How Do Mortgage Brokers Rip You Off?
While Mortgage Brokers are legally required to work in your best interest, dishonest brokers are out there. Unfortunately, working with a shady broker can cause you to be ripped off. Here are the most common ways borrowers may be ripped off by their broker.
Lenders Paying the Brokers Fees
Not every mortgage broker charges a flat fee. However, some do. The brokers who charge a fee may have the fee paid by the lender whose loan product you choose. If this is the case, the broker may recommend more expensive loans to get paid more. For example, a standard fee is between 1 and 2%. So, if you apply for a $250,000 mortgage, the broker would earn between $2,500 and $5,000 upfront or added into your loan cost. However, if the lender pays this fee, they may pay the broker a higher fee in exchange for a more expensive mortgage rate. This could leave you paying more interest over your loan term. Therefore, it may be cheaper for you to pay your broker’s fees.
Mortgage Brokers will do all the legwork for you. This means they will compare home loans and find the ones that are the most competitive. However, as mentioned above, they may be working in their best interests, which means they may only offer you loans that benefit them in some way. Therefore, if you know your lender is paying your broker, it is wise for you to do your own homework on what other lenders are offering in terms of interest rates and features.
If you want to work with a Mortgage Broker but are afraid of getting ripped off, contact Mortgage House. Our team of brokers takes a customer-focused approach to lending.