The first thing to do when you’re considering real estate investment in Canada is study. Study your market, study the overall industry and study the place where you will build your portfolio. To be honest, you’re never truly done with the studying part of real estate investment, but eventually, you have to move on. Once you’ve got a firm idea of the layout of the land, it’s time to move on to step two: building a team.
Table of Contents - Should I Use A Mortgage Broker To Buy An Investment Property?
Any seasoned real estate investor will quickly tell you that building a reliable network of professionals is the key to success in the industry. You’ll need a team of people who can source deals for you, help cover due diligence and secure financing. For that last consideration, you’ll undoubtedly find yourself wondering whether it’s worth the time and effort of securing a mortgage broker’s services.
What is a mortgage broker?
Traditionally, when an investor wanted to secure a loan, the only option was to travel from bank to bank, shopping around for the best rates until they found an institution that wanted to work with them. Even then, the options were likely few unless an investor lived in a large city. Here’s where a mortgage broker comes in.
A mortgage broker is a middleman between you and your financial institution. That might make you wary, but in a lot of cases, having a buffer can be a massive benefit to an investor. A broker’s job is to shop around to find the best mortgage rates for your specific situation. Unlike a traditional bank, a mortgage broker does not provide the mortgage. Their job is to put you in touch with those that do.
Get a wealth of options
In the old days, when your only option for a loan was a benevolent bank, investors were greeted with one option: the type of loan offered by that specific bank. When you work with a mortgage broker, however, you’re trading on the expertise of someone who (theoretically) has considered all of the options and delivered the best ones to you.
With the rise of the internet, these options are more plentiful than ever. While that may prove daunting to a mortgage broker unprepared for the slew of options on offer, the right broker can turn it into a great deal for you.
Trade on success
Another reason to consider working with a mortgage broker is their interest in your success. When you do business with a bank, you may discover that they aren’t as motivated to do business with you as you might hope. Either their selection of products is limited, or their rates are too high. There’s very little wiggle room. The reason for this inflexibility is simple. The bank doesn’t need to do business with you to get its money. It’s a hard truth, but one worth learning early.
Mortgage brokers, meanwhile, only get paid through a finder’s fee. And that fee is only paid out when they find you a loan that you accept. In other words, when you work with a mortgage broker, you’re dealing with a financial professional who won’t see a single loonie until they process a successful loan application for you. That can be a powerful motivation to find you the best deal possible.
Expertise only specialization can provide
The reason that the average person puts so much faith in their local bank is obvious. For anyone who just needs a base-level of financial service, a bank is a great way to find a lot of financial services under one roof. It’s like shopping at a big box store.
However, when you’re considering real estate investment in Canada, an institution with a lot of options may not be as beneficial as one with specialized options. The typical mortgage broker in Canada will know much more about the ins and outs of the mortgage industry than an average professional at a bank. That knowledge is something they can pass on to you (and a little more knowledge is never a bad thing).
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You’ll need to shop around
Remember that just because a mortgage broker has several options at their fingertips doesn’t mean they’re choosing the correct one. Success in the mortgage industry is a matter of experience and skill, just like with any other industry.
If you decide to pick a mortgage broker over another financial institution, you should never go with the first person you run across, no matter how good a fit he or she may seem. It’s worth making sure that you visit with enough mortgage brokers to find the one that has the right mix of customer service and industry expertise that is right for you.
To a novice real estate investor in Canada, hearing that a few more signatures could be involved in the mortgage process when you go through a broker may not seem like a big deal. Once you realize the sheer volume of paperwork required in the investment process, you might take genuine pause when you find out that working with a mortgage broker will lead to another pile of documentation that you need to provide before you can secure a loan.
Do you fancy demonstrating proof of your income? How about the length of time you’ve had your job? And those are the easy questions.
More lending options
As mortgage brokers have access to many banks and non-bank lenders, you have more options. Often investors are facing rental property caps or maxing out their portfolios based on their debt service ratios. By working with an experienced mortgage broker you can ultimately buy unlimited rental properties.
In many cases, working with a mortgage broker is instrumental in getting your investment portfolio up and running. Be sure to do your research and interview multiple brokers before you decide who you’ll work with—and enjoy a mutually beneficial partnership.
Should You Use A Mortgage Broker or Bank When Investing in Real Estate?
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