Bank vs Mortgage Broker - which the better choice?

The short answer simple answer are banks. Bank should be able to offer the lowest rates and they can cover all the initial set up expenses.

One may look at the bank's posted rates wonder how could this possibly be true. The truth is, the banks posted rate is not their best rate. You have to go directly to them and negotiate the rate as well as the initial set up cost. My suggestion, is try several banks before deciding on one. Make sure you obtain interest rate and set up cost. Then, make your decision.

So what value is a mortgage broker, if banks is the better choice? The challenge behind banks is getting approved. A bank is only one lender and can be picky with who they are willing to lend money to.

If you can't get approved by the banks with the best rates, a mortgage broker may be able to help. They have a long list of lenders, both large and small that are more flexible with granting loans. Mortgage brokers should also know how to make you look good. All loans have exceptions to their rules. If the mortgage broker can prove and they should know the best tricks, that you will be able to make payments, then you will get approved. In worst case, a mortgage broker could use a higher interest rate lender to assist you with your mortgage.

Hope that helps!

Scams a mortgage broker uses to get your mortgage

Scams1. Get you, the client, to buy more than you can afford

Mortgage brokers biggest competitors are banks. Simply, mortgage broker cannot offer lower interest rates than banks because mortgage brokers are the middle man looking for commission. They are simply an add on cost. So to weed out the competition, the mortgage broker would encourage you to buy more than you can afford. This ensures the banks will not approve you, thus eliminating the competition. The mortgage broker's advantage is that he can find lender that give high interest rate mortgages where as the banks will not. The broker could justify to you, "House prices always goes up. It is better to buy more and pay the higher interest you will get high appreciation on your more expensive homes." If you believe it, than you would need to use the mortgage broker's services.

Suggestion:

Whether the investment wil make larger returns is a risk you would need to analyze without the assistance of the broker! This was what caused the recession in the United States where many Americans were buying more than they could afford. If you are new to the world of real estate, I would only take the lowest interest rate possible. There is a lot of crooks out there and a lot of mistakes you can make.

2. Never tell you, the client, about the fees a mortgage broker makes you pay

This very common tactic is used everywhere. Make you work as hard as possible, so you have a vested interest and then sneak in the fees like you were already suppose to know. The mortgage broker will first make sure you can get approved. Ask for the necessary information and then, suddenly out of no where, he will ask for your credit card inside one of the approval documents. He won't tell you any other fees, unless if you already know it. Doing so, slowly gets you committed.

 

Suggestion:

Thankfully, if you have read these articles, you will know all the fees it takes get approved. Unfortunately, I ahve not met a mortgage agent honest enough to tell you all the fees before making you work for it.

3. Advertise outrageously low, impossible to approve Mortgage Interest Rates

Mortgage brokers know that to attract clients, they need to have lower than theory competitor's interest rates. One tactic is to offer lower interest rates that can never be approved. I saw one mortgage broker site giving interest rates as low as 1.1% during a time when the standard is 2.15% and the prime rate is 3%. If you were to try and call this broker up, he'll then tell you that interest is no longer available or you didn't qualify or something to that extent. The purpose of getting you to call, is to get information. Now he, the mortgage broker's knows you are looking and he can then attempt to sell you something.

 

Suggestion:

Posting Mortgage interest rates that cannot be approved is downright lying. I simply would not recommend working with liars.

Scams a mortgage broker uses to get your mortgage

Scams1. Get you, the client, to buy more than you can afford

Mortgage brokers biggest competitors are banks. Simply, mortgage broker cannot offer lower interest rates than banks because mortgage brokers are the middle man looking for commission. They are simply an add on cost. So to weed out the competition, the mortgage broker would encourage you to buy more than you can afford. This ensures the banks will not approve you, thus eliminating the competition. The mortgage broker's advantage is that he can find lender that give high interest rate mortgages where as the banks will not. The broker could justify to you, "House prices always goes up. It is better to buy more and pay the higher interest you will get high appreciation on your more expensive homes." If you believe it, than you would need to use the mortgage broker's services.

Suggestion:

Whether the investment wil make larger returns is a risk you would need to analyze without the assistance of the broker! This was what caused the recession in the United States where many Americans were buying more than they could afford. If you are new to the world of real estate, I would only take the lowest interest rate possible. There is a lot of crooks out there and a lot of mistakes you can make.

2. Never tell you, the client, about the fees a mortgage broker makes you pay

This very common tactic is used everywhere. Make you work as hard as possible, so you have a vested interest and then sneak in the fees like you were already suppose to know. The mortgage broker will first make sure you can get approved. Ask for the necessary information and then, suddenly out of no where, he will ask for your credit card inside one of the approval documents. He won't tell you any other fees, unless if you already know it. Doing so, slowly gets you committed.

 

Suggestion:

Thankfully, if you have read these articles, you will know all the fees it takes get approved. Unfortunately, I ahve not met a mortgage agent honest enough to tell you all the fees before making you work for it.

