Essential Knowledge Series
People often wonder:
Is it better to go with a mortgage broker or a bank?
The short answer is that it depends. There are pros and cons to working with a mortgage broker and with a bank.
Mortgage brokers aren't perfect. In the same way, Banks aren't perfect.
Anyone who has opened an account with a Bank knows that there are benefits and drawbacks. Sometimes you'll have the best service from the bank, and sometimes the bank will make you want to move your money as soon as possible.
At the same time, if you've worked with a mortgage broker, you may have had the best and easiest service or perhaps a bad service.
As I said before, there are pros and cons for both banks and mortgage brokers.
So how do you decide?
The answer lies in an experience I had not long ago. It began with me needing to make new keys for my home. I thought this would be easy. So I went to one of the big box hardware stores where they sell everything and anything. I got two new keys made and went home.
I got home and tried the new keys. To my surprise, neither one worked. I thought to myself, "The person who cut the keys must not have known how to use the machine. I'll go back and have another person make me new keys."
Wouldn't you know, those keys also didn't work. I decided to return the keys and go to another one of those big box stores because I had lost trust in that store. Once again, the keys didn't work. I couldn't figure it out. So after wasting multiple trips back and forth to the general big box hardware stores, I decided to go to a specialty key maker.
You won't believe it. I talked to the guy, and right away, I knew this guy was the real deal. He gave me information about the key, told me he had to cut this key a certain type of way and left me feeling satisfied and confident this new key would work. When I went to the box stores, the employees just put the key in the automatic key machine, and that was it.
When I got home, I had one of the most satisfying feelings ever. I inserted the key... and it worked.
The Moral of The Story
You're probably wondering, "Alex, what does this have to do with getting a mortgage."
It has to do with working with a bank versus working with a mortgage broker. A bank is like the big box store in my key story. They do it all but specialize in nothing. A mortgage broker is like the specialty key maker in my key story. They don't specialize in everything but instead specialize in one thing. Mortgages.
Thankfully, in my key story, going back and forth to the store wasn't the biggest issue other than wasting my time and gas. However, when you're making one of the largest purchases of your life and spending hundreds of thousands of dollars, you don't want to worry about any mistakes.
What Banks Offer
When you start a mortgage application with a bank, you'll have pros and cons. I've listed the pros and cons below to give you an easy distinction.
Pros
Large corporations with good credibility and reach. Generally speaking, you know they will be reliable because of their size and need to stay accountable.
Multiple branch locations and easy access to online banking and telephone banking.
Banks will generally lend in most locations in Canada and can lend across provinces.
If you have a good credit score, banks will usually be able to get you a competitive interest rate.
Cons
If you have a lower credit score, banks won't work with you, and you won't get approved.
Bankers aren't required to complete education courses on funding a mortgage. This means they don't have experience and knowledge of the mortgage industry and how to properly get you an approval.
When you walk into a bank, you don't know which person you are going to have serve you. You might get the 10-year banking veteran or the 10-month new banker who has never funded a mortgage.
If you start a mortgage application and they complete a credit check and get declined, you'll then have to get another credit check at a different institution. Multiple credit checks will decrease your credit score.
Bankers can only offer rates and terms available to them. They can't fluctuate from their policies and won't be able to find you the best options for your situation.
With a bank, you might be working with an employee who is currently trying to service 100 different customers. Response time is going to be slow, and this could cost you thousands of dollars in losses if your mortgage doesn't get approved.
What Mortgage Brokers Offer
When you start a mortgage application with a mortgage broker, you'll have pros and cons. I've listed the pros and cons below to give you an easy distinction.
Pros
Mortgage brokers have access to over 50 lenders. Once they check your credit score, they don't need to check it again to bring your information to multiple lenders. As a result, your credit score won't be affected.
Mortgage brokers must complete education courses to work in the industry and must complete a yearly exam in order to remain in the industry. As a result, mortgage brokers stay updated with the most recent mortgage industry information and guidelines.
Most mortgage brokers will have multiple agents in their brokerage, which means you will have a vast amount of knowledge and experience in the industry. For example, in our parent brokerage, we have over 50 years of experience with the people that work with us. We are able to leverage these relationships and this experience to determine the best solution for our clients. Most mortgage brokers have the same access to knowledge and experience.
As a result of the access to multiple lenders, mortgage brokers will be able to get you the best interest rates on the market.
Mortgage brokers will generally work with fewer clients than a bank. This means you aren't just another number and will be in direct contact with your mortgage agent and have quick response times. This fact alone can save you thousands of dollars.
Cons
Brand recognition. Mortgage brokers are smaller in size and volume than banks. As a result, you likely won't have a mortgage broker branch right around the corner.
Some mortgage brokers charge a fee for their services, whereas generally, banks don't.
Final Thoughts
Yes, a bank will be able to get you a mortgage 7 times out of 10 without any issues. But a mortgage broker will get you a mortgage 10 times out of 10, with multiple options and explain each and every detail of your mortgage.
It seems trivial, but that key story taught me a lot. Will I ever shop at box stores again? Of course. But when something important and complex is on the line, I'll be sure to go to the specialist next time.
I'll leave you with this quote. "The shoemaker makes a good shoe because he makes nothing else." ~ Ralph Waldo Emerson
Questions/Comments?
Give us a shout in the comment section or find our contact details on the main page of our website at www.triedandtruemortgages.ca
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