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Getting a Mortgage: The Difference Between Banks and Mortgage Brokers

Getting a Mortgage: The Difference Between Banks and Mortgage Brokers

Toronto Mortgage vs Bank

In the past, those in need of a mortgage turned almost exclusively to their banks, however there are now far more options at your disposal with the growing presence of mortgage brokers in Canada. Mortgage brokers are licensed mortgage specialists who have access to a wide variety of lenders and mortgage products, and act on the borrower’s behalf in finding the best mortgage products and rate available on the market.

To this day, about two-thirds of borrowers still receive their mortgages from the bank, however that number is decreasing as each year passes by. With online information being more available than ever, borrowers are increasingly realizing that dealing with a mortgage broker will often save them time, frustration, and in many circumstances, money. Let’s take a look at the advantages and disadvantages of going to your bank vs. using a mortgage broker:

Banks

Banks are typically local brick-and-mortar financial institutions that offer mortgages as well as many other traditional banking services, such as checking and savings accounts, car loans, and credit cards, along with other financial services such as wealth management and investment vehicles.

Advantages Disadvantages
  • Physical presence for servicing issues.
  • Less documentation may be needed in order to qualify.
  • One stop shop for all of your financial needs.
  • Allows borrowers to keep all of their services with one provider where there is a pre-established relationship and trust.
  • Conservative lending guidelines.
  • Limited to only the mortgage products offered at their institution.
  • Lengthy processing time.
  • The top rates are not offered up front – you must negotiate the rate yourself.
  • Only available during business hours, often resulting in needing to take time off work.

 

Mortgage Broker

Mortgage Brokers are licensed individuals who sell mortgage products on behalf of lenders. They facilitate your search for the most suitable mortgage product and structure your loan to suit your financial needs. Brokers do not provide the loan themselves, but rather outsource your file to the lender, who then approves and provides the funds for the mortgage.

Advantages      Disadvantages
  • Rates and mortgage products available that are usually better than the banks.
  • They will do all the work, shopping, and negotiating on your behalf.
  • Are typically much easier to get in contact with, and will work/meet with you during non-business hours – all from the comfort of your own home.
  • Have a network of a wide variety of lenders, including the banks, ensuring they place the borrower with the best available product on the market.
  • Volume discounts are passed on to the borrower.
  • Flexible, non-traditional loan programs, especially for clients that are self-employed or have bruised credit.
  • Can finance tricky deals because of their knowledge of the entire mortgage industry and their ability to use various lending partners.
  • No in-house loan processing.
  • Many lenders used do not have a physical brick and mortar location.
  • Sometimes require more documentation in order to get the loan in comparison to a bank that you’ve been dealing with for years.
  • Some lenders used may not be household names (although are still 100% credible and trustworthy).

 

Why can Mortgage Brokers often get better rates for borrowers than the banks?

There are a few different reasons this often occurs. Firstly, the banks spend billions of dollars a year advertising, which gets passed along to the client in the rates they offer, whereas many of the non-bank lenders that brokers have access to only advertise to the brokering community. They count on brokers to provide them with the business, and as a result, they can offer better rates to borrowers.

Secondly, bank employees get bonuses if they sell higher rates, giving them added incentive to do so. It takes a lot of negotiating on the borrower’s part to whittle the banks down to their lowest rate available, whereas a broker will typically offer the best rate and mortgage product up front to the client. Moreover bank employees are paid by salary and commission, so they typically don’t have as much to lose by not gaining your business.

Brokers, however, only get paid by commission if the mortgage closes, giving them far more incentive to make sure they get your business and provide you with the best service possible. They are not only thinking about this mortgage, but hope to provide you with a positive experience that will result in both repeat and referral business in the future.

In many cases, the banks even offer a borrower a particular mortgage product with a higher rate than what a broker would be able to get the client from that exact same institution via their broker division. The reason for this is because the banks offer their best rates up front in their broker divisions, instead of trying to sell the highest rate possible to unsuspecting borrowers that may not have the full knowledge of the industry and current rates available.

Contact MortgageMeister.com today to speak to one of our mortgage professionals. We’ll take care of your financing needs from start to finish, all from the comfort of your own home, while offering you the best rates and mortgage products right from the start – no haggling like at the banks. We do that for you!

What fees do Mortgage Brokers Charge?

What fees do Mortgage Brokers Charge?

  When it comes to mortgages, most people don’t have the time or know-how to ensure they are getting the best possible mortgage product and rate available to them. However, they also do not want to have to pay someone in order to get their mortgage in place. There is a common misconception that all…Continue Reading

Getting Approved for a Mortgage If You’re Self-Employed

Getting Approved for a Mortgage If You’re Self-Employed

Being approved for a mortgage in Canada has never been the easiest thing if you’re self-employed and it’s become even more difficult since the 2008 financial crisis. The maximum amortization period in the country has now been limited to 30 years, and in some areas the housing prices are becoming quite expensive, like here in…Continue Reading

Just finalized my mortgage with @MortgMeister. Took exactly one day, now off to the cottage! #HighFive

Definitely not the same experience I had with the bank, thanks @MortgMeister #ThatWasEasy

Just got my quote from @MortgMeister, my wife gave me a high five when she saw it. Thanks Jeff!

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