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Mortgage Brokers: Get one working for you!

Of all those reality shows on TV lately, have you noticed how many participants are mortgage brokers? Sarah of Joe Millionaire fame was an assistant to a mortgage broker and Bachelor Bob was a mortgage broker. That's because in the U.S. there is a large number of mortgage brokers and using a mortgage broker is commonplace. The U.S. consumer rarely goes directly to a bank to get a mortgage.

In the U.S. in 1992, 25% of the mortgage were processed through mortgage brokers. By the year 2000, that statistic had risen to approximately 70%. The Canadian mortgage market seems to be heading in the same direction. At the end of 2001, mortgage brokers had 25% of the market share in Canadian mortgage origination. A recent Canada Mortgage & Housing Corporation (CMHC) study indicates that by 2005, mortgage brokers will have 50% market share in mortgage originations.

What does a mortgage broker do?

A mortgage broker will work with you to arrange financing that best suits your needs. This usually doesn't cost you any fees, since the broker is paid a commission by the lender for placing mortgages with them. A brokerage fee usually only applies if the mortgage application doesn't fit standard qualifications and the lender, willing to grant the mortgage, is a tier-two lender in the business of higher risk lending.

The brokers of today have access to 30+ lenders, including most of the major financial institutions in Canada. Simply put, more lenders means more competition for your mortgage. Using brokers is also a very efficient way for lenders to add to their mortgage portfolio. The lender only pays a commission to the broker when a mortgage funds. Lenders eliminate the bricks and mortar costs of bank branches and all other costs associated with originating mortgages, in branches. More competition and lower costs add up to mortgages with better rates and terms to suit your needs.

The mortgage industry in Canada is changing (for the better) and the mortgage brokers are the catalyst for this change. As the consumer becomes more aware of the value proposition of what a mortgage broker brings to the table, many more of you will start using brokers and recommending brokers to your friends and relatives. Who knows, a mortgage broker could be your next "Canadian Idol"!