Why Use the Services of a Mortgage Broker?

Independent Loan Agents and How They can Save a lot of Money

Jul 22, 2009

Mortgage Brokers Can Find the Best Deal, Ian Britton

Mortgage brokers can negotiate the best terms for mortgages and have experience in finding the best loans available.

A first time buyer in the market for a property can easily become perplexed when the time comes to apply for a mortgage because the lenders are abundant and varied, mortgage quotes differ and vary and it can all become very confusing.

Mortgage Broker Defined

A mortgage broker shops around all the different banks to find the best rates, terms and loans on behalf of his or her client. Independent mortgage brokers can usually negotiate better rates because they are not tied to a specific bank, they can get wholesale rates because of the volume of loans they put through to these different banks

The advisor then gathers all the paperwork and passes it along to the lender for underwriting and approval.

How are Independent Mortgage Brokers Regulated?

This varies from country to country but generally the industry is highly regulated and a mortgage broker can get into a lot of trouble for bad advice.

In the UK, all mortgage advisors need to have studied and passed suitable qualifications by law to sell mortgages and then are regulated through the Financial Standards Authority for everything they do. The broker is financially liable if the advice is later shown to be defective.

In other jurisdictions the loan advisor is limited to pointing the borrower in the direction of an appropriate lender, no advice given and a commission collected for the sale.

How a Mortgage Broker Works

An independent mortgage broker will gather the information necessary from the borrower and assess the borrower's circumstances. This may include an assessment of credit history and affordability.
The mortgage advisor will then assess the market to find a mortgage product that fits the client's needs and apply for pre-approval (agreement in principle) from the lender.
All documents will need to be compiled, such as payslips and bank statements. The legalities and conditions need to be spelled out to the potential new home buyer so that both parties are protected.
All materials will then be submitted by the broker to the lender for final approval.

Mortgage Broker's Fees

An independent advisor will normally make his or her fees from the commission off the mortgage once a potential house buyer has decided which home loan is right for them. Usually this is approximately 1% of the loan amount, which is not much when weighed against the amount in interest saved over the life of the loan if a good deal is made.

Overall, it is a good idea to use the services of a well-qualified, reputable independent mortgage broker when applying for a mortgage or re-mortgage. The process will be in the hands of a professional who has the experience and tools available and will save the home buyer time, money and possible frustration.