When your credit rating is not satisfactory or your income does not meet the lender’s requirement or both, you may need a mortgage broker to arrange a mortgage loan for you. Availing the services of a mortgage broker under the foregoing circumstance is expensive because of a broker’s and a lender’s fees in addition to a legal and an appraisal fees. If you are in urgent need of a mortgage, you have no choice but to use the services of a mortgage broker and willingly pay the cost.
You may also use a service of a mortgage broker even if you have a good credit rating and satisfactory income because a broker would not charge a broker’s fee nor a lender’s fee as the lender would give a broker a finder’s fee. In fact, you maybe able to get a good interest rate as a broker would shop around for you for the best mortgage terms available.
However, if you could not meet the lender’s minimum requirements, you have to look for a mortgage broker you are comfortable with. Then, ask the costs involve and the terms of the mortgage that are acceptable to you before signing on the dotted line to avoid surprises at the end that could tempt you to hold your mortgage payments.
A good example was a couple who arranged a second mortgage through a mortgage broker. The couple had to pay broker’s and lender’s fees. They signed the mortgage papers and Statement of Mortgage without understanding the contents on said documents.
After realizing that they were charged a brokers fee of $1,200, they were fuming and decided to stop the mortgage payments on the ground that they were not informed of the broker’s fee.
The couple did not pay their mortgage for one month, then two months. On the third month of non payments they received a demand letter from a lawyer of a lender threatening to issue Power of Sale. They ignored the lawyer’s demand thinking they had the right to withhold their payments. Finally, they received the legal documents for the Power of Sale action.
As a result, the couple had to pay all the arrears on principal and interest to place the mortgage in good standing and had to pay extra $1,500 for legal fees and disbursements.
The inability of the mortgage broker to explain clearly to the couple concerning the broker’s fee was not a ground for the couple to withhold the mortgage payments.
They should have continued paying while making the complaint on the mortgage broker’s fee issue.
When you avail of a service of a mortgage broker, you have to understand clearly the cost involved and pay the cost willingly. Had the couple been prudent enough at the outset, they would have avoided the hassles and the extra cost of $1,500 in legal fees and disbursements.
Adam Aspilla is a Senior Financial Counselor of the Debt Clinic of Canada Inc. and the author of the book, You Can Negotiate All Your Debts. He also writes a biweekly column, “What Matters In Life” in “Taliba Newspaper. For free initial, professional and confidential consultation, please call 905-306-7572.