Exploring Your Mortgage Options: Banks/Credit Unions vs. Mortgage Brokers
When thinking about redoing your mortgage or getting one when buying, you will be faced with significant financial decision to make, and it is important to explore all your options. Two main avenues are available: dealing directly with a bank/credit union or working with a mortgage broker. To simplify the discussion in this article, we will refer to both banks and credit unions collectively as ‘banks’.
Let’s Compare Between The Options Available
Each option has its own set of advantages and disadvantages, and the best choice depends on your unique circumstances, and the amount of time you have, your negotiation skills, and how much of that time you want to spend doing some of the work required to get that mortgage financing.
Applying With A Bank
Applying for a mortgage with a bank involves submitting individual applications to each bank to determine the amount you qualify for. If you’re familiar with the mortgage application process, you can apply directly with a bank, and work on negotiating a deal. Most people will just accept the rate that the bank will offer them. Keep in mind that since they do not share information, each one of those banks will have to do a credit check on you, which could be affecting your credit rating.
Applying With A Mortgage Broker
Mortgage brokers are licensed professionals who can secure a mortgage for their clients by acting as intermediaries between you and potential lenders. They guide you through the process and ensure all paperwork is accurate, preventing unnecessary delays and ensuring your lender has everything they need to approve your mortgage. When working with A-lenders, their services are typically free as the lender pays them after the mortgage closes. The amount of paperwork that the broker will ask you to provide is similar to what your bank will ask.
The decision between a bank and a mortgage broker is a personal one. The best approach is to compare the options, consider the pros and cons, and seek advice from trusted friends or family members.
What To Expect When Using a Bank for Your Mortgage
Most people think of their primary bank when considering a mortgage application. Canada’s banks are well-established and trusted sources for your family’s financial needs, including mortgages. Here is what to expect when working with traditional banks:
- Service: People feel secure with a bank and appreciate having all their financial services in one place.
- Local branches: Many people value having a physical branch in their neighbourhood.
- Familiarity: Being able to talk with a familiar person who knows you and your family is often a benefit.
- Risk averse: Banks are A-lenders, meaning they look for lower-risk borrowers with the best credit scores. If you don’t have the best credit, they may not be able to help you.
What To Expect When Using a Mortgage Broker
Regardless if you have perfect credit or if you have a history that includes a recent bankruptcy, if you are self-employed or have been with the same employer for years, if you have a low income or are making over six figures annually, if you have a high amount of debt or hardly any at all, a mortgage broker might still be a better option for you. Here are some reasons why a mortgage broker may be right for you:
- Lender Availability: Mortgage brokers provide more choices for their clients. They may have access to dozens of potential lenders with only one credit inquiry without much impact on your score. Chances are that the broker might even be working with your bank, and is able to offer you the same or a better deal.
- Rate availability: While banks expect the client to accept what they offer them, mortgage brokers are more likely to find a better interest rate, by simply having access to more lenders
- Convenience: Mortgage brokers are more flexible with how they meet the clients, the way they handle the paperwork, the tasks they perform. If your bank declines you, what are your options? If a lender that broker uses declines you, the broker will just approach another lender, without you needing to complete another application. In most cases the paperwork you provide can be used when the broker approaches other lenders. Many brokers are willing to meet with you after business hours, or even weekends, and can communicate the paperwork electronically. Younger generations that grew up in “the digital age” are more comfortable dealing with someone that is proficient in using technology, and don’t place high priority to location conveniences, or proximity to home.
- Getting The Mortgage Done: If you are not able to get approved with your bank, a mortgage broker has a higher chance to get your mortgage approved by another prime lender, or an alternative lender, depending on your individual situation.
Mortgage Services Offered A Bank Vs. A Broker
Most banks, as well as brokers, can get you a pre-approval for a mortgage, an actual mortgage approval, a Home Equity Line of Credit (HELOC), and the optional Mortgage Life and Mortgage Disability Insurance. The main difference is that banks can only offer their own products, while brokers can offer mortgage related products from many lenders, and possibly even your own bank. The main advantage is that brokers will compare various mortgage offers for you and get you pre-approved or approved with a lender that is most suitable for your needs.
There Are Many Questions To Ask When Applying For A Mortgage
We have another article that deals extensively with the questions that you need to ask when applying for a mortgage. We will not copy them here as the list is long. Feel free to visit our other article for complete list of questions by clicking on this link.
Whether you’re a first-time or a repeat buyer, existing home owner that is looking into renewing or refinancing a mortgage, or a retiree considering a reverse mortgage, both banks and brokers can help you navigate your options. Choosing the right option can sometimes be a challenge. So, take your time, ask questions, and make the choice that feels right for you. If you choose to work with a broker, we can provide personalized service, a wide range of mortgage options, and the expertise to get you the mortgage that is most suitable for your individual needs.
If you have any more questions or need assistance with your mortgage shopping, don’t hesitate to reach out to us at TheBroker.ca Ltd. We can be reached at (519) 252-9665. We’re here to help you navigate your mortgage journey.
Please note that this information is current as of the time of writing and is intended for general informational purposes only. It should not be relied upon as financial advice. Always consult with a mortgage professional for advice tailored to your specific circumstances.
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