3. Advertise outrageously low, impossible to approve Mortgage Interest Rates

Mortgage brokers know that to attract clients, they need to have lower than theory competitor's interest rates. One tactic is to offer lower interest rates that can never be approved. I saw one mortgage broker site giving interest rates as low as 1.1% during a time when the standard is 2.15% and the prime rate is 3%. If you were to try and call this broker up, he'll then tell you that interest is no longer available or you didn't qualify or something to that extent. The purpose of getting you to call, is to get information. Now he, the mortgage broker's knows you are looking and he can then attempt to sell you something.

 

Suggestion:

Posting Mortgage interest rates that cannot be approved is downright lying. I simply would not recommend working with liars.

Summary, tips and silly things home buyers do

To summarize, your objective should be to look for a reputable lender at the lowest possible interest rate.

Aside from that, your secondary objective should be to get the shortest possible commitment, highest possible prepayment and minimize your mortgage approval cost.

You first need to get some idea as to how much you can get approved for. Mortgage brokers and banks will vary in this case.

Unlike most commission based sales, I do recommend using the Internet to search for mortgage brokers. As long as you know your stuff, there is very little a mortgage broker can do to harm you (unlike Real Estate Agents)

However, I do recommend using banks over mortgage brokers, if you can. Banks are simply more reputable.

If you are new to getting a mortgage, don't fall in the trap of going with a higher interest rate because housing prices will go up. That simply could put you in jeopardy just like the US housing crash of 2009.

Don't aim to starve yourself so you can pay off your mortgage like no going out to dinner or movie for five years. People have thought o these silly ideas, but few if any follow through. They just end up going into debt.

Although you can make smaller commitments like no buying coffee everyday. But these commitments will save you money whether you have mortgage or not. Thus, these saving techniques is really independent of your mortgage. That is, if you couldn't commit to it before your mortgage, you probably wouldn't be able to commit to it after.

Don't aim to pay off your mortgage as quickly as possible if you have other debts or intend to get other debts. Your mortgage interest should be the lowest interest rate compared to any other debt interest. I knew one person who made a huge down payment on her mortgage because she didn't want to make large scheduled payments. But then she bought a car and had to take a out another loan that had an even higher interest rate. She should have just use the down payment to pay off the car loan.

There other ideas that can help you pay off your mortgage like The Smith Manoeuvre. Although I think this idea is dead due the Tax Free Savings Account.

One simple way to set your mortgage payment schedule equivalent to your salary pay day schedule. If you calculate the interest savings of this simple idea, you could save up to five years of interest.

Good luck, hunting!

If you have any other questions or concerns, post them, so I can respond.

How your Mortgage Broker Gets paid and how it works against you

Background:

A mortgage broker is the middleman between the lender and you, the client. A mortgage broker only gets paid when the he/she is successful in getting the loan and the client accepts the loan

 

 

A mortgage gets paid more when you borrow more!

The mortgage broker will attempt to get you to borrow as much as possible. He may say something like "Why don't you borrow more, since the interest rate is so low?" In some cases, if you do have other debt or is looking to make large purchases, it is better to borrow using your mortgage if it is indeed the lowest interest rate. However, whenever you borrow, you may have to pay more fees such lawyer fees are higher and if you break out of the mortgage, the penalty fee is also higher.

 

Only borrow what you are going to use and not anymore.

 

A mortgage gets paid more if you borrow for longer.

The mortgage broker will tell you to go with the longest possible commitment like the five year standard as they claim. He may say something like "Make your mortgage commitment five years or ten years so that you don't have to worry about renewing" or "Five year Fixed rate is the standard. Everyone uses this standard" Five years is the standard for variable rate. Five years fixed rate is a scam. The longer you borrow, the more expensive it is to break out of. If rates go down, you get screwed.

 

Commit to the shortest possible period given the lowest interest rate.

 

A mortgage broker gets paid more if you go with Fixed Rate instead of Variable Rate

Fixed rate is a scam. He may say something like "Interest may go up. Best to play safe."

Fixed rate is higher than variable rate and the chances of interest rate going down is the same chances of it going up. Fixed rate is often 2%-3% higher than variable rate. If you were to listen to your mortgage broker and go with Fixed rate, at five years. The chances of prime rate going up to 2% in 2-3 years is very slim. And even if it did, you would still be saving money! Prime rate would have to go up 4% over five years for you to break even!

 

 

The mortgage broker may want you to buy a used home over a prebuilt home.

Prebuilt homes often come with their own lenders with a guarantee approaval mortgage rate at lower than the mortgage broker can offer. Thus, the mortgage is afraid by going with prebuilt homes, you will no longer use their services. Your mortgage broker may say something like "Used homes are sturdier and visible so that you can see it. They can also be a better investment."
The truth is, prebuilt homes often go higher in value faster than used homes. Prebuilt homes also come with warranty required by the government that the house must be free of defects for a year. Used homes offer no such warranty.

 

 

Bottom Line:

You, the client and your mortgage starts off with a mutually beneficial relationship where you want a mortgage and the broker wants to be the one to give it to you. But that's where the mutual benefit ends. For the mortgage broker to get paid more, he needs you, the client, to lose more. He needs you do things that will simply cost a lot to get the mortgage. You need to rely on yourself or someone else that is not going to benefit from your loss. In conclusion, you need to know what kind of mortgage you are looking for. Don't ask the mortgage broker because he will only look for a mortgage lender that pays him the highest commission.

 

If you have any questions or concerns, post them below...