One of the most common questions people ask when they begin to think about applying for a mortgage is, “Should I go with a Banker or Broker?” Walking into your local bank branch might seem like the default action when applying for a mortgage but the reality is that despite the fact that banks are well connected, a mortgage broker is going to be more flexible and offer you more options, starting with a good rate.
Rates and Financial Situations
Banks typically aren’t advertising their best rate. You can likely pay less (sometimes a lot less) than their promoted “sticker price.” The trouble is that you have to be willing to negotiate for it. This is unappealing for many consumers who find negotiating with a bank to be the most intimidating part of the whole home buying process. It can also be difficult to negotiate for the best rate when you don’t know what the best rate is. A mortgage broker doesn’t give you a “sticker price.” Instead I negotiate with lenders on your behalf to find you the best rate possible.
Big banks tend to be very rigid and conventional with their lending. Having a bad credit score or being a self-employed applicant can make it difficult to secure a bank loan. Brokers, by comparison, understand that not all financial situations are the same and won’t immediately turn you away when they see a credit score less than 650. By carefully understanding and working through your finances, a mortgage broker can provide options for many specialty cases, such as looking for a second mortgage for an investment property. So rather than be turned down by a bank, skip the hassle and give me a call.
Understanding and working with your unique financial set up is just the tip of the iceberg when it comes to the flexibility of a mortgage agent. I can meet with you on your time table and I’m open to chatting with you over coffee rather than sitting across a desk. I can connect you with non-traditional lenders so that you can secure the loan you need.
But it’s important not to confuse the flexibility of a Mortgage broker with a “Mobile Mortgage Specialist.” There’s a big difference. Recently Canada’s big Six Banks (which includes Scotiabank, CIBC, BMO, RBC, The National Bank of Canada, and TD) have come under fire from the Financial Consumer Agency of Canada (FCAC) for not offering their clients reasonable rates. You can read the full article here. These “mobile specialists” are paid commission for closing mortgage deals and they receive bonuses for over selling. And if they don’t close a sale, they don’t get paid. Additionally, with banks encouraging these specialists to get out in the community and make industry connections, they are under less supervision and are left up to their own business ethics.
Canada’s Big Six banks have created and entrenched themselves in a harmful sales culture. This “retail banking” approach means that pushing sales has become the top priority for these institutions while the interests of the consumer have been put on the back burner. Bank employees who make higher commissions for signing you up with a higher rate are also not going to recommend that you shop around and explore other lending options. A mortgage is a huge financial undertaking and it is not something you want to be forced into if it doesn’t feel like the right fit.
If you don’t like the sound of paying a loan officer a huge commission for a pressure sales tactic, a broker is the right choice for you. But perhaps at this point you’re wondering where my paycheque comes from. A mortgage broker is more like a freelance agent. I do work on commission, however my commission doesn’t come out of your pocket, it comes from lenders in exchange for connecting them with reliable borrowers. So I only get paid only for a job well done.
Broker Knows Best
Currently, major banks across Canada are in the process of raising their mortgage rates. It began with TD bank and caused a domino effect, with RBC and CIBC following suit. Sometimes raising rates is done to solve a bank’s funding issues, however in this case it appears to be just to increase profit margins. You can read more about the rate increases here. These increases are likely to continue through this year and into the next as more banks follow TD’s lead.
Mortgage rules are always changing and a mortgage broker is the best person to keep you informed and up to date. I will step up to the plate for you and negotiate the best rate on your behalf. Adjusting your rate by even half a percent can mean thousands of dollars in savings for you. I am not going to push you into signing up for a rate until we have walked through the mortgage process and you’re happy and well informed about what you are getting. And as for all the time and headaches I will save you, well you can’t put a price on that.