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Tuesday, 18 October 2011

Why work with a mortgage professional?

Why work with a mortgage agent?

In today’s market economy of low interest rates, rising house prices and increased bank competition, you owe it to yourself to consider working with a mortgage agent for your next home purchase. There are five questions that residential home buyers have asked about mortgage agents:

1) Who are mortgage agents?
2) How much money can I really save using a mortgage agent?
3) How do they get such good deals?
4) What will it cost me?
5) Why haven’t I heard of them before?

First of all, a mortgage agent is an independent business person whose role is to help you find the best mortgage rate for your home investment. The Agent works on your behalf and negotiates with 30 or more different lenders, in order to get you the best combination of low interest rate and payment terms. In Alberta a mortgage agent is licensed by the Provincial government and adheres to a Code of Best Practices to ensure that you (as the consumer) get the best mortgage for your needs. An Alberta mortgage agent is also accountable to the Real Estate Council of Alberta.

Look at a mortgage agent much like your travel consultant. Just as you would request a travel agency to help get the best fare from home city to wherever you are going, so too does a mortgage agent help you find the lender who will give you the best mortgage. As a Canadian, it may be hard to believe that there really are more than 30 quality lenders (beyond the few well known chartered banks) who are willing to compete for your mortgage business – often with much better rates and terms.

Although your local bank can often offer you an incentive of up to 1% off on
their ‘posted rate’ a good mortgage agent will regularly negotiate 1.25% to 1.35% and sometimes can get as much as 1.50% depending upon circumstances.

The main reason for such deep discounting is because the mortgage agent is not on the bank payroll, so the bank does not have to pay a salary, benefits, pension and other costs associated with retaining fulltime personnel. The reduction in cost is impressive and the savings are passed onto you, the consumer. In an actual sense, the mortgage agency industry is good for both the bank and the consumer’s financial bottom line.

Mortgage agents also have significant buying power because of the large volume of customers they work with, each year.

The fee for using the services of a mortgage agent is normally paid by the lender which you ultimately choose. There are cases however, when the consumer is charged a fee-for- service; this is usually in complicated mortgage situations or commercial and investment deals.

In the past 20 years, less than 15% of Canadian home buyers used the services of a mortgage agent. According to the Canadian Institute of Mortgage Brokers and Lenders, that figure rose to 25% in 2001 and is expected to reach 50% by 2005 and beyond.

In conclusion, regardless if you are looking for your first home or your 5th revenue
property, it pays to meet your local mortgage agent. See what they can do to help reduce your frustration when negotiating with banks and reduce your overall cost of borrowing.

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