Why choose a mortgage broker?
 October 10 2015     Posted by

Why choose a mortgage broker?

Time and time again I hear the question, 'Why would I use a mortgage broker when I can just go to the bank?' Another question I often hear is, 'How are mortgage brokers paid?' It has become apparent to me that many people are unclear about what a mortgage broker actually does, and the advantages of using their services. I hope to share some information with you that may have you considering the services of a mortgage broker for your next home purchase, refinance, debt consolidation, or renovation.

For many people, mortgage payments are their single largest expense. Yet, when financing a home, many Canadians don't comparison shop to ensure they're getting the best mortgage rate and terms available. This mistake can cost homeowners tens of thousands of dollars over the course of their mortgage. 

Increasingly, Canadians are turning to mortgage brokers for their first and next mortgage, taking advantage of the value and convenience of their services.  A 2011 study conducted by CMHC (Canada Mortgage & Housing Corp) found that 48 per cent of first-time buyers completed their transaction with a mortgage broker, up from 45 per cent in 2009 and 35 per cent in 2007. One of their most compelling reasons to work with a mortgage broker is that they have access to a wide range of lending sources, making it significantly easier to match borrowers with the mortgage product that best suits them.

If you are dealing with one of the largest mortgage brokers in the country, you'll also enjoy considerable bargaining power. A large brokerage has clout with lenders to negotiate volume discounts that lead to lower rates and greater product choice than other companies. And, brokers are generally paid by the lender, making it a logical choice to always consult with a mortgage broker. They're shopping the market for the best rates, doing all the work, and there's no cost to you!

Mortgage brokers think outside the box. We work with self-employed, spousal separation, refinance plus improvements, retired, bruised credit, rental properties, etc. 

Here are some comparisons between broker and bank:

Mortgage Choice

Broker - Over 50 lenders, including most of the major banks, credit unions, and national, regional and private lenders offering a variety of rates and terms.

Bank - Every bank has it's own menu of house mortgage products. You get their rates and terms only.

Of course you always have the option to shop around yourself, but consider the effect it can have. When you shop for a mortgage, there is an accumulation of lender inquiries on your credit bureau report, possibly affecting your credit rating and, ultimately, the rate and terms of your mortgage. This isn't the case with a mortgage broker, who only does one inquiry yet can still get many competing lenders to quote on your business.

Mortgage Rates

Broker - Mortgage brokers negotiate discounted rates with lenders, and have access to rate promotions and specials.

Bank - Rates are set by the bank. If there's a better deal in the marketplace, you'll have to find it yourself.

If you are like most homeowners, you are focused - for good reason - on finding the best possible rate. Rate is important of course but cheapest isn't always best. Some discounted mortgages come with rigid contracts that could work against you in the future and actually cost you more in the long run.

Independence & Objectivity

Broker - A mortgage broker works for you, not any one lender.

Bank - Naturally, mortgage specialists are there to build business for the bank.

Ongoing Service

Broker - Offers ongoing advice and conduct annual reviews, showing you how to pay off your mortgage faster, power down debt, finance renovations, or invest in property. Brokers will work around the clients schedule to make the transaction as easy and convenient as possible.

Bank - No proactive advice is typically provided. You will get an annual mortgage statement.

Ultimately, the role of your mortgage broker is that of a trusted advisor and it's a relationship that can last a lifetime. Many mortgage brokerage clients have been referred by word of mouth, and many are even second- and third generation client families.

At Renewal

Broker - Your broker will go to bat for you again - to make sure you have the best products and rate.

Bank - You may not be offered the best deal initially, requiring you to proactively contact the bank to negotiate.

It's important to investigate your options and make sure you are getting the best possible deal. Not auto-renewing your mortgage and making sure you get a fully discounted rate could save you thousands.