Can You Use a Mortgage Broker to Get a Home Equity Loan?

You can arrange a home equity loan yourself or use a broker

Fact checked by Timothy Li

Arranging a home equity loan is usually a straightforward process because the loan is secured against your property. Nevertheless, you should shop around for the best deal because interest rates and loan terms vary among lenders. You can do this on your own, but some homeowners turn to a mortgage broker for help in smoothing the process and getting the right deal.

Key Takeaways

• Finding and closing on a home equity loan is similar to getting a mortgage.
• Borrowers can arrange the loan themselves or use a mortgage broker.
• A mortgage broker may or may not be able to secure better loan terms than you would get on your own.
• Mortgage brokers charge a fee for their services, which is paid by either the lender or the borrower. 

Mortgage Brokers and Home Equity Loans

Mortgage brokers are the middlemen in the mortgage loan process. They act as intermediaries between financial institutions that offer loans secured by real estate and individuals interested in financing real estate purchases.

Mortgage brokers make their money from lenders, who pay for the extra business they bring in. That might suggest that a mortgage broker adds costs to the deal, but that’s not always the case. Mortgage brokers often have relationships with many lenders and know the mortgage industry very well. This means that a good broker may be able to get you a better deal than you could get on your own.

That said, you should always do a little of your own research before contacting a mortgage broker. In addition to traditional banks, you can reach out to savings and loans, credit unions, and mortgage companies.

It’s wise to get at least three quotes, and a mortgage broker can help you compare offers. 

Important

Many mortgage and home equity loan customers assume that a broker can deliver a better deal but this is not always the case. Some lenders offer homebuyers the same or better terms and rates than they offer brokers. It never hurts to shop around on your own to see if your broker is really offering you a great deal.

Advantages of Mortgage Brokers

Working with a mortgage broker has advantages and disadvantages, and you should weigh these to work out what makes the most sense for you.

Working with a mortgage broker has benefits:

• It may save you work because they will contact lenders for you.
• They may have access to special offers and lenders that the average borrower doesn’t.
• They may be able to manage or reduce your fees.

Disadvantages of Mortgage Brokers

On the other hand, there can be drawbacks to using a mortgage lender:

• Your interests and theirs might not be aligned. You are looking for a loan that will be good years into the future, while an unscrupulous mortgage broker is looking for a quick payment for closing a loan.
• Most mortgage brokers charge fees, and you may have to pay some of them. Whether it makes sense to pay the fees depends on whether the broker is saving you money in other ways.
• Some lenders don’t work with mortgage brokers, so some offers will be available only if you go directly to a lender.

Ultimately, the decision on whether to work with a mortgage broker depends on personal preference. If you find a mortgage broker you trust, work with them. If you feel comfortable finding your own best deal, go for it.

How Much Does a Mortgage Broker Charge?

Most mortgage brokers work on commission and generally earn 1% to 3% of the amount of the loan. Some brokers are paid by the lender, others by the borrower.

When Should I See a Mortgage Broker?

You should see a mortgage broker only after you’ve done a little research for yourself. Get an idea of the rates that are available so that you’ll know you’re getting the best deal.

Do Mortgage Brokers Also Arrange Home Equity Loans?

Most mortgage brokers arrange home equity loans as well. A home equity loan is a type of mortgage. Moreover, many of the same lenders offer both. The broker’s connections with lenders are their biggest advantage for borrowers.

The Bottom Line

Finding and closing on a home equity loan is fairly similar to getting a regular mortgage. In either case, the borrower can choose to go through a mortgage broker or go it alone.

A mortgage broker won’t necessarily be able to get you better loan terms than you can get on your own. They will charge a fee for their services, to either the lender or to you. In the best-case scenario, a broker might be able to negotiate a better deal on your behalf.