Mortgage Refinancing Mistake #1: Mortgage brokers always have your best interests in mind
Like finance, the mortgage industry can be extremely complicated and overwhelming. There are so many lenders and products on the market, not to mention the terminology can get incredibly confusing, that you as the borrower is often at the mercy of the mortgage brokerage you are working with.
It’s all too easy to get lost once terms like LTV, GDS/TDS, equity take out, non-conforming, fixed vs. variable, and stated vs. verified income start getting thrown around.
You can only hope that your broker is acting ethically with your best interests in mind, rather than trying to pad their commission cheque. Part of your mortgage broker’s job is to make the process of securing your mortgage simple, not more complicated.
Before committing to working with a broker on one of the biggest financial decisions you will make in your life, here are a few questions you should ask yourself:
- Have they explained the solution they are proposing to you?
- Does it make sense financially for you to do the deal or not?
- Have they been keeping you in the loop when it comes to setbacks or progress?
If the person you’re talking to is using a lot of industry jargon to sound smart or you said no to any of these questions means your broker is probably not considering your best interests in the deal and you should consider working with someone else.
Read More: Why choose a mortgage broker
Mortgage Refinancing Mistake #2: Banks always have the best rates
In the world of mortgage refinancing, banks have it easy. As the biggest and most recognizable names in the finance industry, most people think of the banks first when it comes to mortgage financing and assume they have the best product.
But that’s a big mistake.
The trouble with working with a bank directly for your mortgage refinancing is twofold. The first issue is that the person you speak to at the bank regarding your mortgage isn’t actually a licensed Mortgage Agent. They fall under a special designation called a Mortgage Specialist and that basically means they don’t have to undergo the training that a licensed agent must get through to practice their trade.
Which leads to the second issue in working with a bank instead of a mortgage brokerage, and that’s the bank’s mortgage specialist can only offer you the bank’s products. They have don’t have the ability or the expertise to shop around and get you the best deal.
Just because you do all your banking with a particular institution, that doesn’t mean that they are able to offer you the best rate on the market. A licensed Mortgage Agent will not only work to get you a solution that makes the most sense for you, they will have access to a number of lenders, including the other big banks.
Even if your bank seems to be offering a great rate on their mortgage product, you will never know if you could get a better deal with another lender if you aren’t working with an experienced agent.
Not only that, but what happens when you get turned down by your bank?
In the modern age, credit is getting harder and harder to secure. For the vast majority of the population, alternative and private lenders are the only option when it comes to getting a mortgage or refinancing. Sometimes, it’s not about securing the best interest rate on your mortgage. Sometimes it’s just about securing mortgage financing in the first place.
Mortgage Refinancing Mistake #3: The interest rate is all that matters
When considering mortgage financing, most people think the interest rate is all that matters. The lower the interest rate the better. But the interest rate is only one small piece of the overall mortgage puzzle, and like we talked about in the last point, what happens when you’re turned down by the banks?
When you’re working through the process of mortgage financing, you should be looking at your total cost of borrowing, not just the interest rate. An experienced Mortgage Agent will be able to help you understand the different options that are available to you buy also explain what each option will cost you over the term of the deal.
One of the most important things when it comes to mortgage refinancing, especially when you are working with alternative lenders, is the plan. Your broker should not only tell you why they want to go with a particular lender or product, they should have a plan of action for you that puts you on an upward path.
If you’re going through a refinance, consolidating debt, or getting a second mortgage, it’s vital that you have a plan that gets your finances back in order. The last thing you want at that point is to go through the whole process again, year after year, paying excessive interest and draining your finances.
Your broker should help you to understand the habits that got you into the position you’re currently in and what you need to do to reestablish your credit. That way you can get back to being bank worthy clients and keeping more of your hard-earned money.
Mortgage Refinancing Mistake #4: Brokers are too expensive to work with
One of the most common misconceptions about mortgage brokerages is that they are expensive to work with, but that’s just plain not true.
A mortgage broker’s fee comes out of the funds of the deal that they put together for you as the borrower. If there is no deal, there is no cost to you at all. And that’s only if there is a fee involved which is not always the case.
Either way, when comparing your options, you have to weigh out the opportunity if you don’t move forward with a deal as well as what the costs associated with the deal are.
Mortgage Refinancing Mistake #5: A mortgage broker won’t be able to help me in my situation
A common mistake a lot of borrowers make is they think that mortgage brokers only work with people with good credit and a good down payment. The truth is that describes the big banks more than it describes mortgage brokers.
A good mortgage broker can work with borrowers in a variety of financial situations because they have access to so many different lenders and products on the market. As a home owner looking to refinance, you have more options than you realize.
There are products available to fit every niche in the market, and a good broker will be able to connect you to right lender to get you the solution you need.
If you’re an ‘A’ borrower with lots of equity in your home, a broker will be able to connect you with a lender with some of the best rates available.
If you’re in a bit of debt with a rocky credit score, a broker can get you financing with an alternative or private lender and help you consolidate everything and get you back on the path to good credit.
And if you’re mortgage free, a good broker will be able to help you leverage the equity you have built up in your home that you can use to purchase another house, do renovations, or even invest the funds.
So not matter your situation, it always pays to talk to a mortgage broker when it comes to refinancing your home. Don’t make these five costly mistakes on your next deal.