What Is a Home Loan (Mortgage) Broker and What Do They Do?

Mortgage brokers are responsible for more than 40% of residential mortgage originations in Canada, and demand for their services continues to grow. But before hiring, you should know what a home loan broker is, what they do, the pros and cons of working with them, and how you can find the best broker.

What Does a Mortgage Broker Do?

Let’s start with the basics and define mortgage broker first. What is a home loan broker? They're like your shopping agents for mortgages. They are intermediaries between you (the borrower) as a future homeowner, and various lenders (banks, trust companies, private lenders) to help find the best mortgage financing.

Now, what do mortgage brokers do? They find the best mortgage based on your priorities and financial plans. They assess different mortgage lenders, compare rates and terms, and negotiate on your behalf. They’ll guide you through the process (from pre-approval and application to closing) and offer the most relevant advice in each step.

Mortgage Broker vs. Bank: Which Should You Choose?

Now that you know what is a mortgage broker, should you go directly to them or consider banks too?

If you value having multiple options and personalized service, a mortgage broker may be the better choice. But if you prefer the simplicity of dealing with banks, a direct lender might suit you best. Let’s have a quick review of their pros and cons:

For a detailed comparison, check out our previous post on “Mortgage Broker vs Bank”.

Advantages of Using a Mortgage Broker

Here are the important benefits of working with home loan brokers:

• Access to Multiple Lenders: Brokers have relationships with various lenders, providing access to various mortgage products and options.
• Access to Special Products: Brokers may have access to niche mortgage products, such as those for self-employed individuals or those with less-than-perfect credit.
• Better Rates: Brokers can negotiate better interest rates on your behalf due to their established connections and knowledge of the market.
• Personalized Advice: They offer tailored advice based on your financial situation, helping you choose the best mortgage solution.
• Simplified Paperwork: They assist with preparing and submitting the necessary documentation, making the application process smoother.
• Pre-Approval Assistance: Brokers can help you secure mortgage pre-approval, giving you a stronger position when house hunting.
• Knowledge of the Market: They stay updated on market trends, lending policies, and regulatory changes. So, they're always ready to offer insights that benefit you.
• No Cost to the Borrower: In many cases, lenders pay brokers. Meaning their services are often free for the borrower.
• Expert Guidance and Support: Experienced brokers understand the complexities of this process and manage challenges effectively. They’re also available to answer questions and provide support from start to finish.

Potential Drawbacks and Considerations

Considering what is a mortgage broker and what does a mortgage broker do, they are invaluable assets for soon-to-be homeowners. However, you should know about the slightest Drawbacks and Considerations before deciding:

• Limited Lender Selection: While brokers have access to a wider range of lenders, some smaller or niche lenders may not work with brokers. This could limit your options in specific situations.
• Broker Fees: Most brokers are compensated by the lenders, but some may charge fees for specific services, such as a complex refinance or a challenging application. To prevent any disputes, clarify the fee structure upfront.
• Potential Conflicts of Interest: Mortgage brokers are legally obligated to work in your favor. Even so, a conflict of interest can happen if they get a larger commission from another lender. Reputable brokers always prioritize your best interests and disclose any potential conflicts.
• Dependence on the Broker: You’re trusting your broker with a huge financial decision. Their expertise is crucial, but you should still actively participate and understand the process.
• Time Sensitivity: The speed of mortgage approval depends on different factors, including lender processing times, and is not solely under the broker's control. Experienced brokers always strive for efficiency, but unexpected delays are possible.
• Shopping Around: Don’t rely on one opinion. Compare offers from multiple brokers to ensure you're getting the best terms.

For a deeper dive into the pros and cons of using a mortgage broker, click here.

How to Choose the Right Mortgage Broker

You’re probably wondering how to select a mortgage broker. We’ve gathered some questions and tips to help you choose the right broker:

*Asking questions like “How much do mortgage agents make” may not really help with your goal.

Frequently Asked Questions About Mortgage Brokers

Are mortgage brokers worth it?

In many cases, yes. They provide access to a wider range of lenders and negotiate better rates and terms, saving time and effort. However, thorough research to find a reputable broker is crucial; a broker who doesn’t just care about getting a mortgage signed (and not the best one).

Do you pay a mortgage advisor?

Do you pay a mortgage broker? Rarely. For qualified borrowers, brokers often work on commission. After signing the mortgage, the lender will pay their commission.

Why would anyone use a mortgage broker?

People use mortgage brokers because they get them closer to their dream homes while saving them time and money. They make an overwhelming process easy.

What are the main differences between a mortgage agent and a mortgage broker?

A mortgage broker is a licensed individual or firm that matches borrowers with lenders, while a mortgage agent works for a mortgage broker.

What is the difference between a broker and a mortgage company?

A mortgage broker connects borrowers with multiple lenders to find the best mortgage options, while a mortgage company is a financial institution that directly offers its mortgage products.

The bottom line

A home loan broker is your advocate in the often-complex world of mortgages. They simplify the process by connecting you with multiple lenders, negotiating better terms, and guiding you through each step.

Ready to find the perfect home loan? Submit a free request at Houmse to find the best professional in your region.