What is a Mortgage Broker?
A mortgage broker is an intermediary that liaisons between the mortgage borrower and mortgage lender. They are responsible for gathering information and completing the documentation process concerning income earned, an asset owned, credit report, employment details and such other information required for assessing the ability of the borrower to secure financing.
What Does a Mortgage Broker Do?
- Mortgage brokers help a borrower in finding the right type of mortgage options.
- They gather the necessary information such as the assets owned, income earnedIncome EarnedEarned income is any amount earned by an individual, such as a salary, wages, or employee compensation. It can also be an individual's income through their own business., employment details, credit report, etc. of the borrower to evaluate the client’s ability to secure financing.
- They give guidance on how one can make use of home equity. It can help in the attainment of competitive interest rates.
- They simplify the process of refinancingRefinancingRefinancing is defined as taking a new debt obligation in exchange for an ongoing debt obligation. In other words, it is merely an act of replacing an ongoing debt obligation with a further debt obligation concerning specific terms and conditions like interest rates tenure. a home loan.
- They give expert advice and the best guide on the process related to buying a new home.
How is a Mortgage Broker Going to Get Paid?
They are eligible to receive a considerable amount of fees for their services only upon the finalisation of his deal. This means if a mortgage broker is unable to convert a lead, then he is not entitled to receive any fees for all his efforts and hard work. The commission charged by a mortgage broker is paid by the lender or by both the lender and borrower, and as per industry norms, he is generally entitled to receive 1 per cent of the total loan amount.
Advantages of Mortgage Broker
- Evaluate Buyer and Seller Needs: They evaluate the needs of both the borrower and the lender and accordingly introduces them so that the chances of deal finalisation are one hundred per cent confirmed.
- Evaluate Borrowing Power: They do the legwork of evaluating borrowing power of the borrower by accessing their details of credit rating, assets owned, yearly income etc.
- Compare between Options: A mortgage broker help in making a comparison between all the mortgage options that are available and can guide the borrower in choosing the best option amongst all.
- Offer Expert Advice: They offer expert advice since they do research work on the properties.
- They may not necessarily source the right deal for the parties to a transaction. Sometimes the lenders may offer the borrowers the same rates and terms as what they provide to the mortgage broker. Therefore, in such a case, a borrower might unnecessarily end up paying broker’s fees.
- Not all lenders work with intermediaries or mortgage brokers. Therefore, working with them can make an individual miss out on such lenders that have opted for a broker free transaction.
- The services of a mortgage broker are chargeable, and hence, the parties to the transaction are entitled to pay the same.
This has been a guide to what is a Mortgage Broker and its definition. Here we discuss how do they work along with advantages and disadvantages. You can more about finance from the following articles –