Buying your first home in Toronto is a big deal and should be celebrated. But, many people don’t because they are too busy and stressed by trying to apply for a mortgage. This is where a mortgage broker would be beneficial. Many people will hire a real estate agent in Toronto when looking for a new home, not realizing that a mortgage broker can be just as important. If you’re wondering what services a mortgage broker can offer or why working with the best mortgage brokers in Toronto is beneficial, keep reading!
Find The Best Mortgage Broker In Toronto
Why Work With A Toronto Mortgage Broker?
While anyone can apply for their own mortgage, you may not get the best rate possible. This is because many people choose to go to a bank for their mortgage needs and a bank may not have your best interests in mind. A bank is only able to offer you their products, not tell you about better rates from other lenders.
Many people are also concerned about the cost of using a mortgage broker, but most mortgage services are actually offered at no cost to the consumer. A mortgage broker is typically paid with a commission by the lender that you choose in the end. This means that our mortgage brokers only have your best interests in mind and will get you the most beneficial mortgage rates possible.
Similarly, a mortgage broker can actually save you money in the long run. Mortgage brokers tend to work with a variety of lenders, many that don’t even deal with the public directly. This means the rate that these lenders offer would not be available to you unless you work with a mortgage broker.
Not only will hiring the best mortgage broker in Toronto save you money, but it will also save you time. They take over most of the application process and will complete all negotiations with lenders for you. This will ensure you’re getting the best rate possible without you even having to lift a finger.
Mortgage Broker Services
Before trying to find the best mortgage broker in Toronto, you should know what types of services they offer. The main service that mortgage brokers offer is a residential mortgage, typically for borrowers to buy a new home. A residential mortgage is a loan given to a person to help finance their purchase of a residential property which can be a house, apartment, condo, or land.
A mortgage broker will help take away the stress of applying for a residential mortgage. They will guide you through the entire mortgage application process and even fill out most applications for you. Upon getting all of your paperwork together and completing your application, a mortgage broker will send it out to the various lenders they work with.
Lenders may be a bank or other institutions that mortgage brokers negotiate with on behalf of the borrower to get the best rate possible. Many of these lenders do not work with the public directly, so the benefit of working with a mortgage broker is that you will get access to exclusive, trustworthy lenders.
Applying for a mortgage is not the only residential service that mortgage brokers offer, they may also help you with refinancing your home, renewals or switches, applying for a second mortgage, or applying for a reverse mortgage to receive your home’s equity.
Although most people associate applying for a mortgage with their home, a mortgage can also be obtained for a commercial property if you want to open a business.
A commercial mortgage is a loan that is taken out on commercial real estate for business purposes. This may include properties such as a shopping mall, a storefront, a restaurant, an apartment building you’re renting and much more.
Applying for a commercial mortgage can be complicated and stressful as the requirements are much more extensive. The rate for a commercial mortgage is usually much higher as well due to the higher risk of owning a business versus owning a home. So, using a mortgage broker who has experience in applying for commercial mortgages can be extremely beneficial.
Although residential and commercial mortgages are a great option, some people may not be able to obtain one. Requirements to be eligible for a residential or commercial mortgage from typical lenders can be strict and if you don’t meet all of them, you won’t be approved. If this resonates with you, a mortgage broker can help you find a private lender instead.
Private lenders can be any person that is willing to lend their money to another person with an agreed interest rate. Since anyone with the necessary money can be a private lender, a lot of borrowers are wary about working with private lenders. A mortgage broker, however, will help you find reputable private lenders that can help meet your needs.
A private mortgage is a good option for self-employed borrowers that have trouble getting approved for a typical mortgage due to an irregular or steady income. Those with debt, poor credit, or who have filed for bankruptcy may also benefit from a private mortgage as traditional lenders tend to reject their application.
A reverse mortgage is not a service that many people are familiar with, likely because it only applies to those who are over 55 in Canada. If you are over 55, a reverse mortgage is a great option to take out part of your home equity without selling your house.
With a reverse mortgage, you can access anywhere between 10-50% of your home’s equity as monthly payments or as a lump sum. But, you must have already paid off your mortgage or use part of your equity to pay it off.
