A mortgage is going to be the one of the largest financial commitments in your lifetime, so it’s important to find someone who has your best interests at heart. My goal is to highlight the differences among mortgage professions, so everyone is more aware of the services available to them. An agent and broker are very similar in the fact that they can both broker a mortgage. This means they are licensed to choose between a variety of lenders and provide one of these options to the client. The actual definition is “A person who buys and sells goods or assets for others”. Every mortgage transaction needs to have a Principal Broker approve the mortgage to ensure that it complies with legislation and regulations. A broker can be the Principal Broker, but an agent cannot. This is not something that will impact the client in any way, it’s mainly regarding mortgage paperwork. For simplicity’s sake, I’ll be using “broker” for the rest of this article referring to a broker and agent interchangeably.
A Mortgage Specialist is an individual who works for a bank and offers that bank’s specific lending products. A specialist is restricted to that bank’s mortgage rates and cannot provide alternative lenders to their clients. I mentioned earlier that a broker must be licensed to deal in mortgages on behalf of clients. Before a broker can be licensed they must complete an FSCO approved course. A specialist position does not require any course or licensing to deal in mortgages. If you qualify for conventional lending (through banks and credit unions), you do not pay fees to the broker. The bank will pay a finder’s fee to the broker for the mortgage. The only time a broker will take a percentage is if you need sub-prime lending. A specialist is paid by the bank and works during bank operation hours while a broker is technically self employed and can choose their availability. Since a broker doesn’t work for a specific lender they can provide impartial information to the client. This gives the broker an opportunity to assess the specific needs of their client and find the right mortgage based on their client’s finances and lifestyle.
To dig a little deeper into the importance of being able to choose between lenders, I’d like to provide a quick example of what this can mean for the client.
Bank #1 is offering their client a fixed rate mortgage at 3.5% compounded semi-annually.
Bank #2 is offering their client a fixed rate mortgage at 3.25% compounded semi-annually.
Bank #3 is offering their client a fixed rate mortgage at 3.0% compounded semi-annually.
A mortgage of $375,000 with monthly payments amortized over 25 years.
The monthly payment for Bank #1’s mortgage will be $1,872.27. Over a 25 year period this will cost a total of $561,679.13.
The monthly payment for Bank #2’s mortgage will be $1,823.13. Over a 25 year period this will cost a total of $546,936.71.
The monthly payment for Bank #3’s mortgage will be $1,774.68. Over a 25 year period this will cost a total of $532,401.19.
The monthly difference between Bank #1 and Bank #3 is $97.59 and the total difference is $29,277.94. This is a significant amount of money that could instead be used as savings, investments, children’s tuition, or possibly an in ground pool if you want to spoil yourself with all that extra cash. In summary, it pays to shop around, so consider speaking with a broker and let them find the best mortgage for you.