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What You Need To Know About Mortgage Brokers

What You Need To Know About Mortgage Brokers

For those who are completely new to the mortgage field, this article covers the basics. A mortgage occurs when a property is charged by a creditor as debt security.  Mortgages are popular in the banking industry today and they influence interest rates because of their importance. Mortgages are paid off over a long period of time, in many cases over a thirty-year period. Despite the fact that they are paid over a long period, mortgage charges take up a significant part of the monthly salaries of most people.

What is a mortgage broker?

Having established the ideology of what a mortgage is about, it’s important to know what mortgage brokers are. A mortgage broker is an intermediary that negotiates mortgage loans for individuals, groups, and business organizations. A mortgage broker may either work on behalf of a bank or lending institution, or be independent. In many cases after mortgage brokers working on behalf of institutions have obtained vast experience in the field, they move on to become independent mortgage brokers, otherwise known as private mortgage brokers.

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How are mortgage brokers paid?

Although mortgage brokers can be paid in a variety of ways, in most cases they are paid by the lenders. Consequently, this implies that they offer services free of charge to their clients. While many brokers are paid by their lenders, other brokers charge clients a small fee for their services. It’s important to understand that private brokers can freely set their service prices and preferred mode of payment since they operate independently. When dealing with mortgage brokers, it is important to know if you’re dealing with a broker who works with an institution or with an independent broker. Before hiring the services of a mortgage broker, ask questions about fees and payment mode. This is especially important if you’re transacting with a private broker.

Like other businesses, there are some downsides to note when transacting with corporate mortgage brokers. The major downside is that they do not have access to funds being requested as fast as possible, especially in cases of emergencies. They have large numbers of clients to process funds on their behalf and may not be able to process loan requests within a short amount of time. Mortgage brokers working for financial institutions typically have less experience. Conversely, independent mortgage brokers have acquired vast experience and can process loan requests much more speedily. This experience helps them bypass undue hierarchies, prepare paper work, and present loan requests to the right bank official directly and get prompt response after the loan request.

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What advantages do independent mortgage brokers have over corporate mortgage brokers?

Independent mortgage brokers have a very unique edge that makes them very proficient in service delivery. One advantage of using independent brokers is the array of information and deals to which they have access. Because they transact with multiple lenders, they are well connected and have in-depth knowledge about the ins and outs of brokerage service. It is safe to say that the independent broker is connected to a large number of lenders; some are connected to over twenty lenders. This variance gives you alternatives and the ability to make choices that suit your best interests.

This makes the services of an independent service unique and worth potentially several thousand dollars depending on the property value for which a mortgage is being sought. For example, a mortgage of $100,000 at about 1% lower interest rate over a thirty year period saves $30,000 depending on when interest on the principle amount is recalculated.

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In the mortgage industry, mortgage fraud is a cause for concern and there’s need to determine credibility before transacting with a mortgage broker. In the United States for example, the credibility of a mortgage broker can be easily ascertained by checking with the Better Business Bureau (BBB). The BBB provides business ratings so you can get detailed information about the proficiency, history, and other important business accreditations of a mortgage broker. In other countries similar organizations provide similar services and you can look up information on any mortgage broker of your choice and even read reviews about them if they have functioning websites.

Things a Mortgage Broker Does for You that a corporate broker cannot:

  1. Wide scope of honest advice

Trained corporate brokers are limited compared with independent brokers, and corporate brokers only have knowledge about the institution they represent. An independent broker has vast experience and offers varieties of options that best meet your interests.

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  1. In-depth education

Your mortgage broker’s job is to help you understand the different mortgage products that are available for your credit and income level. Your broker can help you develop an action plan so that even if you don’t qualify for a better mortgage now, you’ll be able to get a better rate after implementing the plan.

  1. Help negotiate preferential transactions

Corporate brokers are not hinged on fixed rates; they can help you look into your financial records and help determine the right lender and rates to apply for. A corporate broker may help you in securing lower rates, but you don’t have valid guarantees that these reductions won’t be cancelled out by hidden fees. Independent brokers know the loop holes, can identify pitfalls and hidden clauses in paper work, and help you save lots of money in the long run.

Featured photo credit: Sherissehume via sherissehume.com

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Last Updated on June 6, 2019

The Average Retirement Savings and How to Save Wisely

The Average Retirement Savings and How to Save Wisely

Are you on track for retirement?

If not, don’t worry, I’m not sure either. I save each month and hope for the best.

Fortunately, I’m at an age where most people don’t save so I’m ahead of the curve.

But, what if you aren’t in your 20s? What if you’re near retirement and are looking to gauge where you stand?

If so, keep reading. Here’s how to prepare for retirement and save wisely during the process.

What Does the Average American Have Saved for Retirement?

Saving for retirement is tricky.

Tell someone straight out of college to save $10k a year for retirement and it’ll be next to impossible.

Make the same request to someone decades older and they’d be more likely to be able to save this amount. But, a 20-year old college student can be “financially ahead” of someone saving more than them. Why?

Age matters in your financial journey. The younger you are, the more time you have to save and put compound interest to work. As you get older and have more saving power, you’d have less time to put compound interest to work.

Here are the average savings Americans hold by age bracket:

20’s – $16,000

During this stage, most people are paying loans and moving up the corporate ladder. Your best bet during this stage is to focus on eliminating debt and increasing your income. Don’t focus only on getting a high-paying job neither.