A reverse mortgage is great to pay off any debts like your mortgage, help with your bills, cover health expenses, or pay for home repairs. When you move out, the home equity loan will need to be repaid.
If you already have a mortgage, you may be considering refinancing it. Refinancing a mortgage is when you pay off your current loan and replace it with a new one. As this can be a confusing process, working with a mortgage broker to refinance your mortgage is a good option.
Some reasons a homeowner may be considering refinancing their mortgage are: they want to get a lower interest rate, they want to shorten the term of their mortgage agreement, they want to consolidate their debt or they want to switch to either an adjustable-rate mortgage or a fixed-rate mortgage.
As there are many different reasons to refinance, but also many different downfalls, consulting a mortgage broker before refinancing is in your best interests. They can help you decide whether it’s a good idea to refinance or not and to help you with the process.
Toronto Mortgage Broker Vs. Bank
To sum everything up, there are plenty of benefits of using a mortgage broker in Toronto, but are they actually better than working with the bank? Here are some pros and cons of mortgage brokers versus the bank.
Benefits of a mortgage broker
One of the main benefits of using a mortgage broker is that you will have plenty options of lenders without having to negotiate with them yourself. Every mortgage broker typically has their own portfolio of lenders that they work with to get you a good rate. If you have bad credit this is also a benefit because even though one lender may reject your application, another one of the mortgage broker’s lenders may approve your application.
Mortgage brokers also have a greater knowledge of the industry. As they have completed a course about the mortgage industry and have first-hand experience working in it, mortgage brokers are more knowledgeable than a bank would on various mortgage services.
A mortgage broker will have your best interest in mind and find you a product that suits your needs. A mortgage broker is working with you to find something that works for you, not trying to sell you a service.
Mortgage brokers also tend to be more available and flexible than banks. We all know that banks have a fairly rigid schedule and are often closed when most people are off work in the evenings and weekends. A mortgage broker, however, will often make themselves available after typical business hours to talk to you. Most times you don’t even need to meet with them in person as they will email or fax necessary paperwork.
Drawbacks of a mortgage broker
One of the only drawbacks of using a mortgage broker is that you may have to pay mortgage broker fees. Typically, mortgage brokers will receive a commission from the lender you receive your loan from, but this depends on the service and the mortgage broker. To avoid unexpected fees, make sure you discuss any potential fees with your mortgage broker beforehand. Also, ensure that anything you discussed is in your broker agreement that you will both sign.
Benefits of the bank
If you already have a bank that you go to for your financial services, you may feel more comfortable working with them to apply for a mortgage as well. This may also allow you to combine existing services to your mortgage services or to get perks like waived account fees. This majorly depends on your bank and what deals they offer.
Similarly, if you have been with your bank for a long time, you will likely feel more comfortable and secure with spending your money there since it is already in your account. You may have also built a relationship with a financial representative there which could lead to a lower interest rate. It may also be easier to keep all your finances in one place.
Drawbacks of the bank
Banks have the strictest policies and approval process for getting a mortgage. They tend to look for a low-risk borrower like someone who has no debt or a high credit score. Due to this, they may reject your mortgage application.
Similarly, if you want to check multiple banks for their rates, you will need to go in and do all the negotiating yourself. Waiting or getting appointments just to find out what rate the various banks can offer you is time-consuming. A mortgage broker will do all the negotiating for you through their lenders.
A bank has rigid hours and locations. If you have any problems or questions about your mortgage application, bank workers are not readily available to discuss them. Similarly, if you do have to go in, you will likely have to wait until a worker is free to assist you since they are working with multiple people. Your mortgage broker is as well, but not on as large of a scale as banks, meaning a mortgage broker will likely have more time allotted for you.
Choosing A Mortgage Broker In Toronto
We have a simple form above that connects you to a top mortgage broker in Toronto specifically for your needs at no cost. In case you want to find a mortgage broker another way here are some tips before choosing a mortgage broker.
