A mortgage is perhaps the biggest investment that you will make in your life. When you take out a mortgage, you are committing to at minimum tens of thousands of dollars worth of debt – but in most cases the debt runs into the hundreds of thousands, or even a million. You will be paying back the mortgage for decades, so you need to know that you like the property that you are moving into and that you can afford the expense.
One of the biggest decisions will be who you would borrow from when you are considering a mortgage. Should you borrow from your bank, or would a mortgage broker be a better choice?
The answer can be rather complicated. Dealing directly with a bank is a good option if you have a good credit rating, and you have a good relationship with your bank. There are a lot of banks that do work directly with borrowers, and will allow you to take out a mortgage through them, actually cutting out the middleman. In fact, dealing with banks is becoming increasingly common. “Before the housing bubble bursting, brokers had about a 30 percent share of the mortgage market, but that figure has fallen to just ten percent in recent years.” declares David Johnson of http://www.mortgageplan.ca/
Does that mean that agents are no longer relevant? Far from it! Brokers offer a valuable service both for home buyers and those who are looking at refinancing their properties. The trick is deciding whether you want to go that way, or whether you wish to go to your bank.
Your Credit Rating Matters
Most people opt to go to their bank purely because they have an existing relationship with them. When you already have several products with a bank, you can often get an excellent deal when you take a mortgage out. Also, your bank has a good idea what you are like as a customer, and this means that they will be in a good position to make decisions for you that are based on how you behave, rather than an imaginary credit score.
But for people who have poorer credit ratings, this is not an option. Often, these people are forced just to work with a broker. A good mortgage broker will have an enormous list of companies that they can work with, and they will know which ones are more receptive to the sub-prime market.
Note that even if you have a good credit rating, there are some reasons to work with a broker. Yes, the broker might charge you a fee – but for that fee they could get you a much better rate on your mortgage. The broker has access to wholesale mortgage rates, which are lower than the retail rate that the bank will offer you. Paying a little up-front today to get a better rate makes more sense than having to spend a fortune in additional interest for the next several years.
If you are self-employed, then you might find that the broker is unable to get you a good deal, though. In that case, a bank could be better. Your bank knows how much money you have come in and how much you spend each month, and this means that they can qualify you for better rates and a mortgage more easily. A broker might be able to verify this information with your cooperation, but they may not consider the proof you provide to be sufficient so that you might be offered a ‘stated income’ mortgage, rather than a verified income one, and this could mean you pay more than you have to.
It’s worth getting quotes from as many lenders as possible to see what they can offer you, even so. It might feel like a lot of work to shop around, but if you aren’t going to do due diligence on the biggest purchase you have ever made in your life, what would you do it on which is one time when you just cannot afford to take chances or run the risk of getting ripped off by a lender.