A mortgage adviser, otherwise known as a mortgage broker, is someone who specializes in finding the most suitable mortgage deal for your personal needs.
Typically, as well as being tasked to find the best value mortgage deal for you, a mortgage adviser can increase your chances of securing a mortgage too.
The broker’s commission, which is usually paid by the lender, can vary, but will typically range from 0.5% to 2.75% of the loan principal. It is important to note that federal law caps broker fees at 3% and requires that they not be linked to the interest rate on a loan.
Mortgage Adviser: Facts and Statistics
There are over 23,125 Mortgage Brokers currently employed in the United States, with the market size, measured by revenue, of the mortgage brokers industry estimated at $628 million in 2022.
The market size of the Online Mortgage Brokers industry in the US has grown 7.1% per year on average between 2017 and 2022.
Mortgage rates hovered around 3% throughout 2021, and experts predict that by the end of 2022, despite the rising prices in the housing market, rates aren’t predicted to be higher than 3.5% at the end of 2022.
What is a Mortgage Adviser?
A mortgage broker is essentially an intermediary between a financial institution that offers mortgages.
The mortgage broker will work with both parties to get the individual approved for the loan. They also collect and verify all of the necessary paperwork that the lender needs from the individual in order to complete the home purchase.
A mortgage broker typically works with many different lenders and can offer a variety of loan options to the borrower they work with.
What does a Mortgage Broker do?
A mortgage broker aims to complete real estate transactions as a third-party intermediary between a borrower and a lender. The broker will collect information from the individual and go to multiple lenders in order to find the best potential loan for their client.
Finally, the broker serves as the loan officer; they collect the necessary information and work with both parties to get the loan closed.
How much does a Mortgage Broker cost?
A mortgage broker may be compensated through a combination of fees paid from borrowers and commissions that are paid out by the lending institutions who want them to originate loans.
The costs vary greatly but a mortgage broker generally earns between 1% and 3% of the total loan amount.
The total amount paid by the borrower will vary based on the type of loan, what broker is used, and how much the broker is earning in commissions from the lending institution.
What are the Advantages and Disadvantages of Using a Mortgage Adviser?
An estate agent may tell you that it’s compulsory or that you’re more likely to have your offer accepted if you use their mortgage adviser. Whilst this isn’t usually the case, there are certainly some clear benefits to using a mortgage adviser, but it is ultimately up to you to weigh up the pros and cons.
Advantages of using a Mortgage Adviser
A Mortgage Broker will probably save you a lot of legwork.
Mortgage advisers have regular contact with a wide variety of lenders, some of whom you may not even know about. An adviser also can steer you away from certain lenders with suspect payment terms buried in their mortgage contracts.
A Mortgage Adviser will likely have very good expertise in the field.
The mortgage industry can be confusing, and things can change rapidly as interest rates fluctuate and mortgage deals come and go.
Having an expert who can explain things clearly and understands best practice can be invaluable.
An Adviser may be able to help manage some of your fees.
Several different types of fees can be involved in taking on a new mortgage or working with a new lender, including origination fees, application fees, and appraisal fees.
In some cases, mortgage brokers may be able to get lenders to waive some or all of these fees, which can save you hundreds to thousands of dollars.
It could save you a lot of time and research.
Mortgage advisers can be very useful if you don’t have a good working knowledge of the finance and mortgage markets, or don’t have the time to spend searching for deals, doing the paperwork and speaking to lenders.
Disadvantages of using a Mortgage Adviser
Your Mortgage Adviser may have differing interests to you.
Your ultimate goal when shopping for a mortgage is to find one with an affordable interest rate and low fees, as you are in it for the long haul.
A mortgage broker, on the other hand, often gets a fee from the lender for bringing in the business. This fee can be based on the amount of the mortgage and will vary among lenders.
An adviser’s goal, therefore, is to get you into a mortgage that maximizes their compensation.
There is usually a cost attached to having a Mortgage Adviser.
Mortgage brokers aren’t always free and can add to your costs at a time when you’re trying to save as much money as possible.
Fees can vary significantly between brokers so it’s worth shopping around.
Your Mortgage Adviser may have some limitations.
Not all advisers will have access to the entire mortgage market, meaning relying solely on a broker can limit your options. Some brokers may prefer certain lenders if they have good relationship with them.
You can and should always ask a broker beforehand how many lenders they work with and if they have a preference for any particular lenders.
What to do to Prepare for your First Meeting with your Mortgage Adviser
At your first meeting, ask your adviser whether they can source direct deals (these may offer special rates or discounts). If your adviser recommends a particular mortgage to you, ask them to explain in detail why this deal is most suitable for you.
A good mortgage adviser may also offer useful tips and guidance throughout the home-buying process, so be sure to find an adviser with whom you get along well.