A loan broker, sometimes known as a mortgage broker as they are typically required when getting a mortgage, is the middle person between a lender and a borrower. They are a stepping stone that can act as the intermediary between someone who wants to buy real estate and those offering loans to do so. These brokers help would-be borrowers find a lender with the best terms and rates to meet their financial needs.
A loan broker can provide a valuable service to you when it comes to borrowing from a lender, especially if you do not feel particularly confident in your understanding of the process of getting a loan and what will best suit your financial goals.
Why Use a Loan Broker?
While a borrower can directly withdraw from a lender, a loan broker can help the borrower decide which lender meets the borrower’s financial goals. By working with an experienced, competent mortgage broker, you can get help in finding the right mortgage. It is usually an unavoidable truth that getting a mortgage can be a stressful time – especially if you are a first-time house-buyer and are unsure of the ropes. By opting for a loan broker, you can potentially save your time, effort, and money.
What Are the Advantages and Disadvantages of Loan Brokers?
Before you decide on whether or not to opt for a loan broker, you must consider the advantages and disadvantages of what their position can offer:
Saving You Time and Effort – A loan broker may save you considerable legwork. They have regular contact with a wide variety of lenders, some of whom you may not know about, and so can make useful suggestions to you. In turn, they could also steer you away from certain dangerous lenders that have onerous payment terms buried in their mortgage contracts. Of course, it would be beneficial to do your own research – you can get a sense of the average rates available for the type of mortgage you’re applying for online.
A Broker May Have Better Access – You may not be able to contact certain lenders directly. Brokers may also be able to get rates from lenders that might be lower than what you can get on our own due to the volume of business they generate for a lender.
A Broker May Manage Your Fees – Several types of fees may be involved when you take of a mortgage, or when you work with a new lender. For example, appraisal fees or origination fees. Loan brokers may save you up to hundreds of dollars by getting lenders to waive some or all of these fees.
But make sure you are not too hasty, there are also some disadvantages you must consider:
Your Interests May Not Align – The most important thing is that you find the best loan for you complete with affordable interest rates. A loan broker often gets a fee from the lender for bringing in business and so a broker’s goal may be to get you a mortgage that maximises their compensation. Make sure you protect your own financial interests.
You May Pay a Fee – Mortgage brokers are paid either by the lender or by you. If the fee is covered by the lender, you need to be concerned about whether you’ll be steered to a more expensive loan because the commission to the broker is more lucrative. If you need to repay the fee, figure it into the mortgage costs before deciding how good a deal you are getting.
How to Choose a Loan Broker
If you do decide to opt for a loan broker, first things first, start by making sure you understand exactly what they do. Then, a good place to start when you begin to select a mortgage broker is by asking friends, relatives, and business acquaintances for referrals to make sure you keep yourself safe and prevent you from selecting a dodgy broker. You should also look at online reviews and check for any complaints to ensure you have a good idea of their reliability before getting involved with them.
When you meet with possible mortgage brokers, ask them to detail how they’ll help you, all their fees, the lenders they work with, and their experience in the business. Get a feel for how much interest they have in helping you get the loan that you need – you will want to leave with a clear picture of their experience and the precise help they plan to provide.
Remember to always choose a loan broker that is right for you and your circumstances – can they help you in particular, given your specific financial circumstances? Make sure your loan broker understands and caters to your particular needs to ensure the best deal is made for you.