What can a mortgage broker do for you?
I’m not sure where to start. There is so much to offer. Nadeem Basaria is someone who believes in family, friendship, community, honesty, and service. It’s just part of who he is. He is also a licenced mortgage broker.
When I first met Nadeem years ago, he was a mortgage specialist with TD Bank. After dealing with clients that didn’t fit into a bank’s lending criteria, Nadeem decided to venture out on his own.
“As a broker I can shop around for my clients. Some clients who are self-employed or don’t have the right number of years of employment history, or the correct amount of savings for a down payment, do not qualify for bank mortgages, others would like to negotiate a better rate. These are the things that an independent broker can help with,” says Nadeem. “At the bank, I was a mortgage specialist. To be a broker I had to return to school. It took several years, but it was beneficial as I now have an understanding of the full spectrum of the business. I know what the rules are for all borrowers, across all the institutions and private lenders.”
“In Canada there are an average of 40-50 different lenders. Although I have access to all of them, I do tend to deal with a select few. By dealing with specific institutions, I can offer volume discounts to my clients as we are putting together up to 50 deals a month. That can amount to several basis points in my client’s favour.”
“I’ve been independent for 16 years now. My licenced is regulated by the Financial Services Commission of Ontario. I’ve seen the market through many cycles. It means I can confidently discuss all outcomes and reference to specific challenges such as the market collapse in 2008 and even the recent changes brought on by Covid-19,” says Nadeem. “Buying a house is likely the biggest transaction any of us will do. The next would be refinancing, which many are doing now to take advantage of our current low interest rates.”
Mortgage brokers vs banks
After talking to Nadeem, I decided to look into the business of mortgage brokerage. I was surprised to find how much the market had shifted over the years. In 2003, 26% of the total mortgage market was handled by brokers, now it’s 47%. Banks still retain 53%, but that number is shrinking every year1. If you look at specific sections of the market, the numbers are even more telling; for first time home buyers, mortgage brokers command 55% of the market2.
The main difference between banks and mortgage brokers is that banks offer only their own products, while mortgage brokers can present multiple mortgage options. Interestingly, many chartered banks sell through mortgage brokers including TD Bank, Scotiabank, and CIBC. (Nadeem did indicate that he tends to deal with TD and Scotia). The role of the independent brokers is to negotiate the lowest rate for you; or if you fall out of the coveted sphere of bank criteria, they also have access to lenders who specialize in servicing people with adverse or poor credit ratings. They can advise you on which lenders will consider your case, and which will not, based on your individual circumstances.
The second big difference is that a broker will take the time to help you through the whole process, always looking at the loan from your prospective. As a client of a mortgage broker, you fill in one form. The broker does the rest including consulting you on your personal situation and providing you with the details on various lenders, as well as discussing the pros and cons of fixed versus variable rates, or open versus closed mortgages as they apply to you and your specific situation including your tolerance to risk. They will also go through what cancellation or pre-payment policy is attached to each mortgage and what that can mean for you.
So how does a mortgage broker work for me? How much does it cost?
As a licenced mortgage broker working with A-list lenders (banks), their services are provided at no cost to you as they are paid by the lender after the mortgage closes. There is, in fact, a form the broker must sign that ensures no additional fees are charged.
If you are someone who requires less traditional financing options, B-lenders or private lenders, then there could be fees. Your mortgage broker will explain what fees are applied to your circumstances.
What difference can a few basis points make?
There are a variety of simple mortgage calculators available. I played with https://www.cchwebsites.com/content/calculators/CAMortgageLoan.html
Based on a mortgage of $1.2 million with a down payment of $200,000 and a 25-year mortgage amortization with a 5-year term, the difference between 2.5% and 2.75% is $37,636 in total interest charges. Monthly, that is a difference of $125.45 in your mortgage payment.
If you are planning on refinancing, the numbers could be even greater. If you negotiated your mortgage in 2015, your rate may be significantly higher than what is available today. Your house has also probably increased value which means you could refinance for more money allowing you to do the home improvements you’ve been thinking about.
If you’d like to explore options, Nadeem can be reached at 416-999-6840. His business tagline – “mortgage experience you can depend on” tells the story. As I said at the beginning Nadeem believes in family, friendship, community, honesty, and service. Everything you’d want in a mortgage broker who is working for you.
FSCO Licence # M08003489
1. 2019 CMHC survey: https://www.ratehub.ca/bank-vs-mortgage-broker