Bridging The Gap: The Benefits of Using a Mortgage Broker
Bridging the Gap: The Benefits of Using a Mortgage Broker
If you are looking to buy a home within Ontario, the odds are that your property will cost you hundreds of thousands of dollars more than you have currently sitting in your bank account. That does not mean that your purchase is impossible, but like most Canadian homeowners you will most likely need a mortgage to be able to make it work. In a mortgage, a lender will loan you the additional funds that you need to make your purchase, and you in turn will be repaying that money, with interest, on a regular basis.
The amount of money in that mortgage though, and the interest and terms of your repayment, are all up for negotiation. Banks and other lenders offer mortgages based upon your personal finances, including your income, savings, debt, and expenses so as to help ensure that you would be able to repay the amounts without defaulting on the loan. They’ll throw around insider jargon about ‘gross debt services’ and ‘total debt services,’ which can bring added confusion to the existing stresses of home buying or refinancing.
With numbers and rates circulating so fast, it can be hard as a buyer to understand their real life implications. There is no need to go through this process alone, though. Mortgage brokers and agents are there to be your guide.
What are mortgage brokers/agents?
Mortgage brokers and agents (to avoid confusion we’ll refer to them collectively as ‘brokers’) are licensed professionals who serve as the liaison between you and various mortgage lenders in order to find you the best possible rate and terms for your mortgage, all so that you can comfortably buy your next property or refinance your current one. They are regulated by the Financial Services Regulatory Authority of Ontario (FSRA) and are held to ethical and professional standards and governed by the Mortgage Brokerages, Lenders and Administrators Act, 2006. These organizations govern how brokers conduct their business, and help make sure that brokers are acting in your best interests.
Instead of going straight through to traditional banks, mortgage brokers have access to multiple lenders at their disposal including other financial institutions, credit unions, loan and trust companies, and other individuals or companies who lend money on real estate. Because they have those close relationships with multiple mortgage lenders, they can use this network to negotiate and find the best rate for you.
What are the benefits of going with a broker?
One of the reasons that mortgage brokers are so easy for borrowers to work with is that they speak the same language. While mortgage rates and agreements can become heavily technical and complicated, brokers are well-trained to put everything into plain language so that you can understand exactly what is going on. Their first major step will be taking you through a pre-approval, which is an early okay from a lender informing you, based on your current financial position, how much you would be able to borrow to make a purchase or refinance. This requires a series of documents proving your finances including pay slips, bank statements, current loans, copies of your ID etc., but a broker will walk you through all of that one step at a time. Once that paperwork is all compiled together, it actually makes things easier for every other professional, such as your real estate agent and your lawyer, if you choose to move forward with a mortgage arrangement.
If you’re shopping across the major banks for different rates, your credit score might take a major hit. Each bank will obtain a copy of your credit report separately, and each time they do it then lowers your credit score and can limit your borrowing power. Even before you make a purchase, your purchasing power is already impacted by just asking the question. Mortgage brokers, on the other hand, only pull your credit report once and then take that same report to each of their various lenders to see who can provide you with the best offer.
While banks have been unable to offer those close personal relationships for some time now, things have gotten even worse since the COVID-19 pandemic began. Bank employees are overloaded in this busy housing market, and with already-restricted bank hours (not available evenings and weekends) it may be difficult to establish contact with a mortgage representative at key times. Brokers though tend to work in teams, and often have someone available at short notice who can assist with an urgent question or matter even outside of traditional office hours.
Key Takeaway
Mortgage brokers can be an integral part of the home buying process. They can also help you get equity from your home or assist you with refinancing. In this hot real estate market mortgage approval and transactions may need to happen fast, and there are a lot of moving pieces that need to come together quickly in order to secure your purchase.
At Sari Rose Law, we pride ourselves in our exceptional client service. We know how quickly things can move, and our team responds to emails and phone calls quickly to ensure that the real estate process runs as smoothly as possible. Mortgage brokers play a similar role when it comes to mortgages, and we work closely with them to help you navigate your purchase. Once your offer to purchase has been accepted or mortgage commitment has been signed, contact our office right away to start the legal process for buying or refinancing your home or home-to-be!