Why would someone use the service of a mortgage broker?
A mortgage broker is an agent who brings borrowers and lenders together in a mortgage transaction. Brokers are involved in residential mortgage loans, interim financing for large projects, and bulk sale of mortgages on the secondary market.
In residential sales, a mortgage broker can play a vital role in assisting with:
- Providing the best rate, term, conditions, and prepayment privileges for the transaction
- Financing unusual properties
- Dealing with unique circumstances which arise during the transaction
- Dealing with timing difficulties
- Pre-approving the purchaser for financing, thereby allowing the buyer to make a cash offer, rather than a conditional one
The broker has a wide range of financial contacts and is aware of specialized packages and sources of money, but performs a variety of services and functions:
- A broker will keep informed and stay up-to-date on the policies, and requirements of various institutional lenders, in order to provide current and accurate financial advice.
- The broker will conduct an interview with the borrower to determine the requirements and flexibility that fit that borrower's needs.
- The broker will contact the appropriate lender, outline the transaction and complete the necessary documentation required - the loan application, salary confirmation, proof of equity, financial information and credit evaluation.
- All documentation is prepared and forwarded to the lender by the broker. He then becomes directly involved in the negotiations to obtain the loan requested.
- Upon acceptance of the loan by the lender, the broker will review the approval with the borrower and explain the approval documents in detail. The borrower must understand all the documents being signed.
- The broker will continue to provide liaison between the lender and borrower right up until the day of closing.
Mortgage brokers in Ontario are regulated by the province under the terms of the Ontario Mortgage Brokers Act, which is administered by the Ministry of Financial Services Commission of Ontario (FSCO). The Act requires that all mortgage brokers be registered as such, and contains extensive provisions designed to regulate the activities of mortgage brokers and protect the public.
One of the important provisions in the Act required that a mortgage broker deliver a Statement of Mortgage to the borrower at least 72 hours (excluding Sundays and holidays), before they are asked to sign the Mortgage Instrument or a Commitment to enter into the mortgage. They may reduce the 72 hour period to 24 hours, but only if they obtain Independent Legal Advice. This Statement of Mortgage is a detailed form, indicating terms and conditions of the mortgage and stipulating the costs involved, including the appraisal fee, brokerage fee, mortgage insurance premium and any other charges directly related to the mortgage transaction.
Most brokers feel that if they can't find a way to save you money by way of lower interest rates, better prepayment privileges, terms, conditions, alternative financing, service or flexibility, they will probably send you back to your own financial institution. Most brokers depend upon repeat business from clients, solicitors, real estate agents and even from the lending institutions who may refer deals to brokers that do not meet their lending criteria, thus the broker strives to maintain an excellent rapport with these contacts.
How to best describe mortgage brokers? They are an independent mortgage money traders, who are consumer and services oriented.
Guy R. Gauthier