The Pros and Cons of Using a Mortgage Broker - Evan Tando (2024)

FAQs

What is the disadvantage of working with a mortgage broker? ›

The Drawbacks: Fees: Brokers earn their living through commissions, which might be passed onto the borrower, either directly or embedded in the loan terms. Not Always Unbiased: While many brokers prioritize client needs, some might push certain products that offer them higher commissions.

- Ask Other Homeowners

Talk to them and see who they worked with to find their mortgage loan. Ask as many homeowners as you know so that you can get a variety of responses. If multiple people say they worked with the same broker, there's a good chance that broker is worth hiring.

Mortgage brokers often work closely with lenders, so they may have access to insider knowledge, deals and rates the average home buyer doesn't. Mortgage brokers also often have strong negotiating power and may help you get a lower interest rate on your mortgage because the banks want their business.

Using a mortgage broker can speed up and remove some of the stress involved in the house-buying process. As mortgage brokers have access to special deals, they may also be able to get you a cheaper mortgage than you can find yourself. Some will even tell you about better mortgages you can only get direct.

A mortgage broker can offer a wider array of options and streamline the mortgage process, but working directly with a bank gives you more control and costs less. Kate Wood is a mortgages and student loans writer and spokesperson who joined NerdWallet in 2019.

Disadvantages of Using a Mortgage Broker

Because brokers usually obtain a fee from a lender for the business they've brought in, they may not always keep the best interests in mind for their clients. The compensation varies from lender to lender; thus, the broker can source a deal that boosts their compensation.

A Broker May Not Source the Best Deal for You

Some lenders may offer home buyers the very same terms and rates that they offer mortgage brokers (sometimes, even better). It never hurts to shop around on your own to see if your broker is really offering you a great deal.

Fixed fees typically cover the broker's services, from lender research to finding and securing products that suit your needs and circ*mstances best. However, some mortgage brokers might charge additional fees for complex cases or if you require extra services.

The short answer: as soon as you've got a property goal. The longer answer: whether you're scoping out your options, have a long-distance goal in mind or you're ready to enter the property market (like, yesterday)… chances are you'll benefit from having a chat with a mortgage broker.

How do you know if a broker is good? ›

Verify that your broker is regulated by a recognised financial authority locally or globally. This regulation ensures that the broker operates within established guidelines and safeguards your investments. Check their registration number and cross-reference it with the regulator's website for confirmation.

There's really no wrong answer. A broker can make the mortgage experience easier but they don't have access to every lender. Doing it yourself takes more time, but when you've found the right loan and lender, you might end up with a better deal.

The first thing a broker will do is meet you and get a better understanding of what it is you want. Brokers are, after all, your finance professionals, so the better they get to know you, your financial circ*mstances and long-term goals, the better they can match you with a product that is right for you.

Getting help from a mortgage broker is usually free for you. They don't charge you directly because they get paid by the banks for bringing them a customer (i.e. you). If you're getting a loan of $500,000 and the broker's commission is 0.5%, the bank will pay them $2,500 for leading you to them.

This is not the case. Brokers differ in their lender networks and the deals they can negotiate. Take the time to shop around and speak to several brokers to ensure you're getting access to the best possible mortgage options for your situation.

A mortgage broker is offered loans on a wholesale basis from lenders, and therefore can offer the best rates available in the market, typically making the total loan cost lower for the client. A reputable mortgage broker will disclose how they are paid for their services, as well as detail the total costs for the loan.