Big Banks vs. Mortgage Brokers
Banker vs Broker – What’s the difference?
When seeking a mortgage, there are two places you’re likely to wind up: at a bank, or at a mortgage brokerage. Both can provide you with the mortgage you’re looking for, though how they do that can be very different.
What’s a “Banker”?
The term “banker” refers to someone who is employed by a bank. In the context of mortgages, it’s referring to a mortgage associate at a bank.
Your banker will be able to provide you lending products offered by the bank. These products include mortgages, lines of credit, credit cards, and other lending products.
A banker is paid by the bank to represent their products and will have limited knowledge of competing products.
What’s a “Broker”?
A mortgage broker is someone who works as an intermediary between you and the lender. Unlike a banker, a mortgage broker has access to a variety of mortgage products offered by a multitude of banks, lenders, and other financial institutions.
A mortgage broker is paid based on a commission. This commission is paid by the lender (not you, the borrower) once the deal has been completed.
In Canada, your mortgage broker will have access to mortgage products from all major banks as well as many alternative lending options.
Who Should I See Regarding a Mortgage?
While you bank would prefer that you work with them directly, most people will find themselves better served to work with a mortgage broker.
There are several good reasons for this:
First, a mortgage broker will have access to a variety of lending products from many different lenders. This is advantageous for a few reasons:
- Not all mortgages are the same. Different mortgage products have different options tied to them, such as pre-payment options, payment deferral options, and other components of the mortgage that you may find valuable.
- A mortgage broker will understand the differences between the various mortgage products available and provide you with a recommendation that is suited to your specific needs.
- Mortgage brokers shop on your behalf. Different lenders have various mortgage rates available, depending on the nature of the product and your creditworthiness. Your mortgage broker will compare different lenders and mortgages against each other.
- A mortgage broker is focused on getting you the right mortgage, not their mortgage. After discussing your needs and priorities, your mortgage broker will provide you a list of options that fit your criteria. This list will likely include options from various lenders, interest rates, pre-payment terms, and other types of criteria.From there, you will work together to determine which mortgage makes sense for you.
Next, once you’ve determined the lender and mortgage option that best works for you, your mortgage broker will then act as your point of contact with the lender. This means that they will guide you on the next steps, assist in finding the paperwork, and point you in the right direction throughout the application and approval process.
An experienced mortgage broker will know exactly what comes next and what you need to do next, helping to eliminate much of the anxiety and stress that comes with a mortgage application. They will also keep everything organized, so that the process is made as simple as it can be.
Finally, your mortgage broker will try to get the best possible interest rate from your lender. In the event the lender you’ve chosen isn’t working out, or if the deal begins to turn sour (for whatever reason), your broker will have other options readily available to make sure the deal gets done.