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Instead, focus on learning via Podcasts, reading books, and taking specialized courses. Doing this will make you more valuable and give you more career options.

30’s – $45,000

At this stage, you’ve hopefully escaped your entry-level salary and work at a career you enjoy. Your earning power has increased but you now have more obligations. For example, marriage, kids, and a mortgage.

Set a plan to pay off all your debt and focus on eliminating unnecessary expenses. Leverage financial tools like Personal Capital to ensure you’re on track for retirement.

40’s – $63,000

This is the stage where you’re at the prime of your career. Top financial institutions recommend you have at least 2 to 4 times your salary saved up. If you’re falling behind, start maxing out your 401K and Roth IRA accounts.

50’s – $115,000

During your fifties, you’re close to retirement but still, have time to save. You may be helping your kids pay college tuition and other expenses. Since you’re at the peak of your earning power, max out all your retirement accounts.

60’s – $172,000

By this point, you should have about eight times your salary saved up. If not, you’ll depend primarily on social security benefits averaging $1400 per month. Max out all your retirement options as much as possible before retiring.

Ways to Save Money on a Tight Budget

The sad reality is that most Americans aren’t saving enough for retirement.

Even high-earning power isn’t enough to secure one’s financial future. You need to have the discipline to save for retirement while time is in your favor. Don’t wait for you to have a high salary to save, start with having a small budget.

First, get a clear picture of where you stand. Write down a list of “needs” and “wants.” For example, Netflix and Amazon Prime are “wants” and a “cell-phone” is a need.

Use tools like Personal Capital to analyze your spending patterns. Personal Capital allows you to add all your financial data in one place–making it a powerful option to gauge where you stand.

Once you know all your expenses, organize them from highest to lowest expense. When you can’t cut more expenses, call your service providers to negotiate a lower price. If you’re not good at negotiating, use services like Trimm to lower your monthly expenses.

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How to Save Money Each Month

By this point, you know the average amount of money you should have saved for retirement based on your age.

But, breaking this down into monthly goals can be challenging. Here are some rule of thumbs to follow:

Aim to contribute 10%–15% of your salary each paycheck. Review your progress each week.

Why so often? The reality is that life gets in our way and you will have many financial setbacks. Your goal isn’t to be perfect but to get back on track instead.

Reviewing your finances weekly lets you know where you stand with your retirement. This doesn’t have to be a long process either. All it takes is login in Personal Capital to view your net worth and check how much you have saved for retirement.

Turn saving into a game and aim to save more each month. It will get challenging but you’ll get creative and find more ways to save.

Top Money Saving Challenge Tips

To prepare for your financial future and not be another statistic you need to be different.

How?

By adopting new habits that’ll help you become a saving machine. Here are some ways you can save more:

Automatically Contribute Towards Retirement

If you’re working for a company, you can automatically contribute towards your 401k. If you’re not currently contributing more than 10%, make this your goal. Contribute 1% more today and automatically increase this amount a year from now.

Odds are that you’re not going to be negatively affected by contributing 1% more. Many times we spend our money on things we don’t need. Contributing more towards retirement is a great way to secure your financial future.

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Use the Right Tools to Know Where You Stand

Once you’re contributing more towards your retirement accounts, gauge your progress. Make use of finance tracking apps to help you view the big picture of your retirement.

When I’d first signed up for the app Personal Capital, I didn’t know I had a negative net worth. Despite saving thousands of dollars, my debt brought my net worth to the negative. Knowing this motivated me to save more and spend less.

Now, I have a positive net worth. But, it was because I was able to view the big picture using the app. Find out what your net worth is using a finance tracking app and you may surprise yourself.

Bring in Experts to View Your Blind Spots

If you have too little or too much money saved, you should consider hiring financial experts.

Why?

You may need someone to hold you accountable to help you reach your financial goals. Or, you may need help managing your money as effective as possible.

Regardless of the reason, getting help may help improve your financial situation.

Before you hire an expert, find out which areas you need help the most. For example, if you’re constantly overspending, find a debt counselor. If you’re struggling with choosing the best investment options, hire a financial advisor.

Speed up Your Retirement Contribution

After learning how to manage your money well, the next best thing is to earn a higher income.

You’re capped at how much you can save but not much you can earn. Even if your employer isn’t giving you a promotion, you can still take charge of your financial future. How?

By starting a side-business.

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This will be something you’d work on after you’ve finished your day job. Once you start earning income from your side-business, you’ll be financially better off.

The best part is the more work you put into your side-business,[1] the more potential it has to earn more money.

So start a side-business in an area you’re familiar with. For example, if you enjoy writing, do freelance writing for small e-commerce businesses.

Once you’re earning a higher income, you can contribute more towards your retirement. Don’t wait for the right opportunity to secure your financial future, create one.

Reach Financial Freedom with Confidence

What if you were able to retire tomorrow with no problem, all because you’d have enough money saved up and little to no debt left to pay off? How would you feel?

My guess is that you’d feel happy and relieved.

Most Americans are falling behind their retirement goals for many reasons. They’re not prepared, they carry bad money-habits and are thinking short-term.

For you to retire successfully, you need to work backward and adopt better habits. Contribute more towards your 401K and focus on growing your income.

If you do, you’ll save money and pay debt faster.

Don’t beat yourself up if you’re behind your retirement goals. Take the first step today towards a brighter financial future. Isn’t retirement worth the hard work and sacrifice to be at peace?

Featured photo credit: Huy Phan via unsplash.com

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