Getting the best rate is not enough. Negotiating a mortgage is not just about getting the best rate. There are many pitfalls. Here are five common mistakes when it comes to taking out a mortgage and ways to avoid them.
- Underestimate Your Real Needs
It’s not just the interest rate that counts. Unfortunately, this is often the only information that the borrower can obtain.
Sure, the rate matters, but there are dozens, if not hundreds, of settings that will save your customers thousands of dollars. For example, did you tell them about combined products, like the possibility of dividing your loan into different parts, one at a variable rate and another at a fixed rate? Do not hesitate to join forces with a mortgage broker to establish the right strategy.
- Do Not Anticipate The Development Of Real Estate Needs
Over 80% of mortgage borrowers take out a fixed-rate loan over five years. For some, this may be a perfect choice. For others… what a pity! Does your client plan to expand his family within a year or two? He only plans to live on this property for a few years and then move out.
It is therefore certain that his condominium or small house will no longer meet his needs. If he had chosen the right product, namely a contract over two or three years, for example, he would avoid a penalty of several thousand dollars, in addition to having benefited from a probably lower interest rate than that over five years. He could also have opted for a variable rate to reduce his potential penalty.
- Underestimate The Paperwork Can Be Dangerous
With the tightening of American mortgage rules, the conditions for obtaining a loan are more complex than before. It is important to remain vigilant and to sort through your papers in advance, because if an important document is missing and you have to order it (for example, a notice of assessment), this can compromise a transaction.
Advise your client to be proactive and organized, the success of a funding request depends largely on their ability to quickly provide the necessary documents.
- Imagine That Treating With A Mortgage Broker Has Costs
People often don’t understand why mortgage brokers can get a mortgage with better terms than they do, and what’s more, it’s free. It is a question of business volume. A mortgage broker agency reports tens of millions of dollars in loans to a bank each year and is therefore in a better position to negotiate.
It should also be understood that the mortgage broker is a self-employed worker who costs nothing to the banks, as long as he has not presented a complete, well-constituted file, which will be approved by the institution.
This service is therefore completely free for your client because it is the bank, which will pay him after the file. Mortgage brokers are subcontractors of the banks that work for the client, not for the financial institution.
- Think That The Broker’s Role Is Limited To The Negotiation Of A Rate
Carrying out a real estate transaction, as it should on behalf of clients, comes from extremely varied fields of expertise! For days, weeks, or even months, the mortgage broker is the central pillar of the exchanges between the client, the real estate broker, the bank and its branch, the notary, the financial services advisor, and sometimes even the appraiser and/or the building inspector.
The mortgage broker is “hyper-specialized” in real estate financing. He will scrupulously accompany your client in each crucial stage of the transaction to ensure that his dream is realized.
If your client decides to carry out the exercise himself, he must enter the following details with the financial institution with which he takes out his mortgage:
- What are the penalties for breach of contract?
- What are the repayment terms?
- Is it possible to make the mortgage payment from two separate bank accounts?
- Are there undisclosed bank charges?
- Is he obliged to take mortgage life insurance and/or other products to be able to benefit from a promotional rate? Nothing should be overlooked!