Ok, so it’s time to shop for your mortgage and you don’t know whether you should deal with a bank or a mortgage broker. All you know at this point is you want the amount you desire at the best rate possible…who wouldn’t? If you aren’t clear as to what a bank or a broker can offer, you have come to the right place.
A recent study shows that approx. 50% of Canadians received only one quote when shopping for a mortgage, crazy isn’t it? How many houses do you see before buying one? Maybe you aren’t there yet, but I guarantee it will be more than one! Treat your mortgage the same way, get multiple quotes so that you can see what’s available to you. Read our article on credit ratings to explain how getting multiple quotes, in a specific time frame, won’t affect your rating.
Let’s explore some of the details of each so that you can make an informed decision and move on with your home shopping.
A mortgage broker is a professional who works for themselves as opposed to working for a specific bank or lender. They shop between lenders’, typically 100’s, to find the deal that best suits the client. They are regulated in Canada just like banks to ensure compliance with banking and finance laws. Brokers are paid commission from the lender for securing a good borrower. Brokers work on your behalf by negotiating with lenders to get you the best rate possible, saving you the time from having to go from bank to bank and trying to negotiate the mortgage rate yourself. If your credit isn’t so hot and the banks turn you down, don’t give up, as a mortgage broker may be able to secure you a mortgage with a number of other lenders that will be more than happy to work with you.
Banks have mortgage brokers or “specialists” as well, except they work for the bank. What this means is that they offer you the products and services available at the bank, not from the 100s of other lenders available in the market. Sure, they might throw in a free chequing account or another service as a perk to shopping with them, but unless you are in there for freebies try to focus on the mortgage. When dealing with the banks it’s generally up to you to negotiate the best rate possible. Are you up to doing that? If not, a mortgage broker would likely be of more service to you. If you are in the position of needing to get lines of credit, credit cards, or other products to minimize your borrowing costs, banks may be the answer.
Compare and Save
Don’t think that your “relationship” with the bank will give you an advantage; the Canadian mortgage business is highly competitive and there are countless options available. Take the time to find out what product is best for you and compare the rates, read our article on variable & fixed mortgages. There are some great tools like RateSupermarket that can give you an idea of where your rate stands in the overall Canadian mortgage market. In fact, you can even submit an application and get your mortgage done online. If you are set on using your bank then at least use the tool to compare how your bank stacks up to the competition.
This will be a major decision for you; it could cost you thousands of dollars or save you thousands in the long run. Be a savvy shopper and get all the information ahead of time before making your decision.
A blog helping people understand more about Real Estate in Ontario and Canada