Mortgages: bank vs broker
When it comes to mortgages, there are as many types to accommodate a borrower’s financial needs. There are also different places to get mortgages, and two of the most popular options in Canada going directly to a bank or calling a mortgage broker.
57% of current Canadian mortgages were obtained from a bank, making it the most popular option for people to obtain a mortgage. Every mortgage lender, including a bank, has its own mortgage products and rates. You’ll find your standard mortgage products at a bank, like fixed rate and variable rate mortgages, but the not all mortgage products are offered at all banks and interest rates will be different from one bank to another. Just like you can only buy store-brand items at a particular store, you can only obtain one bank’s exact mortgage product and rate with that particular bank.
When you walk into a bank for a mortgage, you will speak to a mortgage specialist, who will be familiar with their own products, penalties, fees, etc., but can only offer you those products that are under their roof. Banks are a good option if you are an optimal candidate for a loan. They tend to be fairly conservative when it comes to lending, so you need to meet fairly high criteria if you want a mortgage with a bank. Many people are already familiar with their bank and some may even think that it’s a more stable option than other lenders when it comes to feeling secure about such a big loan. If someone already has a number of accounts with a particular bank, he or she may prefer to get a mortgage there as well, to keep it all of their finances under one umbrella.
30% of mortgages obtained through mortgage brokers. The biggest advantage to using a mortgage broker is that brokers are able to shop around and look at mortgage products offered by a variety of lenders, banks and otherwise. A good mortgage broker will be able to match you and your situation to a particular lender and product, thereby getting you the best interest rate possible in the current marketplace. When it comes to first time home buyers, the mortgage market is split almost evenly between banks and brokers, perhaps because first-time buyers may need a little more help being walked through the process, as opposed to people who are refinancing or who have been through the process already.
Mortgage brokers can form relationships with particular lenders, which can work in your favour when it comes to the review and processing of your mortgage application, but it can also be to your detriment if your mortgage broker chooses a lender with whom they have a better relationship as opposed to the lender who can offer you the best mortgage product or interest rate. Mortgage brokers are also paid by the lender, so while there’s no cost to you, you want to make sure that you’re working with a good broker who will offer you the best product possible and not the one that will net them the most commission. When it comes to the convenience factor, you can’t really beat a broker – a mortgage broker will meet on your terms, whether it’s speaking over the phone or coming to your home to talk to you face-to-face. You can start the mortgage process without ever having to leave the comfort of your couch.
Whatever option you ultimately choose, make sure to do some preliminary research yourself and shop around for the best mortgage rate before speaking to a mortgage professional. That way, whether you opt to get a mortgage with a bank or through a mortgage broker, you’ll be well-prepared.