What Mortgage Brokers Are All About: The Basics
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A summary is provided at the bottom of the article body under The Final Word … for those speed demons amongst you readers.
For those of you that are completely fresh on the mortgage scene, let's cover the basics. A mortgage is when you charge property to a creditor as security for a debt. What that means in plain English is you give a portion of your property's ownership to a bank for money. Mortgages are one of the largest loans in banking today, making your interest rate all the more important. Mortgages typically take thirty or more years to pay off, and are a good percentage of many people's monthly payments.
Now, what is a mortgage broker? They are someone who facilitates this exchange of property ownership for money. They can be a part of a bank, credit union, or other lender's paid staff, or they can be independent after they gain some years of experience. For our purposes, we're going to call private mortgage brokers just "mortgage brokers" and mortgage brokers who work for a bank or other lender "bank staff."
So, how are mortgage brokers paid? Although there are a number of differenting methods, they are mostly paid through the lender they give the loan to. Of course, that means that the service they provide to you is potentially free of charge. Some also charge the person seeking a mortgage a lump sum of a few hundred dollars or so, because every mortgage broker is free to choose their own prices and form of payment since they are an independent business. When speaking to mortgage brokers, make sure to inquire about the method of payment.
Are there downsides to using a mortgage broker? Yes. The major downside of using them as opposed to bank staff is that they themselves do not have access to the funds you're requesting. If funding is required as an emergency, then approaching a bank or lender's staff directly is probably the best option. Still this is not necessarily the case. Bank staff have, on average, less experience and may have a large number of clients and other work to deal with as well as a long chain of hierarchy and bureaucracy to work through. Mortgage brokers, on the other hand, prepare everything for the bank ahead of time and present it directly to a bank official, allowing them to skip certain members of the bank hierarchy and get to a simple decision.
If mortgage brokers do not have the funds themselves, then why choose one over a bank? The benefit of using their services over those of bank staff is that they will make the lenders compete for your business and often have special deals set up through the lenders that only they have access to. Typically, they have an arsenal of somewhere around thirty different lenders to choose from and make compete for their business, giving you a wide range of options. This makes their service worth potentially thousands or millions of dollars depending on the value of the property you're seeking a mortgage for. Check this out: a mortgage of $ 50,000 at just a% 1 lower interest rate over the standard 30 years saves around $ 15,000 depending on when interest on the principle amount is recalculated.
A serious concern when approaching mortgage brokers is mortgage fraud, so how do you know that a mortgage broker is credible? Within the United States of America, the Better Business Bureau gives accreditation to mortgage brokers that can prove their experience in the field and swear to uphold a code of ethical practices, much like the one doctors are sworn to uphold. Still, there are many, many different organizations that offer similar accreditation, so make sure to investigate the agency beforehand. In most modern nations today there is an organization that gives this type of accreditation, so ask mortgage brokers in your own nation what accreditation they have and what it means to them.
What would good mortgage brokers do for you? Good mortgage brokers would ask how much money you need to have lent, the amount you can afford to pay each month, and the time you'd like to have the mortgage paid off within. Good mortgage brokers would appear professional and be cordial and hospitable while sticking to business and not wasting your time. They may present several different options to you to include your own reason and decision-making abilities in the mortgage acquisition process while simultaneously recommending what is probably the best option for you. They would always offer you greater savings than the price of their own services. Above all, good mortgage brokers would keep in mind what's best for you and your loved ones above any private concerns in their own interest.
The Final Word …
A mortgage broker independent from a bank or lender should always be able to offer you more savings than the cost of their services. Otherwise, their profession would be worthless to people since it would contain no real value. Although it's not always the case, they are more likely to have their clients' best interests in mind over those of the banks and corporations that they serve. Always ask if they follow a code of ethical business practices as a part of their certification.