A Licensed Mortgage Broker works for you - the client; What is a Licensed Mortgage Broker?
The licensed person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them. A firm or individual bringing the borrower and lender together and receiving a commission. A mortgage broker does not retain servicing.
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Mortgage Brokers Get Best Rate
ELLEN ROSEMAN August 21, 2005 The Toronto Star
Enio Lazzer works for one of the major banks. He gets an employee discount on bank products, including his mortgage. But when his real estate agent suggested using a Mortgage Broker, he decided to give it a try. He was trading up to a bigger home and wanted to get the best possible interest rate.
A Mortgage Broker found him a very good rate. But Lazzer found his own bank was willing to match it. "I was going to stay with the bank, but the Mortgage Broker said, `Let me keep working on it.' He ended up doing far better than I could have on my own." The mortgage broker not only offered cheaper financing, but better service as well. "There was constant follow-up, right through to the closing date," Lazzer says. "I was a cynic about mortgage brokers, but now I'm a believer."
For example, Lazzer recently renewed his mortgage and cashed in some investments to pay it down. Then, he borrowed to invest, using his home as collateral. Using this strategy, some of his mortgage interest becomes tax-deductible. "I'm a chartered accountant and I know this stuff," Lazzer says. "But it was the mortgage broker who took the initiative. He looked at my mortgage application and asked the right questions."
Canadians usually go to their banks for housing loans. Fewer than half of first-time home buyers use a mortgage broker and only 25 per cent consult a mortgage broker when they refinance or renew.
But mortgage brokers have access to low-cost financing that ordinary customers can't get. They're skilled at playing off one lender against another. The service is free to most borrowers. Mortgage brokers are paid commissions from the lenders with which they place the business. Only 2 per cent of some Mortgage Brokers clients have impaired credit, traditionally the purview of mortgage brokers.
Jeff Brandman says "I feel that my Mortgage Broker represents me, trying to get the best deal for me. The bank represents the bank, trying to get the best deal for itself."
Gerry Lodder is a partner in Diversified Business Group, a real estate developer. It buys and renovates apartment buildings in small towns, then turns them into condo buildings. "Our clients are investors, who buy two to three units at a time," he says. "We insist they put at least 25 per cent down and finance the rest. It's pretty conservative." Lodder sends his clients to a Mortgage Broker. "The Mortgage Broker makes our job so much easier," he says. "Most clients are so busy they have no time to shop around themselves. And banks don't give them the same respect they give a Mortgage Broker."
Taddingstone Consulting Group did a report on Mortgage Brokers and asked hundreds of them how they do business. It found lots of choice for consumers. There are more than 5,000 mortgage brokers in Canada, including more than 2,000 in Ontario, up from a few hundred 10 years ago.
"However, 60 per cent of brokers have been acting as a mortgage broker for less than five years," says Greg Holohan of Taddingstone. Until now, it's been relatively easy for someone to act as a Mortgage Broker. But Ontario is revising its legislation this fall to address this issue. There's also a push in the industry toward higher standards. The Canadian Institute of Mortgage Brokers and Lenders has launched a designation called Accredited Mortgage Professional (AMP). Just under 45 per cent of Canadian brokers now have it. Another 35 per cent plan to get it this year. AMPs must have worked as a mortgage broker for two years and taken courses, including Ethics. They also have to commit to continuing education.
Brokers have different specialties. While 20 per cent say their role is to get the lowest rate and 25 per cent say it's to help credit-challenged borrowers, the majority (55 per cent) want to act as partners with clients to select appropriate products.
The average mortgage broker deals with six lenders on a regular basis. You may want to ask which lenders they have actually completed a deal with in the recent past.
Using a broker may help if you're in unusual circumstances, new to Canada or self-employed. Brokers tend to have access to interest-only mortgages or 100 per cent loan-to-value products, which are more typical of the U.S. market.