1. Make sure the mortgage broker is licensed
To work as a mortgage broker in Toronto, a person must be licensed by the Financial Services Regulatory Authority of Ontario. This licensing board helps ensure that all mortgage brokers are trained and knowledgeable before they start working independently with lenders and the public. Working as a mortgage broker while unlicensed is illegal, so most mortgage brokers you come across, especially from reputable brokerages, will be licensed and fine to work with. To be sure, you can search for a licensed mortgage broker on the Financial Services Regulatory Authority’s database, all you need to input is their last name and city. This will ensure that you are choosing a reliable and knowledgeable mortgage broker.
2. Research them further
Once you’ve found out your potential mortgage broker is licensed, you can research them even further. Many reputable mortgage brokers will have a website or social media, check these out to see what service they offer to see if they align with your needs. Social media pages are also a great way to see reviews. Past clients may have posted about how the mortgage broker worked for them. Places like Yelp or Google Maps are other great places to look up reviews of mortgage brokers.
If they are a newer mortgage broker, they may not have many reviews yet. In this case, calling or emailing the brokerage they work for to ask about their work history and client relations may be a good idea.
3. Plan your budget
After you have researched a few mortgage brokers and looked at their websites, you should have a good idea of what the going rates are. Knowing what the standard rates are for the services you require before meeting your potential mortgage broker will help you to not get taken advantage of.
Look at a rate comparison website and write down some of the average rates to take with you to a meeting. If you are meeting with an experienced and highly recommended mortgage broker, however, their rates may be higher than the average. At the end of the day, you get what you pay for. A newer mortgage broker will likely charge less as they do not have the same experience as someone who has been in the industry for years. You need to decide how much you’re willing to pay and contact mortgage brokers within that price range.
4. Meet them in person
Since you’ve done an extensive amount of research on rates and mortgage brokers’ backgrounds, it is time to meet a few. Mortgage brokers should be more than willing to meet you in person to get to know you better and give you an idea of what services they offer. You don’t need to sign any contracts or agree to work with any mortgage broker on the spot. Instead, use this time to ask them questions and get to know them to see if they are someone you would want to work with.
You can ask questions about their work history, how up to date they are in the Toronto mortgage industry, if they have any references you can contact and what their process is like. You can even give the mortgage broker a few details about what you’re looking for and ask what they think they can do to help you.
Meet with a few mortgage brokers in order to make an informed decision. You will be working with this person for quite a bit in a stressful time in your life, you don’t want to dislike them or their policies. So it is important to take the time to get to know them before you commit to anything.
5. Pick a mortgage broker
Finally, after all your research and interviews you can pick a mortgage broker. Picking a mortgage broker is solely based on you and your preferences. The best mortgage broker in Toronto for your needs may come down to your gut feeling rather than experience and that’s okay.
Once you pick a mortgage broker, you can get down to starting your application process. Your new mortgage broker will guide you entirely throughout this process so you don’t need to worry.
Getting Approved For A Mortgage In Canada
After all the research, interviews and choosing between a bank or mortgage broker, you are finally ready to apply for your mortgage. But, before you do, you should know what requirements you need to meet to apply for a mortgage in Canada to avoid disappointment if you get rejected.
One of the biggest requirements you need is a good credit score. Credit scores in Canada range from 300 to 900 and are based on things like how much debt you have, how long you’ve been using credit and your payment history such as whether you pay your bills on time or not. Lenders will usually accept a minimum credit score of 650-680.
You must also prove that you have an adequate income in order to cover your monthly mortgage payments. Your income can be verified by including things like a tax return, income statement or bank statements in your mortgage application. Lenders will compare your income to your debt to see what percentage of your income is going to pay off your debt in order to determine how much you will have left to also pay your mortgage.
This goes into our next point that if you have a lot of debt or even declared bankruptcy recently, lenders may not approve your application. This is because lenders don’t want to be left not receiving their loan back.
Lastly, you need to have enough money for a down payment towards your home or business. Typically the minimum requirement for a down payment is 5%, but this varies depending on the lender. The more you put down, the lower your loan will be.
Though we have covered a lot in this article from what services mortgage brokers offer to how to find the best mortgage broker in Toronto, you may still have questions. If you do, reach out to a few mortgage brokers in Toronto to start your search.