Should I Use a Mortgage Broker or My Bank’s Mortgage Specialist?
Looking for the best mortgage rates and terms? Should you work with your bank or hire a mortgage broker? In this blog, we’ll break down the key differences between mortgage brokers and bank mortgage specialists, along with the pros and cons of each. Let’s dive in!
Independent Mortgage Brokers:
Mortgage brokers act as intermediaries between you and multiple lenders. Instead of being tied to a single financial institution, they shop around to find the best mortgage rates and terms tailored to your financial situation. Here’s what they offer:
Access to Multiple Lenders: Mortgage brokers work with a wide range of lenders, including major banks, credit unions, trust companies, and private lenders. Due to this, they are able to compare mortgage products and find the right product to fit your financial situation and future goals.
Quick Communication & File Processing: from my experience, mortgage brokers typically have a better track record when it comes to responding to queries and getting clients fully pre-approved for a mortgage. Many banks do a “pre-qualification” which is not a full pre-approval. If you haven’t submitted all your paperwork to your bank but they told you you’re pre-approved, double check. If you’re not fully pre-approved this can cause a lot of problems later on when the bank is scrambling to finish the paperwork before a subject removal date. They might not even be able to get the approval done in time and this could cost you the deal. Professional mortgage brokers do all your file work and document submission up-front, prior to a live deal, so you know your exact budget before shopping for a home. This makes the financing process a lot less stressful during a busy subject removal timeline.
Personalized Service: Since brokers are independent, they focus on finding the best mortgage product for you rather than promoting a specific bank’s offerings.
Negotiation Power: Because brokers deal with lenders regularly and bring them multiple clients, they often have access to volume discounted rates that you wouldn’t be able to get on your own.
Flexible Qualification Criteria: If you have a lower credit score, are self-employed, or have a non-traditional income, a broker can find a lender that suits your needs.
Guidance Throughout the Process: Mortgage brokers help you understand mortgage terms, explain your options, and ensure you make informed decisions.
No Cost to You: In most cases, mortgage brokers are paid by the lender, meaning you get expert advice without any additional fees.
Mortgage Specialist, at Your Bank:
When you go to a bank for a mortgage, you’ll work with a mortgage specialist who is employed by that institution. Here’s what they offer:
Access to One Lender’s Products: A bank mortgage specialist can only offer mortgage products from their financial institution, which limits your options.
Strict Qualification Criteria: Banks have set lending criteria that may make it difficult for self-employed individuals or those with lower credit scores to qualify.
Familiarity and Trust: If you already bank with a specific institution, you might feel more comfortable dealing with them directly.
Limited Negotiation Power: While banks may offer discounts to existing customers, they are less likely to negotiate rates compared to brokers.
Additional Banking Services: Banks can offer bundled financial products, such as mortgages combined with lines of credit or special promotions for existing clients.
Why a Mortgage Broker Could be the Better Choice
1. More Mortgage Options
When you work with a bank, you’re limited to that bank’s mortgage products, which may not be the best fit for your needs. A mortgage broker has access to multiple lenders, giving you more choices and increasing your chances of securing a better rate.
2. Competitive Mortgage Rates
Brokers work with a variety of lenders and can negotiate lower rates on your behalf. Since they bring lenders multiple clients, they often have access to special discounts that banks may not offer directly to consumers.
3. A Mortgage That Fits Your Needs
Every home buyer’s financial situation is different. A mortgage broker considers your income, credit history, and future goals to match you with the right lender and mortgage product. This is especially helpful if you’re self-employed, have variable income, or need a customized mortgage solution.
4. Approval for Unique Financial Situations
Banks have strict lending criteria, which can make it difficult for first-time buyers with lower credit scores, high debt ratios, or non-traditional employment to qualify. Mortgage brokers work with lenders who specialize in helping buyers in these situations.
5. Save Time and Effort
Instead of meeting with multiple banks and comparing rates yourself, a mortgage broker does all the legwork. They gather your financial information once and submit it to different lenders, streamlining the process and reducing stress.
6. Expert Advice and Ongoing Support
Brokers are there to guide you through the entire mortgage process. They can help you understand mortgage terms, explain penalties, and even assist with refinancing in the future. Unlike bank mortgage specialists, who may change roles or leave the bank, brokers often stay in the industry for the long term and continue to provide support after your mortgage is finalized.
7. No Cost to You
Most mortgage brokers are paid a commission by the lender, meaning you receive expert guidance at no additional cost.
When Might a Bank Be a Better Choice?
While a mortgage broker is often the best choice, there are some situations where working with a bank might make sense:
You have a strong relationship with your bank and they offer special perks. If you have a long history with a bank and they provide incentives such as cashback offers, bundled services, or loyalty discounts, it might be worth considering.
You prefer a one-stop-shop for banking. Some people like the convenience of keeping all their financial products (such as checking accounts, investments, and mortgages) with one institution.
You are confident in negotiating rates yourself. If you have excellent credit and financials, you may be able to negotiate a competitive rate directly with your bank.
Need a Trusted Mortgage Broker Recommendation?
As a Vancouver real estate agent, I work with many top mortgage brokers who can help you secure the best mortgage for your first home. Get in touch with me today, I will provide you with a handful of recommendations.
Written as of March 29, 2024.
This blog is for informational purposes only and should not be relied upon for legal, investment, mortgage or other advice. It is not intended to cause or induce breach of an existing agency agreement. All information provided is deemed reliable but is not guaranteed and should be independently verified.
