They Advise Clients to Choose 5-Year Fixed Rate
Most mortgage experts usually advise clients to choose a mortgage with an initial 5-year fixed rate. They claim that they can find the cheapest 5-year fixed-rate mortgage in the market. The hard truth is that consumers are better off with an adjustable-rate mortgage in around 90% of the cases.
Using a broker to get the lowest 5-year fixed-rate mortgage will only ensure the client is worse-off financially while the mortgage brokerage firm and lender make money.
I Had a Great Relationship With My Bank
I recently got fed up with my full-service bank and opted for no-fee banking services even though I had a great relationship with them. That is why, as a first-time homebuyer, it was not intimidating for me to walk into my branch and ask about mortgage rates.
Today, however, I am into my 3rd home and have had mortgage renewals several times and did mortgage refinancing once, so I’m enjoying the perks of sticking with one lender. This includes; waived home appraisal fees and waived interest penalties. In addition to that, my mortgage rates have always been within 0.01% of the prevailing market rates.
The first impression I had of a mortgage broker was not impressive at all. They usually send flyers in the mail, encouraging people to remortgage their home and use the money to go on vacation, get a new car, consolidate debt, or increase their amortization. They also post misleading rates on their websites claiming that their mortgage rates are 2% or lower than the rates charged by the top 5 banks, even though they are posting rates charged by their banks, and not the best rates on the market.
Mortgage firms are also quick to encourage homeowners to “lock-in” now as they spread fear over expected interest rate hikes. It is important to note that mortgage brokers get paid a commission, just like mutual fund salespeople. While they may offer free services, they get compensated for every business they bring in.
Consider Doing it Yourself
Mortgage brokers usually claim that they are a one-stop-shop for mortgage products and services, and work with many lenders to save you time and money. The truth, however, is that information about mortgage rates is freely available online, so anyone can compare mortgage rates before picking a mortgage lender. Tools like Rate Supermarket can make life much easier for you.
After narrowing down your search for potential lenders, you can ask for a callback. This does not sound like a big hassle to me.
Don’t get me wrong; there is nothing wrong with working with a reputable and trusted independent mortgage. Just remember that most brokers do not have your interest at heart, especially when there are incentives for both the lender and broker to get your business.
Consider doing your own research to ensure you understand the mortgage rates, terms, and conditions that come with a mortgage, or that are being quoted by a mortgage broker, before making your final decision.