What’s a mortgage broker, and why do you need one?
By Jacqueline Kean
Whether you are looking to purchase your first home, refinance your mortgage or just found out you don’t qualify at your bank, there are a number of reasons you should consider using a mortgage broker.
Navigating the process of finding the mortgage solution that fits your financial needs can often leave you feeling overwhelmed. This is especially true if your credit score recently took a hit, you have non-traditional sources of income, or simply because you are self-employed. One way to navigate this uncertain time is to hire a mortgage broker you can trust to help you reach your goal of home ownership.
Who are mortgage brokers?
Unlike your bank’s mortgage specialists, who are employed by a specific organization and therefore mandated to sell that organization’s products, mortgage brokers have access to several lenders and can help connect you with one that has the best mortgage solution for you.
The right broker will benefit you as a borrower as they can have a wealth of knowledge in mortgage lending, both from formal training and from experience. First, brokers are required to complete formal training. In Canada, mortgage broker licensing requirements are established at a provincial level (e.g. FSRA in Ontario or BCFA in British Columbia, etc.). Furthermore, several provinces also require mortgage brokers to complete a re-licensing course for their license to be successfully renewed.
In an industry that’s constantly evolving, mandatory licensing and re-licensing help to ensure that brokers stay apprised of regulatory changes and possess the skills required to service their clients. After all, brokers can help guide clients through what may be the most significant investment of their lives. Since January 1, 2018, the implementation of significant policy changes has impacted the Canadian mortgage industry and its underwriting guidelines. Some of those changes have tightened lending options for many Canadians.
A broker’s role in alternative lending
Due to the tightening of lending regulations (commonly known as the mortgage stress test), 10% of Canadians no longer qualify for a mortgage with major banks, which means they may be going elsewhere. The alternative market, which is made up of regulated lenders, unregulated lenders, private lenders and mortgage investment corporations, offer solutions for borrowers that traditional lenders are unable to service, such as thin or bruised credit, or those who are self-employed.
Some mortgage brokers have worked hard to develop relationships with alternative lenders so that they can better serve their clients. For example, here at Home Trust, we work with only a select group of brokers. Brokers and brokerages that have been onboarded with us have built a relationship with our team that will provide the broker with resources to help close your deal. These professionals understand which lender will offer you the best solution.
It is important to keep in mind that the process of applying with an alternative lender can be different from applying with a bank. For example, alternative lenders tend to have higher interest rates. Your broker can help you understand the difference between rate and payment and use their expertise to find you the right solution based on your circumstances. Alternative lenders may also require more documents to understand your whole story. Again, your broker can help you understand these requirements.
The right broker for you
It’s important to find a broker you trust. You should also find a broker who has experience working with alternative lenders and providing non-traditional mortgage solutions. At Home Trust, our broker partners recognize the importance of client trust and work hard to understand the borrower’s entire story.
What do we mean by that? As an example, if a client experienced a job loss or other financial strain that affected their credit score, but the broker took the time to hear the whole story, the broker can attempt to show lenders that this was simply a bump in the road, and not a long-term setback. In one such case that was presented to Home Trust, the client had a new job within a few short months and was on the way to getting their finances back in order.
Another market that benefits from mortgage brokers are self-employed Canadians. In 2018, 2.9 million Canadians were self-employed, and although that number continues to increase, traditional financial institutions do not market to this segment of the population. Brokers, knowing firsthand what it means to be self-employed, understand the need for independence and can guide clients through an alternative solution that fits their needs.
Other individuals that can benefit from the services of a broker are those who aren’t familiar with the mortgage application process and what it involves.
A mortgage broker can be someone you can lean on in times of uncertainty. Their skills, training, and expertise in alternative lending all contribute to helping you achieve your dreams of home ownership.
When you’re ready, contact a mortgage broker in your area and ask them about alternative options such as Home Trust for your lending needs.
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