When buying a home, the two most important resources are your real estate agent and your bank, right? Not necessarily.
While your bank is certainly equipped to help you finance your home purchase, there are other options available. Along with local credit unions, mortgage brokers are also able to help you get a mortgage.
In fact, according to Mortgage Professionals Canada, the country’s largest broker association, its members originate more than 35% of all mortgages in Canada and 55% of mortgages for first-time homebuyers.
So, if you’re considering buying a home you might be thinking: Which option is the best for securing financing?
To help you answer that questions, let’s take a look at both the pros and cons of using a mortgage broker.
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To start, mortgage brokers are, well, pros. They dedicate their entire careers to becoming experts in one particular financial instrument: Mortgages. They know the ins and outs hundreds of different offers from dozens of lenders; no two mortgages are alike and mortgage brokers pride themselves on their ability to help homebuyers find the best possible mortgage for their individual situation. They can also explain the myriad mortgage rules and rule changes, such as the recent mortgage stress test.
Brokers can help you get the best mortgage rate. For example: Right now, the best mortgage rate in British Columbia is 3.14% for a five-year fixed rate. Meanwhile, the best rate currently offered by a big bank for five-year fixed is 3.49%. They can help you determine how much mortgage you can afford.
Of course, rates are only one part of the mortgage picture.
They also have access to – and are able to offer – mortgages from dozens of different lenders. Want a mortgage with no pre-payment penalties? Brokers have access to those. How about a portable mortgage? You guessed it: Brokers have access to those as well. Another advantage is their access to alternative lenders; brokers are able to serve certain homebuyers the banks turn away, such as those with bruised credit, new Canadians, or the self-employed.
Brokers will also make sure to go over all the terms and conditions of your mortgage so there won’t be any surprises if your home ownership situation changes or you decide to renew with a new lender. The same can’t always be said about bank mortgage specialists.
This means brokers can be unbiased; they aren’t beholden to one particular lender. Which means they’re more likely to find a mortgage tailored to fit every individual. And that add-on sales speech bank customers are all too familiar with (insurances, lines of credit, credit cards, and other financial products)? Brokers aren’t incentivized to offer ancillary products in the same way bank specialists are.
Finally, most brokers offer a completely online and over the phone experience; meaning you can go through the entire process of securing financing from your own home. All of these factors might be especially appealing to a first time home buyer in BC, Alberta, Ontario and across Canada.
Of course, there are some drawbacks to using a mortgage broker.
The first and most obvious one is the need to form a new relationship. Homebuyers may already have an existing relationship with their bank and its employees. There’s a comfort level there that’s the result of years of banking in the same institution. That level of comfort is captured in one of the big bank’s main advertising campaigns, which features a comfy green chair.
If you prefer face-to-face meetings, not all brokers meet directly with clients. Banks, on the other hand, primarily do business in-person.
Another disadvantage brokers have is that big banks can offer some efficiencies during the application process. Banks already have access to account information, which means they know a homebuyer’s financial and credit histories – cutting down on the need for back-and-forth document exchanges.
Finally, banks have the type of brand recognition many people desire when dealing with their finances.
Both mortgage brokers and banks can help Canadians finance their homes. Both have their advantages and disadvantages; consider your own priorities when getting a mortgage and choose the lending route that best suits your preferences.
Disclaimer: CanWise Financial, a Canadian mortgage brokerage, is a Ratehub.ca company.
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