Most real estate investors use mortgage brokers to find and facilitate the best property loans. As an individual borrower, you should do the same, but what will it cost?
Does Using A Mortgage Broker Cost You Money?
One of the insider secrets of real estate investors is the mortgage broker. Real estate investors do not have time to deal with banks and lenders, so they use mortgage brokers to do it for them.
A mortgage broker is similar to a real estate agent. They are independent professionals that help borrowers shop for the best loan for their situation. Since the broker is not affiliated with a particular lender, they are able to shop across the full spectrum of loans on the market and find the best deal for their clients. They also handle nearly all of the paperwork, which is valuable in and of itself as you know if you have ever applied for a home loan.
There is little doubt that mortgage brokers are the way to go when it comes to financing a property. The question in the minds of most people, however, is howmuch the broker will cost them? The answer is surprising to most.
Unlike a real estate agent, the home loan broker does not charge you any direct fee, to wit, there is no invoice equating to a percentage of your loan. Instead, a mortgage broker is paid by the lending institution that issues you the loan. The broker's feeis usually equal to one percent of the total loan value. It can be lower or higher depending upon the circumstances and dollar figure of your loan.
If the broker is being paid by the bank, does this mean the cost is passed on to you? In most cases, this is not the situation. The interest rate and points on a loan are usually the same regardless of whether you go through the loan process on your own or through a broker. Why? Banks generally consider points to be a profit center. While they do not like to give away profit, they also know that mortgage brokers will bring in large volumes of business than a single loan. Essentially, they bank trades off the fee to the broker in exchange for the money they know they will make over the life of the loan multiplied by the volume of loans the broker will bring in. In simple terms, it is a trade off.
In some situations, you can run into greedy brokers that try to charge you direct, high fees for their service. Unless a fee is directly related to something normal such as obtaining a credit report, be careful. As long as you avoid such situations, mortgage brokers are definitely the way to go. |
