What Is Mortgage? What Options Are Available?
What is mortgage or what is a mortgage is a common question. It is a financial loan offered to credit-worthy consumers in order to purchase a home. When you begin searching for a home you will likely be offered a pre-approved mortgage. What is mortgage pre-approval? This means that you qualify for a mortgage and are given a price range–but you haven’t began or finalized the paperwork yet.
What is Mortgage: Your Options
When you have finally purchased your new home your next step is to finalize your mortgage and secure your approval, to put the seller at ease. At this stage you really have three options, lets look at each more closely.
Option 1 – Go to Your Current Financial Institution
Many people simply go to their current lender, lay all their cards on the table and just ask them to get them a mortgage and say ‘what is mortgage options available to me’. This is done either because people feel they are too busy to go through the mortgage jungle, or because they feel that their bank has always taken good care of them and why would they now not give them a good rate, and finally people feel some sort of misplaced loyalty to their existing institution, especially if they have been dealing with the same banker.
People do not know that the way banks price their mortgages is in the theory that they give as little rate discount as they need to in order to secure the business. Therefore although it may be true that your bank may give you a good rate, really the question needs to be are they giving you the best rate? Also are you really that busy that you can not shop a little bit in order to ensure that you are getting the best rate.
Finally although your banker has always been nice to you on granting loans, or other special services, remember that this is business, and bankers are always under pressure to deliver higher rates, if they know you are not shopping around you will not get the best rate. Consider this: If you had a $160,000 mortgage at 7% from you bank. Lets assume they gave you .5% off of their posted rate and you feel they have given you an acceptable deal. Your total interest cost for 25 years (assuming constant rate) is $176,200. If you are able to shave this rate by a further .5% you would save $14,685!! Bottom line this option alone is not your best course of action.
So, when you’re asking yourself what is mortgage options from a bank–they aren’t the ideal source for your mortgage.
What is Mortgage Option 2 – Hit the Streets
So–what is mortgage shopping? Well, when you are going to buy a television, or personal computer, you would shop around to get the best price. Shopping for your mortgage is no different. If you put the effort out you will get a better deal. The problems with this option are big however. If you have ever tried to telephone a bank these days, firstly it is often difficult to get through to a live person, and once you do they generally do not just throw out their best rates without knowing anything about you. Therefore you either have to give an application over the phone, internet, or in person at the branch to every bank you wish to shop, in order for them to give you their best rate quote.
This has two problems. The first obvious one is that this is terribly time consuming and inconvenient. The second is that each lender will do a credit inquiry on you. If you get many inquiries in a short period of time it will decrease your credit beacon score, if you are on the threshold of a particular beacon score range this may hurt your chances of getting the best rates or an approval at all. Always beware and protect the amount of unnecessary credit inquiries.
Option 3 – Consider Using a Mortgage Broker
A mortgage broker really is the best of all worlds. They have access to all major financial institutions, usually much more than the average person has access to. They often can respond with a discounted mortgage rate far below what’s offered by the banks in 24 hours or less. They only do one application and one credit bureau that is shared with all potential lenders, therefore only one credit inquiry. They specialize in situations that are financially challenged for whatever reason therefore if you are having trouble getting approved you can quite often quickly get an approval through a broker. Finally for straight forward applications, professional brokers traditionally do not charge fees.
The Mortgage Centre City-Wide is a mortgage broker and a member of the Canadian Institute of Mortgage Brokers and Lenders. We specialize in any situation and offer discounted mortgage rates anywhere in Canada guaranteed to be lower than local banks. Get a Pre-approved mortgage today.