Where’s Your Mortgage?
Are you like 90% of the landlords out there and you went to your local bank to get a mortgage? If you are, you’re part of the reason banks are making billion dollar profits.
For the most part they have very little competition and for years they have been painting a picture of how they are looking out for you. Psssst, they might not be.
You would think they would reward your loyalty of keeping your bank accounts, your mortgage and often your investments in one place, but the sad truth is they are richer than you think, because people believe this.
Why I Use a Broker
When we started investing years ago, we too believed that going to our local bank was the best option. It was only after talking to a mortgage broker we discovered we had some real options, not just one, two, three, five or ten year terms.
Then after talking to other investors, our eyes really became opened. If you have a single property and have no plans of expanding, staying with your local bank might only cost you a few thousands dollars during the term of your mortgage.
If however, you plan on expanding, sticking to one bank can seriously handicap you. Most banks will limit you to three mortgages and then suddenly you are allowed no more, no matter how profitable it may be. If multiple properties are your goal, you need a mortgage broker.
Now this doesn’t mean all brokers are created equal, or that there aren’t other caveats to be aware of when going through a broker, but it can open up some significant options and almost unilaterally it will guarantee you a better interest rate than your local bank.
Banks Are Responsible For Profit
OK, perhaps you can tell I’m not happy with the banks. It’s true, they have most of the money, so they can make the rules.
Bottom line, if you want to keep some bucks in your pocket, you need to at least meet with a broker to find out your options. Worst case, if the lender knows you are meeting with a broker, they miraculously shave an extra quarter or half percent off their “best rate”. Isn’t it great when they look out for you like that?
Final Note About “Shopping”
Did you know if you shop banks for a mortgage it can actually penalize you? Every time you go to a bank and apply for a mortgage, they pull your credit history. If you go to multiple banks and do this, they deem you risky for shopping around for the best deal. Brokers pull your history once and then use it to shop for your best deal without impacting your credit.