If you are looking for a mortgage to purchase a home, you may be wondering whether you should use a mortgage broker. This will depend on your needs and circumstances. For instance, you may not need a mortgage broker if you are an independent client, but you may need to use a mortgage broker if you wish to work with many lenders.
You may also want to use a mortgage broker like Canadian Mortgage Services if you want to have access to special rates from certain banks. Over the last few decades, the housing market in Canada has grown at a tremendous pace. With rising demand for housing comes heightened competition for financing, especially among first-time homebuyers. To meet this need, many borrowers have turned to mortgage brokers as a way to simplify their search and get access to the best rates and loan products that are out there.
1. A pure mortgage broker acts solely as a broker
A pure mortgage broker is different from a lender in that they are not a lender. They act as a broker and gather information about potential borrowers. They work on a borrower’s behalf to determine the best loan amount and loan type for the borrower. They also communicate with a lender and borrower to finalize the loan transaction. When the loan transaction is complete, the broker receives a fee, referred to as a loan origination fee. This fee is tax-deductible and subject to B&O tax classification.
While there are different types of mortgage brokers, many of them are considered independent contractors and taxable under the Service and Other Activities B&O tax classification. They must register with the Department of Revenue as an independent contractor and complete a Business License Application.
2. A lending mortgage broker uses a line of credit
A line of credit is a line of credit used by a lending mortgage broker to obtain funding for a loan. It may be a line of credit for a credit card, a line of credit from a department store, or a personal line of credit. This type of financing does not require the party providing the funding to sell or assign the loan to the lender. However, it must be considered a recurring debt obligation, and it cannot be a short-term obligation. Read more about Start-Up Business Loans for Minorities: 5 Best Ways to Get Loan.
Unlike an individual, a mortgage broker who uses a line of credit is independent of the party providing the funding. Instead, the mortgage broker acts as a broker, meeting with potential borrowers, collecting financial information, and processing loan applications. In return for the services provided, the lender pays the broker a fee, called the loan origination fee. This fee is tax-deductible if the loan is secured by a first mortgage or non-transient residential property.
3. A direct lender offers government-backed loans
When a company needs financing, a direct lender can help. The benefits of direct lending include lower origination costs and higher coupon rates, which is especially important for middle-market companies that are less likely to have access to other forms of capital. In addition, the size of the universe for private loans allows lenders to build more diversified portfolios than those found in the public markets. Furthermore, they can access opportunities that public markets don’t offer, such as biotechnology companies that are largely focused on specific diseases.
Direct mortgages can also save people time and money. Unlike brokers, direct lenders can process your application and issue a check as soon as your application is approved. Brokers can help you compare lenders, but they will take a percentage of the mortgage amount. While brokers can help you in the application process, it can take several days to process your loan application. A direct lender can offer you a better rate and will be more flexible with the mortgage process.