Using a mortgage broker is a great way to make the application process easy and get the best mortgage rate at the same time. But many Canadians don’t understand how mortgage brokers work or what the advantages are. We spoke to Allan (who didn’t want his last name to be used) about his experience working with a mortgage broker for his recent purchase.
Allan actually worked with two mortgage brokers when he bought his triplex just east of downtown Toronto. The first was referred to him by his realtor. “That first broker quoted a rate which seemed reasonable to us,” he says.
Being a comparison shopper by nature, Allan decided to get a second opinion. A friend referred him to Bryan Freeman, a mortgage agent at CanWise Financial, a mortgage brokerage owned by RateHub.
“We gave Bryan a call for a second opinion in the interest of keeping our first broker honest,” Allan explains. “Bryan quickly highlighted the baseline rate offered by the institution the first broker had recommended (significantly lower than our broker had quoted us). He then found us two other lending options that were even cheaper than that rate by approximately $10,000 in interest over the term of the mortgage.”
One of the most frustrating parts of getting a mortgage can be that it’s difficult to get all the information you need. The discrepancy between the two brokers played into Allan’s fears that he might have made mistakes when researching mortgages online.
“The most stressful part of applying for a mortgage for us as first-time homebuyers was navigating the process while worrying if the industry (online tools, real estate agents, brokers) might have misled us regarding our financing capabilities,” he says.
There are great tools available online, but to Allan’s point, how do you know whether a mortgage calculator is accurate when it can’t take your credit history into account? How do you know whether you qualify for the lowest mortgage rates available? How do you know what a fair rate is when banks posted mortgage rates are up to 2.5 percentage points higher than the rates most people can actually get?
Allan says his Toronto mortgage broker had a transparent approach that helped calm his fears.
“[Bryan] also walked us through financing alternatives that would still be available to us assuming what most unlikely worst-case scenarios we could imagine,” he says.
For Allan, those scenarios never came true. In fact, he says his broker was able to help him easily compare different mortgage offers to find the combination of features that worked best for his situation.
“Bryan pursued mortgages with two lenders for us that offered different rates, down payments, and conditions,” Allan explains. “Bryan secured an offer meeting all of our conditions from an appropriate lender, and had them modify the amortization to a less-standard period and waive a clause without any other changes.”
Even though he had a good experience with his broker at CanWise, Allan says he learned an important lesson by getting a second opinion.
“My advice on this experience is that many brokers are looking for high-margin business, and will try offering a rate low enough to keep you from looking elsewhere, but higher than they need to,” he explains. “The rates they offer are negotiable.”
It’s true not all mortgage brokers are created equal, and better mortgage rates can be found if you take the time to shop around. The rates mortgage brokers are able to offer depend on a number of factors ranging from which lenders they work with and what volume discounts they can get, to their overhead costs.
After all was said and done, we asked Allan if using a mortgage broker was worth it. He told us that his decision to use a broker—and to get a second opinion—was the right choice.
“Likely it would have taken us months of research to come to the same result we did in less than 12 hours of discussion and paperwork,” he says.
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