Lock in finance.
Securing a loan is taking longer these days so start looking for a lender sooner rather than later. While there are many options out there, it really comes down to two. Do you go with a mortgage broker or a financial institution? Both have their benefits as you can read below.
Mortgage Brokers
How they work—A mortgage broker will approach multiple lenders on your behalf. They understand construction home loans so they can help find the best one for you or even negotiate a better rate.
What they charge— Most mortgage brokers forgo charging you a fee and instead get paid a commission from the lender. While responsible mortgage brokers will have your best interests at heart, there is always the risk that a lender could be chosen based on the commission rate. So it’s worth asking up front if they are fee or commission-based and their lender selection criteria.
When to enlist —You can enlist a mortgage broker at any stage in the home buying process. If this is your first time buying, don’t wait until you find a place. A mortgage broker can answer your questions about what lenders look for, saving a deposit, the difference between fixed and variable interest rates, even give you a second opinion of a lender you’re considering, if that’s what you want.
Where they fall short —Mortgage brokers are just that. They are not able to organise credit cards, savings accounts or handle any of your general banking requirements.
Versus banks or credit unions
How they work —They finance your construction loan from their own range of lending products.
What they charge —This varies. But usually, costs can come in the form of upfront/application fees, ongoing fees, as well as exit fees, and that’s on top of the interest rates. However, to get your business sometimes they will waive some fees. That said, the lenders introduced by mortgage brokers may charge you fees as well. That is unless your mortgage broker negotiates a fee reduction.
When to enlist—More times than not, borrowers will approach their own bank or credit union first because they already have an ongoing relationship. They may even have an existing mortgage with this lender. Also, people often apply to their parents’ bank before they seek out others.
Where they fall short —You are limited to their product offering because they will never recommend a competitor, even if the latter has a better rate. If you are already banking with them, they will have records of your savings/purchasing behaviour. Others can ask for bank statements, of course, but your own bank will be able to review your saving history over a longer period of time.