Mortgage brokers are used with increasing frequency these days in securing finance for real estate purchases. The benefits of using a mortgage brokers make securing finance for real estate a much more pleasant, simple and trouble free way of conducting the transaction for the buyer. Not many people give much thought to how mortgage brokers earn their money â€“ and there is a lot of money to be made in the mortgage industry. Here's how they earn the income they do off the loans they secure for your real estate purchase.
What does a mortgage broker actually do?
People go to mortgage brokers to save themselves time and stress in approaching many lenders to try and secure the best deal for their mortgage finance needs. A mortgage broker will have access to all these products that you would have spent so much time and effort researching. They can often also secure a better mortgage rate and terms of the loan because mortgage brokers have greater access to a variety of lenders, and therefore a wide variety of products. A mortgage broker does not usually get paid unless they secure a mortgage for you â€“ and that's where it becomes lucrative for them.
Mortgage Brokers earn wages plus...
The lucky mortgage brokers will earn a wage or salary, however some will not. All of them will earn a commission based on the loan they secure for their clients. It works like this: Let's say I go to a mortgage broker and tell them I would like a loan for a new home â€“ about $250,000 worth. He asks a few pointed questions about my employment, my personal finances and all the normal sort of questions that are asked when you are making a credit application.
The mortgage broker finds a product that suits me, and I sign off on the paperwork. Everyone's happy! The financial institution that granted the loan is happy because they will be receiving interest payments from me for a long time â€“ profit for them! I'm happy because I got exactly what I wanted and didn't have to go knocking on the doors of lenders to get it. Most of all the mortgage broker is happy because they will get commission payments for bringing me to the bank and signing me up as their customer.
You said mortgage brokers can get passive income...
The commission payments that mortgage brokers receive often come in the form of trailing commissions. That is, they receive a percentage of the value of the loan every month that the loan remains active. Some mortgage brokers receive a commission of 1%, but mostly it's a little less than that. That commission remains payable to the broker for the life of the loan too â€“ so if I never refinance the loan, and don't make extra repayments over the 25 year term, then the mortgage broker will continue to receive the commission for 25 years.
Nice way to make a living? Well mortgage brokers sure work hard for the money they earn, particularly in the early days, and most especially if you work on a commission only basis. The rewards are potentially immense though â€“ and going through a mortgage broker can be beneficial for you the borrower, the lender and the mortgage broker, who enjoys the fruits of their labour for many moons to come.