Who To Choose? A Big Bank or a Mortgage Broker?

Monday May 21st, 2018

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Who wouldn't want to get the best mortgage rate when buying a house or renewing your mortgage?

Here are the major differences between a Big Bank and a Mortgage Broker.

Big Banks

You will likely sit down with a loan officer or 'mortgage specialist' when you visit one of Canada's major banks for a mortgage.

They will (hopefully) go into detail the terminology involved with mortgages. Based on what you tell them they will make a recommendation.

If you play 'hardball' (who likes to do that?) Big Bank mortgage people will usually negotiate with you on the rate and terms. - a hint - the rates they post on their website and at their brick and mortar locations are defintely not their best offer. 

Loan officers or mortgage specialists usually get paid a combination of salary + commission+bonuses. They also won't ever recommend that you look elsewhere.

Unlike a mortgage broker they have no real incentive to get you the best deal possible. It is not in their interest to do so.

Mortgage Broker

A professional who is a freelance agent. 

They go between the lenders and the borrowers and are paid a commission by the lender for securing a good borrower(that's you).

They don't work for anyone. They work for themselves(self-employed). A good mortgage broker will compare the rates from dozens of lenders.

Mortgage Brokers are not lenders.

They are more like connectors. They are looking for people interested in borrowing to purchase a home and they connect them with the best lender that works best for your situation.

They usually find better options but they can go between you and the big banks for a mortgage for you.

A good Mortgage Broker will work to get to know you, calculating what amount of mortgage you would be approved for, sending your application in. Discussing with you the various types of terms and mortgages there are - fixed vs. variable, closed vs. open, different amortization periods. 

Many people have told me that their mortgage broker obtained a better rate than their bank offered.

Big Banks Pros

  • Canada's major banks operate coast to coast, so a location is never too far away.
  • Pretty flexible as to how you prefer to communicate, including face to face meetings
  • Your mortgage can be used as bargaining power with other services they offer, can demand free banking, free safety deposit box and some other perks because you have brought a large part of your business to them.
  • They likely will work in a Home Equity Line of Credit into the deal, but be careful, they are sometimes hard to resist using.

Big Bank Cons

  • Higher interest rate - even a few tenths of a percentage can mean thousands of dollars less in your in your pocket
  • They have fairly specific rules about who they can lend to
  • Extra leg work for you, you have to shop around and negotiate, which isn't always the most comfortable thing for many people
  • No leaverage, you don't know what else is available

Mortgage Broker Pros

  • They can meet you on your time - or online, texting, email, Skype
  • They often have more flexibilty in terms of getting you approved with non-traditional lenders.
  • Basically guaranteed to get the lowest rate possible
  • You will get to see all of your options
  • If you are not into tough negotiating, not to worry, mortgage brokers will do the tough negotiating for you
  • They wish to secure your loyalty and have you refer their service to the people you know so they sometime will pay for things like inspections, appraisals out of their own pocket.

Mortgage Broker Cons

  • You might not be able to sit down face to face. Nowadays most people prefer email anyway
  • Some of the lenders with the best rates are sometimes smaller. Some people don't like the lack of familiarity - but in the long run it doesn't make any real difference
  • The lenders that offer the best rates may not be in the same geographic location as you
  • Some brokers may be motivated to get you approved for a loan that you shouldn't get approved for simply so they can get the commission.  I don't believe that this happens very often, but it is something to consider.
  • In some cases they will charge you a fee depending on the lender and circumstances, although this is rare

Today we can go online and find out the best rates available from mulitple lenders. This site is an example.

Thank you for reading.

What questions can I answer for you? 


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