Mortgage Broker Or Bank?
When getting, renewing or refinancing your mortgage, you have probably wondered about whether you should use a mortgage broker or bank.
In fact, some people are not exactly sure of the difference between using a mortgage broker or bank.
Well, I’m a numbers guy, so let’s start with some numbers:
Around 30% of mortgages in Canada are arranged through a mortgage broker and 70% directly with a bank.
This is largely because the mortgage broker industry in Canada has not done a great job of letting people know about the work they do and how they can help them. Compare this to our neighbors across the border in the US, where estimates are that most people (more than 50%) use a mortgage broker.
What do Americans know that Canadians don’t?
Well let’s state the obvious to begin with. Obviously since I am a mortgage professional I am going to be just slightly biased towards using our professional skills!
Having said that, like all my articles on here I will try to be objective and fair and tell you my honest opinion. So here goes:
WHEN YOU SHOULD USE A BANK INSTEAD OF A MORTGAGE BROKER
Yes I, a mortgage professional, am telling people when they should use a bank – what a crazy idea!
I think it would be pretty silly to suggest that every single person in this world is better using a mortgage broker instead of a bank.
I believe that the vast majority of people would be better using a mortgage broker but there are always exceptions. If you meet the following criteria then I genuinely do believe you would be better dealing with your bank directly:
- You have a long relationship with the bank that you can leverage to get a great mortgage deal. Having a contact inside the bank would help – a manger that you have a relationship with, for example. Having all your accounts, RRSPs, investments and everything with them will help and it also leads into our next point which is…
- You are a really good negotiator. Let me put it this way: do not accept the first offer you get. Negotiate and negotiate harder than you’ve ever done before!
- You have amazing credit – not just good but amazing. The sort of credit score that the bank would swoon at and says ‘you’d be a fool not to give me your best deal right now’. This also plays into negotiating hard.
- You are financially savvy. Again, we are back to negotiating, but when discussing the mortgage you are going to have to do some studying and learn about mortgages and mortgage terms. Basically, you are going to have to do your own research and you will probably need to be financially savvy to do this. If you don’t probe and ask the right questions, you will get stuck with one of the bank’s generic mortgage products that probably isn’t a good fit for you.
WHEN TO USE A MORTGAGE BROKER
Well the easy answer is to take a look at the check points above and ask yourself honestly: is you? There are many reasons to use a mortgage broker but here are a list of the key ones:
- A mortgage broker will usually work with dozens of lenders, not just one (like a bank does). This means they usually have access to better products (notice how I say products, not rates). As I noted above, negotiation is important when dealing with banks. Mortgage brokers have a very strong negotiating position over banks – since we have access to many lenders they are ‘forced’ into giving us their best products.
- A mortgage broker will save you the time and effort of doing everything on your own – and they do it for free! Mortgage brokers are paid by the lenders. You don’t need to learn about mortgages as you will basically have your own free mortgage consultant to use at your will. Imagine if you had 24/7 access to an accountant or lawyer or other professional at your whim for absolutely free – this is pretty valuable! Speaking of 24/7 access…
- Mortgage brokers don’t just work 9-5, Mon-Fri. They work whatever time is best to get the job done for you. If you have a normal job, a family or other things going on in your life, learning about mortgages so you can negotiate hard with your bank might not be the best way to use your time when you can get someone (for free) to do it for you.
- Lastly, it is worth pointing out that mortgage brokers are mortgage brokers. Huh? Well they live and breathe mortgages. Mortgages are their lives. Bankers, obviously are involved in other parts of banking and they only really need to roughly know the mortgage products that they offer (not what else is happening in the market). Some bankers couldn’t even calculate an IRD penalty, never mind explain why theirs are so high!
Just as a lawyer specializes in law and an engineer specializes in engineering, a mortgage broker specializes in mortgages.
Ultimately it is completely up to you and if you choose to go to your bank directly I say good luck to you!
Take a note of the points I made above as they should give you some really good advice and I hope you can get a great deal.
If you believe a mortgage broker can help, well we offer free quotes that you can get in as fast as 90 seconds – just fill out our simple and quick form at: http://www.GTAMortgagePros.com/Apply-Now