Mortgage Broker vs. DIY

7 Replies

BP Community:

I would like to get some feedback from you all. I'm exploring the option of refinancing several commercial loans that I have and engaged a mortgage broker. Actually, the broker was referred to me. My initial thoughts are/were to continue to build direct relationships with the banks, but due to time constraints the broker could perform the leg work of identifying banks to use vs. me doing that work. As I pondered over this scenario, whether I use the broker or not, I would still be building a relationship with the banks. The only caveat being that the broker will get a fee (which is fine).

Your thoughts on my logic above?

Originally posted by @Kenneth C. :

BP Community:

I would like to get some feedback from you all. I'm exploring the option of refinancing several commercial loans that I have and engaged a mortgage broker. Actually, the broker was referred to me. My initial thoughts are/were to continue to build direct relationships with the banks, but due to time constraints the broker could perform the leg work of identifying banks to use vs. me doing that work. As I pondered over this scenario, whether I use the broker or not, I would still be building a relationship with the banks. The only caveat being that the broker will get a fee (which is fine).

Your thoughts on my logic above?

If you're fine with paying a fee and saving time, where's the problem (asks the broker)?

If you have a person that's a professional, that was referred to you by a trusted source and that person performs a service for you that saves you time and ultimately money, I would say that person is worth it.

Like I said in the first sentence, I'm a broker. I've had this question posed to me numerous times and I've had people go to this lender or that and sometimes they're happy because I'm a broker and sometimes they aren't.  Sometimes they "want to go to the source and not pay a middleman" and ended up spending more money than they should have or would have going through me (even with my fee) because I knew a lender whose rates were lower for the same product or having a special that month, but they "wanted to go to the source".  Sometimes I will send a loan to a lender that's a little more expensive because they have one little nuance that would blow up a loan at another lender, but they're fine with and sometimes I'll send a loan to a different lender that may have a little bit higher pricing, but took half the time to close a loan the last time I sent one there and the contract says time is of the essence.

Lots of factors go into a loan and having a good broker on your side will save you time and money.

Stephanie

 

Stephanie has great points. I'm on the residential side, so she knows better than me, but I'd like to add that brokers should be thought of as basically free labor! They pay for themselves. Usually we have access to wholesale pricing that is cheaper than direct to consumer pricing offered by the same bank.

Good stuff here.  I am a residential wholesale broker and don't do commercial.  Look at it this way, you'd fill out one application.  We do all the leg work and shopping around for you to find the best deal that fits your profile.  As was pointed out, basically free labor.  My business is ran with lender paid fees, so the borrowers doesn't directly pay me.  I get comped by the lender who in return re-coups some of my expense via interest rate to the borrower.  For example, a lender paid rate quote may be 3.25% versus a borrower paid fee quote at 2.50%.  Borrower paid will be on the CD.  Different brokers have different comps rates, but you will likely find that most will charge between 2-5%.  Wholesale brokers will be on the lower end, usually.

This is getting really nitty gritty in the weeds.  Ultimately, you are paying the broker over time with a higher interest rate to the lender or directly at closing.  Either way, a wholesale broker will almost always be lower costs than a traditional bank.

In the end, it all depends what your time is worth to you and how serious you are about getting one of the better deals out there.

Nick

I'm a broker in 45 states and can say this: brokers are meant to find the best financing options for you and can sometimes speed up the closing if they have a good relationship with the lender.

On average, brokers charge 1-2% of the loan amount for their services. 

I work as a commercial broker in the non-recourse and agency sector.  One of the biggest things I tell everyone is all I am is free service for you.  While you might not be making this relationship directly, I still have you very involved in the process so you're going to know exactly who you're working with;  I just like to create a one stop shop for you.

We charge .75 to 1 full point for origination with no other fees so I feel like it's free labor!