Well, maybe not a trap - but more like Bait so you would click on the link...you know - then click on the blog...and make me (the writer) really happy you did.
So what's the real reason for this blog? Simple - it's time to give the world an explanation on WHY you should get your next mortgage from FOCUS Mortgage Solutions...we're kind of a big deal, but that's not the only reason you should be calling us for all things mortgage.
You already know that Mortgage Brokers have cheaper rates than your curb side Bank. What you don't know is some of the particulars...and some of the "behind the scenes" stuff that separates one mortgage broker from another.
Let me get this out of the way before we continue...NOT ALL MORTGAGE BROLER'S ARE CREATED EQUALLY.
Some of us still have a Soul.
Okay, that's maybe a bit unfair...but it's true. You see, a lot of brokers price their mortgages according to their Lender relationships...as in a lender will say to a Broker...My mortgage rates may be higher...but I will pay you more if you provide them to your client.
So while Lender "A" may have a 5 year fixed rate mortgage at 3.14% with Full Prepayment Privileges and pay a Broker 80Bps...there is a large number of Broker's who will still sell Lender "B"'s Mortgage at 3.19% for the extra $$$ they will be paid...say 85BPS or even 90BPS total...now in the grand scheme of things, it only costs the borrower a few extra bucks per month, but still - a cost is a cost.
Granted, the difference in the rate is small...and perhaps you require a specialized product where the best rate is 3.19% - but more often than not - that isn't the case. Where it would be the case would be if the property being mortgaged was a Revenue Property or maybe a Unique Property like a Condo Conversion. But on the whole...this is a fraction of the time.
FOCUS doesn't operate like that. We work more on a "Client by Client" base...we are are, after all, "CLIENT FOCUSED". Our lenders don't send us refferrals...our Clients do though!
So while a lot of Mortgage Brokers out there will advertise a low rate and then sell you another, we call that the old "Bait and Switch", you can be confident we have a much larger picture in mind, and we realize we have more to gain by keeping our clients happy rather than some Mortgage Lender who could come or go at any time for any reason.
As for the discounting process...most Mortgage Brokers all receive the same rates from the same lenders. At that point it comes down to your relationship with your Broker.
If your broker genuinely "likes" you - chances are very good that not only will you receive the BEST Rate possible...but you may even get a little bit more - and at at the Broker's EXPENSE.
Yes...you read that right, as in - the Broker is PAYING FOR IT.
Brokers, if they like you enough, can exercise a "Buy Down" option. This is where the Broker will forego their earnings in either part or full in order to benefit a client.
Here's how it works:
Brokers typically get paid around 80 Basis Points (BPS). A Basis Point is .01% of 1.00%. That is to say, if your mortgage is $100,000.00 - the lender would typically pay us $800.00...assuming we sold just a standard rate with no buy down. For the sake of it, let's just say the rate is 3.14% as we did above.
Let's say your Broker likes you and they want to give you 3.09% (down .05%)...they are welcome to do so. However, it's gonna cost them.
For every .05% a Broker buys down an interest rate, they forego 20Bps of their earnings. So it costs them about $200.00 per $100,000.00 your mortgage is.
If your Broker really likes you and they choose to buy down your rate by .10% - you should be thinking of them at Christmas time...because that is COSTING them 1/2 of their earnings.
Keep in mind - you aren't paying your Broker out of pocket - so if you are getting a standard rate offered by all Brokers...be happy enough that you qualify for the rate. IF your Broker chooses to spend their money on you to get your rate down a bit - then be grateful.
We usually buy down rates for nice people. If you are a nice person, you can almost be assured you will get the BEST there is right out of the gates - and potenially a bit more.
If you are a Pretentious, Self Absorbed Peacock (oh yeah...we said that too), and you DEMAND the best of the best, even if the broker works their ass off and makes nothing...well, feel free to call someone else...our feelings won't be hurt.