Mortgage Matters: Making the Right Choices on a Big Investment

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A home loan is arguably one of the most important investments you will ever make. For many people, a mortgage matters and is #1 expense. In fact, US household debt surveys (Center for Microeconomic Data at the Federal Reserve Bank Of New York) reveal the following breakdown of the average debt burden as at Q3 2017:

  • Housing Debt – $9.19 trillion
  • Non-Housing Debt – $3.76 trillion

It’s important to point out that housing debt has been increasing since Q2 2013 when it stood at $8.38 trillion. Prior to that, housing debt reached a zenith in Q3 2008 when it was listed at $9.99 trillion, and non-housing debt was $2.69 trillion. While the US economy has improved somewhat since then, the level of non-housing debt has increased, while housing debt has shown an improvement. The overall debt burden is certainly better today, but housing-related debt is exceedingly high. This begs the question: What are the best options for individuals to manage their home purchases?  There are typically 2 options available to customers. These include banks and mortgage brokers.

Mortgage Matters: Making the Right Choices on a Big Investment
Mortgage Matters: Making the Right Choices on a Big Investment

What Are Some of the Benefits of Mortgage Brokers?

Mortgage brokers are otherwise known as freelancing agents who will liaise between several lenders and a borrower. They are paid a commission for the mortgages that they secure. For that reason, they will gladly shop around for the best possible deal based on the customer’s preferences. They effectively connect shoppers with lenders. The right fit between a lender and a borrower is based on multiple considerations. This includes interest rates, whether fixed or variable, the term of the loan, the down payment, etc. Many people may prefer a mortgage broker since they are affiliated with multiple lenders, and not only one a big bank.

The question as to which mortgage broker to use boils down to personal preferences. It is always best to carefully evaluate the offers being made available, Also, never to sign on the dotted line before you understand exactly what you’re locking yourself into. The lower the interest rate you can secure, the bigger your cost savings over the life of your loan. These can go towards a retirement fund, nest egg, family vacation, or simply saved as cash in the bank.

Better Mortgage Rates with Mortgage Brokers

Sometimes, it’s possible to get a much better rate at a mortgage lender than at a big bank. In recent years, there has been explosive growth in the number of online mortgage lenders peppering the market. Now, customers across Canada and elsewhere can apply for mortgages online. In doing so, they may not be subject to high pressure sales tactics by mortgage brokers and banks.

Some mortgage brokers may not be able to meet you face-to-face, and the best lenders aren’t always affiliated with them. Additionally, the enticements to secure a loan may come at your expense. They may push their ‘lenders’ despite your best interests. However, the cost savings generated by mortgage brokers can go towards paying down the principal on the mortgage.

  • Mortgage brokers take care of negotiating on your behalf
  • Mortgage brokers occasionally pay for appraisals and home inspections
  • Greater flexibility and the lowest possible rate at non-traditional lenders

What Are Some of the Benefits of Big Banks?

Banks typically like to establish personal relationships with their clients. If you are applying for a mortgage at your bank, you may even know the bank manager, or loan officer. This allows for a greater degree of personalization according to what the bank can offer you. However, it must be remembered that you are limited with banks since you’re only working with one lender.

It should be remembered that the rates posted by banks at their land-based locations and online are not always their lowest rates. The loan officers at banks are compensated in a complex way. These compensation methods include things like bonuses, salaries, and commissions. Unfortunately for clients, loan officers at banks will never recommend better options than whatever the bank is offering – it’s simply not in their interests.

  • Many big banks will pay the mortgage appraisal fees.
  • Bank loan officers are pretty flexible when it comes to meeting clients and setting up appointments
  • Bank loan officers can offer you great deals on supporting bank accounts, credit cards, transactions fees, etc.

When you last took a mortgage, did you get your loan from a bank or a mortgage broker?

( Photo by hnnbz )

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