Many individuals and families that plan to acquire a property do so by applying for a mortgage. There are three potential players that you may have to choose from in case you are going in for a mortgage i.e. banks, credit unions, and mortgage brokers. The pros and cons of each are discussed below and summarized via a logical conclusion.
Market research indicates that customers with more products/accounts with a bank are more likely to retain a relationship with that bank. This helps explains the impetus for debit and credit cards, online bill payment, checking, overdraft accounts and loans etc. The more the banks engage clients with these services, the more loyal they tend to be. Many banks have even started offering special discounts to their customers. You can actually leverage this struggle to retain you as a customer to get a good deal.
On the flip side, banks usually have a limited product line available and are usually more conservative with loan programs and their execution per se.
A mortgage broker on the other hand has access to multiple lenders because of which they come up with multiple product lines. Mortgage brokers basically look around and negotiate for customers. They also try to get the lowest rate in the market. This way the volume discount achieved by mortgage broker is directly passed on to borrowers.
Credit unions are nonprofit organizations owned by their customers. They are specifically chartered to cater to the needs of specific membership bases. This means mortgagees are more likely to get a better deal at a credit union. While credit unions offer a very limited range of products, they are highly customer-oriented.
Banks and credit unions classically do have any scrap fees or levy hidden costs into their loans while most mortgage brokers do.
Both banks and credit unions keep money safe. If in the unfortunate case where a financial institution does happen to go under, some or all money in FDIC and NCUSIF insured accounts will be protected for consumers.
The primary benefit of arranging a mortgage through a broker is the extensive range of mortgage products a borrower has access to. The mortgage brokers have the necessary experience and technological edge to evaluate finances and compare the diverse mortgage products available. They can then recommend a loan option that’s suited for each customer. What’s more, applying for a mortgage through a broker would saves a considerable amount of time and effort. Borrowers not only cut down the research, but also the number of applications required by each lender. Usually a mortgage broker requires information only once and they’ll be able to shortlist a suitable deal.
While there are no set piece solutions, what emerges from the analysis of mortgage options is that if customers are not familiar with the types of mortgages available, looking for a new deal can be overwhelming. This is where a mortgage broker can be of assistance. They can explain mortgage options in a language that is easy to understand and suggest the most appropriate deal. There is however, a possibility of missing out on deals that are available exclusively to direct customers if brokers are depended on entirely. Therefore, borrowers should continue to investigate direct deals on their own while engaged with a mortgage broker.