Buying a house is likely to be the most expensive purchase you’ll make in your entire life, so it’s important to thoroughly research the best ways of financing it. When you’re looking for a mortgage, you have the choice between dealing directly with your bank or going to a mortgage broker. Exploring the pros and cons of both choices will give you the information you need to make the best decision for your situation.
Mortgage Brokers
Mortgage brokers are licensed professionals who specialize in real estate financing and work with a number of different lenders. They act as the middlemen between lenders and the borrowers. The advantages of using a mortgage broker include:
Pros
Focused knowledge of the mortgage industry. Brokers deal with mortgages, and only mortgages, and an important part of their job is to stay up-to-date on new products, trends, and regulations in the industry.
Convenience for you as a customer. Brokers usually work evenings and weekends and are open to meeting you on your time. They do the legwork of comparing what lenders have to offer and take care of negotiating with lender on your behalf.
Ability to search out the lowest rate. Brokers have access to wide variety of lenders, and can therefore search out the best deal. They also often get good rates because of the volume of business they place.
Flexibility to accommodate you if you have a less than perfect credit score. Brokers have access to non-traditional lenders who are more likely to take a risk.
Cons
Potential conflict of interest. Brokers are paid by commission from the lending institution. Bad brokers could favor certain lenders and recommend deals that net them the highest commissions but aren’t necessarily the best for you.
Variation of skill. As in any industry, not all professionals are created equal. Ask your realtor and your friends to recommend brokers who they respect.
Banks
Although the use of mortgage brokers is increasing in popularity, the majority of Canadians still turn to their bank when looking for a mortgage. There are several advantages to securing a mortgage from a bank:
Pros
Familiarity. Chances are you already have a relationship with a loan officer where you bank. Securing a mortgage can be a less intimidating experience when you’re dealing with someone you already trust.
Ability to negotiate. Your bank may offer you a lower interest rate because you are a loyal customer. They may give you financial perks like free banking fees or they may pay the appraisal fee or some closing costs.
Oversight of your entire financial picture. A loan officer can help you reach your long-term financial goals, and can advise you as to how the mortgage fits into these goals.
Convenience. Having all your financial products such as your bank accounts, loans, and mortgage in one place can simplify your banking regimen.
Cons
Lack of selection. A loan officer can only advise you on the mortgage products that their particular bank offers.
More time-consuming process. You are personally responsible for negotiating the best rate (and being sure it is the best rate!). If you don’t get satisfaction, you may find yourself going through the same process at a different bank.
When you’re embarking on the exciting (but stressful) process of buying your dream home, it’s important to have the best professional help at your side. Both mortgage brokers and bankers can help you find the mortgage that works best for you, so weigh the potential upsides and downsides of working with each one before you make a decision.