In this article I want to clarify and simplify the basics of this mortgage industry for you, our clients. Since we are not a typical ‘brick-and-mortar’ business such as a retail store or restaurant, many people assume our business model is completely different. Well it is in many aspects, but like your neighborhood shop or a Fortune 500 company, we still follow basic business fundamentals… Revenue (customers and product sales) vs. Expenses/ Overhead (cost of doing business- customer acquisition, employees, marketing, etc.). More expenses means more revenue is needed to be profitable. Simple right? I just want you to remember this when you see those expensive TV commercials, numerous internet ads, hear radio ads during prime-time, see billboards/ signs, and receive fancy flyers in your mailbox. That marketing need to be paid by someone and guess who that someone is?! That’s correct… YOU (the client). No you don’t directly write a check for those means of advertising (you can for me if you’d like!), but I promise you will be paying for it with higher fees and/or higher interest rates! Mortgage companies have to make up for it and create more revenue to stay profitable somehow, and if all we offer are loans… well that’s what the costs will be rolled into. How else would these companies continue to stay in business and keep advertising to you?
As interest rates continue to increase, more lenders and brokers are starting to target clients looking to purchase homes as opposed to using refinance leads and cold-calling clients to solicit refinancing. In turn it’s costing those lenders more money whether it’s for advertising, additional sales people, or purchasing leads from several sources. Again those additional costs have to be recouped somehow. Just keep this in mind when you start searching for a lender for your pre-approval and mortgage.
At Bank of England Mortgage, we simply let our service and knowledge do the advertising! My theory is that if we take care of our clients with excellent service, low fees, and great rates… our clients will do the advertising for us (wishful thinking right!). We would rather save you the money on the rates and fees by not spending it on expensive leads or marketing channels. Take this all into consideration when determining which lender will be your best option. Best of luck!