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Why Use a Mortgage Broker

The traditional way to obtain a mortgage in Toronto is to go down to your local bank and fill out an application and wait to see if you will qualify for a mortgage.
At that point you sit down with the bank employee and they tell you the 3 or 4 options their bank offers.

You will quickly discover that you will 95% of the time be guided to take the five year fixed term rate. This is what most Canadians do. Interestingly enough 71% of all 5 year fixed term mortgages are never completed. The client, that’s you breaks the mortgage midway thru the five year term. This of course costs them thousands of dollars in penalties.

Why does this happen and who does it serve? Folks decide to sell and move for various reasons, they want to move up, they start a family, they are transferred to another city, downsizing and retiring or just downsizing. Divorce happens, partnerships re-arrange.

They may be growing financially and want to buy an investment and need more money. As is usual in the Toronto area homes tend to double in value here every 8-10 years building equity allowing people to cash some out for investment purposes as they pay down.

Some folks discover there are different types of mortgages available after talking to a mortgage broker that can help them manage their money better or simply in other ways.

There are dozens of reasons why a 5 year fixed term does not work for the consumer causing them to break the mortgage and yet the banks keep on recommending it because it allows them financial security and it is by far the most profitable for the bank. They know that 71% of you are going to break that mortgage and pay them extra penalties.

What a Mortgage Broker Does For You
You will probably be referred to a mortgage broker by a friend, family member or business associate.

Depending on where you live your first encounter with them may be in person or over the phone.

When you first connect with a mortgage broker they may initially require you to fill out an online form with your details and send it in to them.
They may also ask you for some proof of identification before doing a credit bureau which is a necessary step and required by law.

If you live close by you may drop in and have a face to face meeting.
Obviously this would be ideal. They will ask you a great number of questions about your finances.
A good broker will also ask you about your big picture and long term goals.

They will want to help you find the best mortgage suited to your financial situation.
In Canada we have roughly 45 lenders to choose from all with multiple products and variations on many themes.

Your mortgage broker will guide you away from fixing your mind only on the interest rate.

Interest rate is one part of a mortgage. Focusing on rate and only looking for the cheapest may attract you to what is known as a No Frills mortgage. These types of mortgages have low rates but no prepayment privileges. Many of them are so tight you cannot even break the mortgage. This means that if you choose to sell the house you will have to pay off the full term of the mortgage including all the interst.

Terms are a huge part of a mortgage and can allow you to pay your mortgage off much faster even if the rate is slightly higher.
There is also private money for special situations which may have costs attached but if you don’t qualify under normal or extended lending guidelines can sometimes work in your best interests.

If you prove to have challenges with how you handle money they will have some tips and suggestions for working with those problems and overall lower your expenses.

A good broker will show you how you can get out of your mortgage as quickly as possible.
They are specifically trained to understand how mortgages work and to find one that will work best for you.

You can also give them written permission to communicate with banking institutions for you so that if you need updates or explanations they will be able to obtain that for you on an ongoing basis… This way you can maintain your relationship with them on a mutli year basis and gain a financial ally.

The difference between these two experiences is huge.
1/The bank employee works for the bank.

The mortgage broker works for you.

2/ Bank employees are told by the bank which products to guide the consumer towards.

The mortgage broker is trained to look at your overall situation and hopefully long term plans and guides you to a product that will work well for you.
This offers you a combination of security if you need it and options that will allow you financial flexibility. Life does change and the bank knows it.
This can save you thousands of dollars over the term of your mortgage.

3/ Your mortgage broker is in business for the long term. They are self employed and their long term viability is built on relationships.

Just a few words of caution. Don’t SHOP your mortgage broker. First find one that you feel good about and trust. Then sit down and decide to work with them. Every time you do an application with someone your credit bureau is being checked. The more times this happens your Beacon Score is dropping. Once financial institutions have seen this happen several times they may not be willing to lend to you as they feel that several others must have rejected you and there is a problem.

Running to the cheapest will not serve you well, finding a good trustworthy person and sharing your plans with them will yield you a much more satisfactory relationship
and a greater sense of personal satisfaction that you have a Team member on your side that you can calling upon for ideas as you grow financially.

You can find our Mortgage Calculators at
Mortgage Calculators Or get started with a Mortgage Application at Mortgage Application.

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