Are you considering a low doc loan, but tempted by your bank’s offered rate? We look at how to know when you have a good deal, and who to expect it from.
It’s all about the rate, isn’t it?
No. Mortgage brokers have access to a far wider amount of products then a banker does. Banks can only offer you their spreadsheets and rates- a mortgage broker can access those from many banks. Remember, too, that loan product can have an influence on this. This means, of course, that the answer is not as clean cut as you may have hoped. No one source is always better or worse, it’s more a matter of what you need and want. Most people are put off the idea of a mortgage brokers as they see it as someone who is a middleman, and thus will raise their ultimate price payed-but it’s important to remember that they are not employed by the lender that they’re working with. They have no affiliation to any one source, and a mortgage broker in turn is paid by the lender for offering their product at all.
This commission is called a “yield spread premium”, and it’s this that puts so many people off of mortgage brokers. However, its not always the case that prices are higher working with a broker. Remember that the broker is actually reducing the cost of business for the bank. The bank has incentive to encourage the mortgage broker to use them- and so they usually provide rates very similar to that that their walk in customers receive. You won’t always loose using a broker.
So what does the mortgage broker do?
The mortgage broker’s job is to help you find the product offering that will best suit you. They will then help you get the best rate possible for that product with one of the banks they work for. They are responsible for your loan application, with accompanying paperwork, and the submitting to the various lenders. They do not, in themselves, offer or underwrite finance. They just have working relationships with lenders that help smooth your application process.
Why would this be an advantage?
Of course, the big advantage of working like this with a mortgage broker is that they smooth the way. If you are a ‘perfect’ candidate, this may not be a big deal…but for those who do not fit this elusive bill they can be invaluable. Their working knowledge of the industry, as well as their relationships with those in the industry, means that they know which lenders tend to lend to whom, and on what premise. They can save you wasting time with lenders who would have no interest in you. They can’t guarantee you faster approval or a quicker loan time, but they do act as your agent and liaison in chasing up these tedious processors. The bank makes the final decision.
In the end, you are likely best advised to shop around both with banks and a broker to see what you are offered so you can get the best deal for you- but a good mortgage broker will help you smooth the process.
Find out more informations here: https://www.theguardian.com/money/2014/nov/24/mortgage-broker-bank-building-society