What Is A Mortgage Broker And Why Do You Need One?

If you’re planning to buy a home in Canada, one of your main concerns is likely what kind of financing you can get this year. 

A big factor that affects how much you pay in mortgage payments is the interest rate on the loan. There might be a difference of a fraction of a percent in interest rates among different lenders. However, because you’re borrowing a lot of money over a very long period of time, even small differences in interest rates can impact the total amount of interest you pay over the life of your loan. 

It pays to shop around and find a lender who will give you the best loan terms and interest rates. It’s extremely time-consuming for you if you have to contact each lender yourself. A smarter approach is to let a licensed mortgage broker do the work for you.

What Is A Mortgage Broker?

A mortgage broker is a licensed individual who acts as a liaison between you and the lender. 

The broker works with a wide network of lending institutions and is an expert in all types of mortgage products. They can help you get pre-approved for a mortgage so you’ll have better bargaining power when you make an offer on a house. 

The broker will evaluate your financial status and determine which type of mortgage product is appropriate for you. They’ll explain the advantages and disadvantages of each type. 

The broker will compare terms and determine if your qualifications satisfy the lender’s criteria. They will help you complete your loan application and gather from you all of the documentation that needs to be included before he submits your application to the lender for pre-approval. 

A mortgage broker also answers any questions you have about the approval process and the terms and conditions of the loan. Once you’re pre-approved, you can get a rate hold on the favorable rate for up to four months. 

When you actually make a purchase, the broker will be your liaison with the lender as you proceed with a full application for the mortgage, and the lender completes the underwriting process.

Why Is It Important To Use A Mortgage Broker Right Now?

Mortgage rates have been historically low over the past year. The second half of 2020 brought us five-year fixed mortgages at below 2 percent. Due to the coronavirus pandemic, the Bank of Canada lowered interest rates last year to support economic activity. 

Fast forward to 2021, the Canadian economy improved slightly, and rates have crept up about a quarter of a percent. Even with the increase, mortgage rates are still close to historic lows, but low rates will not last forever. 

Now that you understand what is a mortgage broker and what he can do for you as a prospective homebuyer, you can get pre-approved for a mortgage and lock in on these favorable rates before you make a purchase.  A good mortgage broker will save you time and money, helping you find the best mortgage product that will fit your unique needs and preferences.