Busted! Don’t Believe These Mortgage Myths!
While mortgages are the most popular financing tool when buying a house, they also happen to be the most complicated if you don’t know how they work. Mortgages come with various rules, exceptions, and requirements which can easily confuse new borrowers.
Sadly, this confusion has led to some misconceptions about mortgages, brokers, and the whole industry. Many believe that mortgage brokers are out to swindle them, while others feel they will never fit the criteria to get a mortgage. Falsehoods like these force them to postpone their dreams of buying a house.
To help you steer clear of misconceptions like these and get the home you desire, Capri Mortgage Corporation has debunked three of the most widely believed myths about mortgages.
Myth 1: The lender pays the broker (excepting - see below).
A mortgage broker gets paid in one of two ways, either the lender pays the broker or the borrower. In almost all cases, one of the two should happen but very rarely both. Regardless of the method, in British Columbia, all commissions or fees must be disclosed to the borrower upfront.
Method A: If your mortgage is placed with a bank or a trust company, the lender will pay the broker a commission, based on the term chosen, for sending them the business. These commissions can vary between lenders. A mortgage broker does not get paid the commission unless the deal is closed. This helps to ensure the broker represents both the borrower and the lender fairly and acts in the best interests of both parties.
Method B: If you do not qualify for bank financing and decide to pursue a private (or equity) mortgage, the lender may be a private individual or private company. The broker will then charge a “broker fee,” and the lender may charge a “lender’s fee.” These fees must also be revealed upfront with full disclosure to the borrower. But remember, not all private mortgages are created equal. There can be large discrepancies between terms depending on whom you are dealing with.
Myth 2: Mortgage brokers don’t report to anyone.
Any mortgage broker conducting business in British Columbia must be registered with the designated governing body. If you are suspicious of the broker, you can go to the FICOM website - www.fic.gov.bc.ca and look up any mortgage broker or company. If they are registered, they will be listed. Any individual registered, must act and carry themselves in a manner which is not detrimental to the public’s interests. The governing body takes this very seriously and the enforcement thereof.
Myth 3: All lenders are the same.
Each lender can have a different tolerance level or criteria to qualify the borrower. An experienced broker may know which lender will be willing to help you or may be able to re-work the numbers to get you qualified. The incentive is - a bank employee (mortgage person) gets paid regardless if the deal gets done, but a mortgage broker will only get paid if the deal is completed. The mortgage broker has a lot of incentive to make it work - if it can. Also, please remember if you have been “pre-approved” this is only a rate hold and not an “approval” for financing. It is a guideline at best.
If you’re looking to learn more about mortgages and related myths, reach out to Capri Mortgage Corporation. As the best private equity lender in British Columbia, we handle all kinds of mortgage financing and can accommodate most proposals. Through our network of institutional and private sector lenders, we offer the most competitive rates and options available in the marketplace. Also, we are direct lenders enabling proposals requiring an immediate response to be approved and funded in-house.