Why Would Your Client Use A Mortgage Broker?

January 11, 2021

A mortgage broker works on behalf of your client to find the best option available. They are to give your client an unbiased opinion and select lenders based on your client’s financial situation.

There are five reasons that a mortgage broker would be used:

  1. Save time and money – the mortgage broker applies to lenders for your client, potentially help you lower your credit score so that your client finds a lender that is offering a lower rate, which saves thousands of dollars in savings over the life of your mortgage.
  2. Lower your mortgage rate – a mortgage broker is an unbiased negotiator and is more likely to get a better mortgage rate than if your client went to the lender themselves. Lower rate = lower payments.
  3. Provides unbiased advice and greater choices – mortgage brokers work with dozens of lenders and that client referrals are the lifeblood of mortgages. Your client’s mortgage broker should choose a lender because they are best suited for your client and not because of the finder’s fee.
  4. No cost (most of the time) – the broker is compensated by the lender directly. The only time your client may have to pay the lender is if they are private or if the lender refuses to pay broker fees; the broker will tell your client in advance.
  5. Protect your credit score – if our client applies to dozens of lenders on their own, it is not only time consuming, but it could also lower your credit score. If you do too many credit scores one after the other in a short span of time, it can lower your client's credit score. When using a mortgage broker, they take out your client's credit score once and use it to apply to various lenders.

The pros of using a mortgage broker are:

  • Easy to use the one-stop shop. Your client will need one meeting that will be either in person or over the phone
  • Free because the mortgage brokers are paid by the lenders
  • Have access to multiple lenders so it is easier to compare rates
  • Brokers have access to more and lower rates. If your clients go on their own, they would not be able to get the lower rates that the mortgage broker would receive
  • Your client receives expert advice as the brokers live and breathe mortgage and would therefore help your client to navigate through the mortgage realm. The broker is accustomed to helping borrowers with unique needs, including freelancers/those with poor credit ratings
  • Mortgage brokers are independent, good brokers want you to get the best rates regardless of who the final lender is. Brokers will let you know which products are best for you and how much you can afford

The cons of using a mortgage broker are:

  • There is a lack of familiarity as your client will be dealing with a new person during the application
  • There is no access to some lenders as not all lenders work with brokers. If your client has a financial institution in mind, double-check with the mortgage broker to see if they work with that lender
  • More documents may be needed (i.e. Proof of income)

Going to see a mortgage broker has almost no downside because your client is not obligated to go forward with their application until after your client finds out what rates they are able to secure. The best-case scenario is that your client saves thousands of dollars in interest charges on their mortgage. The worst-case scenario is that your client receives free, unbiased advice that is personalized to your client's financial situation.

The alternatives to mortgage brokers are:

  1. Sticking with your client’s current financial situation – the easiest route is to get a mortgage from your client's existing financial institution. All your clients’ accounts and history are already there, and it would be unlikely that the financial situation your client is in will also happen to offer the lowest mortgage rate available.
  2. Approaching a new lender directly – contact a financial institution directly. It is unlikely your client will receive a lower rate than the mortgage broker because brokers receive volume discounts.
  3. Going directly to a credit union – some cautions apply. Some credit unions do not work with mortgage brokers and your client contacting them would be the only way.

The recommendation is that your client should get a quote from both your clients existing financial institution and at least one mortgage broker. Although getting a quote from both places is a little extra work, it maximizes your client’s options and gives them the best chance at securing the lowest possible mortgage rate. Shopping around for mortgages takes a little time, but it’s worth the effort to end up with the best possible product and rate for your financial situation.