A mortgage is a loan paid to a borrower against some asset of a given value, for example property. This loan is paid in installments over a given period of time and in case the borrower is unable to pay back the loan amount, the lender can recover their money by selling the property quoted in the agreement. Therefore mortgage companies act as the intermediaries between the lenders and the borrowers.
Usually, banks have acted as the mortgage companies but with time this market has grown such that more brokers are now involved that is concentrated on this sector alone. The roles of such brokers vary from market to market but basically it involves marketing of properties to attract clients. They also investigate the credit worthiness of the buyer and their ability to afford the property they desire. They provide a catalogue to their clients so as to find the specific asset that fits their needs. They generally offer all services in property management such that they serve their clients at minimum cost as possible.
Mortgage companies work on the basis of commissions. Therefore, the more properties sold the bigger their paycheck and as a result the client benefits since the rates are lowered to attract them. Mortgage brokers obtain the loans for purchasing the property on behalf of their prospective clients and gain a profit after the buyer has finished servicing the loan. Also the company can enter into an agreement to sell the property on behalf of the owner.
Previously, the market was known for fraud whereby the brokers did not disclose the full value of the property they are selling. Therefore, the client would pay the premiums over the set time and end up paying much more for the property than it was worth with the brokers earning super profits. Similarly, the broker would quote one rate to attract the clients but later change it. However, legislation has been placed to combat this.
As a result of the recent property market crash, this market has been deemed fairly volatile. This has led to the introduction of mortgage insurance. This protects the mortgage broker from any default on payment from their clients.
Often the question has been asked on whether to look for mortgage companies or look for your desired property yourself and also on how to find legit brokers. It is important to note that brokers do not have access to any special deals that may be unavailable elsewhere. Also some companies do not necessarily offer their clients the deals best suited for them rather they offer deals that garner the greatest profit.
Before engaging in business deals with a broker one has to consider some factors. Do some research on the company with the best review. Investigate on the type of property you are looking for and determine whether the deal you are being offered is the best in terms of the money spent when the deal closes. Engage with recent clients of the firm to know if they received the same type of loan you are being offered. Also if the costs involved were in line with their expectations.
In the event of repossession mortgage companies must resort to selling the property to recoup their original investment. They must be able to dispose of assets more quickly by reductions in price. Therefore, the company acts as a hedge for the owner such that they get reap maximum benefits from their property.