As a prospective home purchaser, you have quite a few decisions to make with whatever options lay in front of you. One of the very first choices that you will have to make is where you want to get your mortgage from. Most Canadians recruit the services of either a mortgage broker or a traditional lending institution – a bank.
Both options come with their benefits and their drawbacks, so it’s important to assess your situation quite closely before making this call. After all, the broker or bank that you work with will have a hefty role to play in your purchase of a home. In this article we will break down the pros and the cons of each option. With this information in mind, you’ll be better-equipped to make an informed choice.
Banks have long been the go-to resource for individuals seeking home mortgage loans. These institutions are staples within our communities and as such are believed to be more reliable and trustworthy.
The Pros of Traditional Banks:
Traditional banking services provide a pretty straightforward mortgage process, from start to finish. If you have a bank that you already love and feel strongly about giving your business to, you’re already in a pretty good position. If your relationship with the bank is a strong one, you could already have one foot in the door on a great rate for your mortgage.
During this process you will be designated a loan officer, who will foster streamlined and efficient communication between yourself and the banking institution.
Oftentimes, home buyers are offered mortgage loans with a lower interest through the bank of their choice – if they qualify. Brokered mortgage loans may come with higher interest rates, resulting in the client paying more overall.
The Cons of Traditional Banks:
One problem that many people face when trying to get a mortgage loan through a bank is the rigid set of standards by which the bank dispenses loans. If the bank decides that you are not a great candidate, as determined by these standards, your request for a loan will be rejected.
Lending from traditional banking institutions also poses the issue of transparency – or a lack of it. Banks do not have to disclose how much they stand to make from doing business with you. They also don’t have to inform you of options and products that they do not offer, even if those options/products are better for your circumstances.
Mortgage brokers function as a go-between for potential home buyers and lenders. They have a deep wealth of knowledge regarding the real estate market and can connect borrowers to a multitude of lending options.
The Pros of Mortgage Brokers:
Most of the time, working with a mortgage broker comes at no cost to the client. This is because most brokers are paid by the lender that picks up the client’s business – not the client themselves.
Mortgage brokers are able to connect their clients to any number of lenders and rates, making it easier to shop around for the best options available. Experienced brokers have established a wide network of private lenders, banks and other lending institutions so that they may provide the best to their clients.
For the self-employed and others who do not have traditional jobs and biweekly paycheck stubs to show for them, mortgage brokers make the lending process much simpler. This is because they can bring borrowers to lenders who are willing to work with their different circumstances.
The Cons of Mortgage Brokers:
If you’re working on a very tight deadline, you should know that a brokered mortgage loan can take longer to approve. The lender eventually chosen has no obligation to prioritize your brokered loan over other loans.
For first-time home buyers, it can make things feel a bit less confusing and distressing when working with an institution that they’re already familiar with. If this is your first time buying a home, you will have no pre-existing relationship with the mortgage broker that you’ll be hiring.
Which to Choose?
If you have already established a trustworthy and reliable relationship with a bank, there’s no reason why you shouldn’t explore this avenue first. You could be given great rates and have a more easy-going, straightforward experience than you’d likely have with a mortgage broker.
Mortgage brokers provide a versatile service, which cannot be under-estimated. These professionals are a great resource for those with unconventional employment, individuals with damaged credit, and those who are simply looking to shop around for the best deal.