Mortgage refinance - ethical dilemma
April 8, 2016 9:08 AM   Subscribe

Is it ethical to go with the best deal on a mortgage that is NOT through a broker even when my broker did a bunch of "free" work that opened up this opportunity?

I was looking to refinance my mortgage, and I contacted my prior mortgage broker who got me my current mortgage in the first place, and he came back with a 2.35% rate which sounded good as it was less than my current plan. So I signed a bunch of applications online, got to the point where lawyers prepped papers and I just needed to go to the lawyer office to sign the deal.

BUT 2 days prior to when I was going to sign that, my current mortgage provider called me as they had received the notice of the mortgage discharge, and they offered me 2.2% to stay with them. I told my broker this, and he got my application updated to match the 2.2%. I then told my current mortgage company of the match and they offered $700 refund on the fees associated, which my broker cannot match without losing money on the deal. I'm in a position where I can either take the 2.2% + $700 refund from my current mortgage company, or just 2.2% from my broker.

My dilemma here is that while it's clearly a worse deal money wise to go with my broker's offer, ($700 is $700!) I probably would never have got this deal if I hadn't talked to my broker in the first place. Am I an asshole for taking the offer from my current mortgage company despite the free work my broker did? Is it ethical to make the broker do this work and just go with the best deal at the end of the day? I'm not super familiar with this type of business, so I'm not sure if it's a jerk move on my part or if it's the acceptable risk the brokers take in this line of work.

Any answers or thoughts are very appreciated.
posted by smurfzambo to Work & Money (7 answers total)
Mortgage brokers are in the business of getting you the best possible mortgage. If the mortgage they're able to negotiate for you is not the best possible mortgage, you're not obligated to take it.
posted by jacquilynne at 9:19 AM on April 8, 2016 [2 favorites]

Stay with your current company, but send a nice gift to the broker as to not burn a bridge for the future.
posted by osi at 9:34 AM on April 8, 2016 [3 favorites]

There is nothing unethical about taking the better deal in this situation--it's just business. State law permitting, your broker could have protected himself by making some of the fees you paid (e.g., the application or appraisal fee) nonrefundable. If he didn't, it's because he sees cancellations as a cost of doing business: sometimes he closes the loan, sometimes he doesn't. You can be sure he's factoring the failures into his fee.
posted by mama casserole at 10:29 AM on April 8, 2016

Factors other than the rate and the $700 bonus are worth considering, and often are very significant.

Are these fixed or adjustable rates? how often can they adjust? is there a cap?

Who are the lenders? You would want to favor a local lender vs. a lender with nationwide coverage. You would want to favor a lender who will keep and service the loan locally rather than pawning it off to the secondary market.

Look into the history of what happened in 2008. There are lessons to be learned.
posted by yclipse at 2:19 PM on April 8, 2016

No matter who you contacted about refinancing (your old broker or one recommended by a friend) your bank would give a counter offer when they found out you might leave them, so really it's not like this broker did anything super special for you. You probably should have shopped around for a good rate, but then again, the way it worked out with the bidding war, having two competitors worked out well for you. You have every right to shop for the best deal.
posted by NoraCharles at 4:14 PM on April 8, 2016

Mortgage brokers are sales agents, and their business plans have to assume they lose a certain percentage of leads. The prepped papers etc are all bog standard forms. If you think about it, a broker's duty is to get you the best deal possible. It would be slightly unethical for someone tasked thusly to recommend you take a more expensive option because they get paid better for it. Legal, but not ethical. Your situation is not so different.

But if it assuages your guilt any, you can send them a gift.
posted by pwnguin at 6:27 PM on April 8, 2016

If you were pleased with the service provided by the broker, you could post positive reviews online and refer people to him when the subject comes up.
posted by Mr.Know-it-some at 6:46 PM on April 9, 2016

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