When it comes to getting a mortgage for a home in Canada, buyers have two main options: going through a bank or consulting with a mortgage broker.
Each has its own advantages and disadvantages, and ultimately, the choice will depend on the individual buyer's needs and preferences.
According to a RE/MAX report and an article written in Vancouver is Awesome, the main differentiator between a broker and bank is that a mortgage broker "works for the client." They have access to more options than if a buyer went to an individual bank and will shop around for the best rates and terms that may suit the buyer's situation. Banks, on the other hand, will give buyers the best options from their own company.
One advantage of going through a bank is that buyers may have a pre-existing relationship with the bank, which can bring comfort and familiarity to the mortgage process. Buyers may also be able to leverage their relationship with the bank to get the best rate and terms possible. However, banks typically only offer their own products, which may not be the best option for the buyer. Also, some banks have a higher threshold for mortgage approval, which can be a disadvantage for some buyers. It is important for buyers to speak with a mortgage advisor, rather than just a teller, to ensure they are getting the best options.
On the other hand, the main advantage of using a broker is that they will put their client's interests first and have access to a wide range of options, including secondary lenders or "B-lenders." This offers buyers the opportunity to get an easier approval but it may come at a higher interest rate. The use of a broker is free for the homebuyer, as they are paid by the lender who gets the buyer's mortgage business. However, working with a broker may involve more paperwork and processing if there isn’t a previous relationship.
In case it’s helpful in your decision, here’s the short form summary of banks vs. brokers:
Pros of going through a bank:
Buyers may have a pre-existing relationship with the bank, which can bring comfort and familiarity to the mortgage process.
Buyers may be able to leverage their relationship with the bank to get the best rate and terms possible.
Cons of going through a bank:
Banks typically only offer their own products, which may not be the best option for the buyer.
Some banks have a higher threshold for mortgage approval, which can be a disadvantage for some buyers.
Buyers need to ensure they are speaking with a mortgage advisor, rather than just a teller, to ensure they are getting the best options.
Pros of going through a mortgage broker:
Brokers work for the client and have access to more options than if a buyer went to an individual bank.
Brokers can shop around for the best rates and terms, and may be able to utilize discounts from lenders they regularly do business with.
Using a broker is free for the homebuyer, as they are paid by the lender who gets the buyer's mortgage business.
Brokers have access to secondary lenders or "B-lenders," which can offer easier approval, though it may come at a higher interest rate.
Having your Broker seek a new institution to refinance with doesn’t take away your option to renew with your bank, so you won’t get denied a renewal just because you looked at your options.
Cons of going through a mortgage broker:
Working with a broker will likely involve more paperwork and processing time if there is a benefit to go through a different lender.
Some buyers may be intimidated by the idea of working with a different lender.
In this inflationary environment marked by rate hikes and volatility, finding a good mortgage rate is an essential part of the homebuying process. Ultimately, whether it is better to go through a bank or a mortgage broker will depend on the individual buyer's needs and preferences. It is important for buyers to consider all options and speak with a professional to determine which is the best fit for them financially.
Comments