Updated by Chris Richards on Jan 21, 2021
In a nutshell, they are independent, trained specialists licensed to represent and provide you with the best advice for your home or property financing needs.
They are retained by the client to shop the mortgage market (including banks, trust companies and other financial institutions) and to provide independent advice in choosing a mortgage commitment to fit the client’s particular needs.
It is a similar service as that of an insurance broker or travel agent in that the professional is highly trained within a very complex industry.
The mortgage broker is typically paid a fee by the lender upon successful funding (no charge to client). If the broker intends to charge you a fee, as would be the case in commercial, agricultural, business and non-bank (private) lending, this must be disclosed up front to the client. In Canada, there are provincial licensing requirements:
In most cases, yes. They represent you, the customer, not the lender. This is important to understand because they are not employees of a particular lending institution, hence can shop around and present you more than one choice.
While you will find no differences between Calgary mortgage rates and Edmonton mortgage rates (as examples) for mainstream single family housing, there may be certain lenders who can lend in difficult locations (like a Fort McMurray mortgage) or different property-types, such as mobile homes, condos, or loans for acreages, and offer better rates than your bank. This kind of knowledge not only results in the more savings to you, but often whether a loan is possible at all!
Contrast this to a visit to your own bank:
Best interest rates are always a concern to borrowers. Daily, the banks and lending institutions working with the brokerage marketing channel send out email updates on their rate specials and lending programs trying to attract new business.
These rates, and preferences for types of mortgages, can change daily depending on economic circumstances or based on the size of an institution's portfolio in a particular type of mortgage. Unadvertised rate specials are frequent.
A good mortgage broker keeps current and knows which lenders to approach first. As a result, mortgage rates obtained by mortgage brokers are among the best available at the time of placement and indeed among the best mortgage rates Canada, period.
Another important distinction to understand is that they have the knowledge required to present a tricky proposal for financing to lenders in the best way possible to successfully obtain property financing.
Financing approval can be tricky for a number of reasons:
The good news is, there is a wide assortment of loan options and features available to home buyers today.
It pays to work with a professional who will represent you and ensure the financing you get is the one best suited to your needs.
Further, if you are looking on how to buy a house in Calgary for example, a Calgary mortgage broker is likely to have local contacts that can assist you in your purchase, such as local Realtors, lawyers, appraisers, etc., and even be familiar with the neighborhoods you are interested in. Same goes to buy a house in Edmonton; a mortgage broker Edmonton may have more local knowledge that can help you get connected in your target area. That being said, with today's technology (smart phones, SMS, email/fax/scan, etc.) it's way more important to deal with a competent and trustworthy mortgage broker than choosing on location. While you might start your research online looking for mortgage brokers Edmonton, mortgage brokers Calgary, mortgage brokers Red Deer, etc., also take a moment to look at the website, social media presence, and testimonials, too, and ask around.
A professional presentation to the right lender on the first application will get the best response and save you valuable time and money. If you go shopping from one bank to another on your own, not only will it take time, there may also be multiple inquiries on your credit report. These "hard pulls" can reduce your credit score. As well, secondary applications with previous credit bureau inquiries may be more costly, because it may signal that you have been turned down elsewhere.
If you are a first time buyer and your first search is simply "can I get a mortgage Calgary" or some derivative, then absolutely contact a mortgage broker first and let them guide you quickly through the process with out making costly mistakes. They should be able to tell you in 10 minutes on the phone if you can qualify, or what steps to take if you can not. Unlike a bank, there is usually no appointment required. If you like, you can get started now and certainly before contacting a Realtor. FYI, the Realtor's first question will be - have you been pre-approved?
If you really-really want to go through your bank, you can still use a mortgage broker to represent you to your own financial institution. This can often result in a better rate than you could get on your own, because your own institution is likely offering lower rates to the mortgage broker channel than they offer their own customers sitting in their office.
Brokers can place all types of loans provided they are backed by mortgage (property) collateral. This includes small loans backed by residential property to million dollar commercial loans backed by commercial property.
Mortgage-backed loans in the millions are not uncommon with private pension funds and private lenders.
In addition to handling straight mortgages, mortgage brokers are often called on to assemble financing (based on mortgage collateral) for businesses. Mortgage brokers excel in this type of financing package because of their expertise in looking at loans from a mortgaging perspective, as well as their knowledge of financial institutions' interests and desires for a particular product at specific times.
When you develop a relationship with a full-time mortgage broker, it is often a relationship that will last a long time, with multiple lending scenarios and advice spanning years, and perhaps for your family members too.
Can You Mortgage Qualify? Explore further here.
Working with a Mortgage Broker - learn more.