breaking your mortgage term (the length of the mortgage) has a direct relationship to how it will affect the lender more specifically, how much money they will make off of your loan in interest. That’s something the bank won’t be so excited to tell you about, but it’s one of the key options we look at in detail together before deciding on which mortgage solution is the best fit for you and your family.
When you’re ready to make the leap to become a new homeowner, give me a call at 705-315-0516 and we’ll take a look at – all – of your options, mortgage loans, and lenders. Together we’ll find the best financial choice for you specifically, to ensure you’ll be ready to snap up that dream home when you see it!