Mortgage Broker vs. The Bank: Why Choose One Over the Other?
August 4, 2023
Whether you're buying your first home, or you've gone through the process before, there is nothing more important than getting the funding that you need to purchase a home. Although many homebuyers assume that going through their bank is the standard route to obtain a mortgage, there are alternative options available to you. Working with a private mortgage broker provides its own list of potential benefits. If you're in the market for a home, discover the pros and cons so you can choose your own winner in the mortgage broker vs bank contest.
Roles and Functions
The first difference in the mortgage broker vs bank debate involves the roles and functions that each of them provides. A private mortgage broker serves as a third-party intermediary who helps the buyer find the best mortgage for them. The route that you choose to go largely depends on your personal financial status, your financial goals, and several other means. However, when you choose a private mortgage broker, you're choosing someone who has access to a number of different mortgage options. This allows you to work with a lending professional who learns about your needs and helps you choose an option that's best for you.
There's also something to be said for choosing a bank or credit union for your mortgage needs.
This remains especially true if you have a well-established connection with a bank. When you apply for a mortgage with a bank or credit union, you're asking them to lend you their money so you can purchase a home. If you're approved, you then pay back the money (plus interest) over the course of a predetermined period. A loan officer at a bank essentially takes you through the process of applying for and obtaining funds from the bank itself.
Access to Mortgage Options
Different banks are allowed to offer different mortgage products. Some mortgage options are available throughout Canada. The Canadian government has multiple homebuying programs, and banks can lend mortgage applicants money through them. In addition to those programs, banks can offer different mortgage options. However, when you choose to go through a bank, you're limited to the mortgage products that they offer.
That's not the case with a mortgage broker. A private lender at a bank can provide you with a list of mortgage products their bank offers. A private mortgage broker possesses access to the mortgage products provided by any bank, credit union, or other financial institution they collaborate with. Though you could certainly gather this information independently, opting for a mortgage broker streamlines the process. No matter how long you've banked at a particular institution, you do not have to get your mortgage from them. You can go to different institutions, inquire about their mortgage products, and make your own decision. Nevertheless, entrusting a mortgage broker to handle all the legwork expedites the process and supplies you with information from a trusted source, well-versed in the advantages and drawbacks of each product.
Expertise and Guidance
The lending professionals at a bank are trained, licensed individuals who truly understand the mortgage industry. The information that they provide is incredibly valuable, and a good bank lender works tirelessly to help his or her clients get through the mortgage application process. However, it's worth noting that bank lenders are experts in the mortgage products that their bank provides. It's simply not reasonable to expect a bank lender to know about every type of mortgage product that other banks are offering.
Conversely, private mortgage lenders commit themselves to learning about mortgage products from different institutions. Not only do they have an intricate knowledge of the programs offered by the Canadian government, but they also form professional relationships with various banks and credit unions that provide them with information about the products that they offer. This allows mortgage brokers to provide their clients with a wealth of information based on the client's needs.
Customer Experience and Support
Bank lenders and private mortgage brokers provide their clients with customer support. Not only do both of these lenders have a fiduciary responsibility to their clients, but the mortgage industry is a customer service industry, which means lenders or brokers who don't create a good customer experience typically don't last. However, it's important to consider the fact that the lenders at a bank are primarily there to sell people the products offered by that bank. While good bank lenders provide good customer service and support, they do so while trying to convince an applicant to choose that bank.
Mortgage brokers provide a different type of customer experience. In addition to the fact that they have the same fiduciary responsibilities that a bank lender has, private mortgage brokers do not have any level of loyalty to a single institution. Alternatively, they can effortlessly provide their clients with the necessary information. Mortgage brokers spend a lot of time learning more about their clients, their credit history, and other important factors. This allows them to put their clients in contact with the lenders who are best suited for them.
Fees and Cost
When purchasing a home, the money borrowed must be repaid with interest. This fundamental principle is applicable across the lending industry, whether dealing with banks or mortgage brokers. Nonetheless, apart from the principal payments (the actual loan amount) and interest payments (the money the lender charges for the loan), there exist additional fees that need to be taken into account. When you borrow money from a bank, they have loan processing fees, loan application fees, closing costs, and more. These costs are often referred to as the "hidden costs" of buying a home.
There are hidden costs associated with going through a mortgage broker. Since the broker assumes responsibility for shopping around, looking for the best products on the market, he or she must be compensated. The level of expertise that a mortgage broker provides is worth a lot, so there is a broker fee associated with choosing this route. Mortgage brokers have their own fee structure, but some of the costs charged by a bank do not apply.
When trying to solve the mortgage broker vs. bank debate, ask yourself some questions about your financial status, your goals, and how much time you have to invest in meeting with multiple lenders. The way you answer those questions will help you make the right choice when obtaining your mortgage.
Your Trusted Mortgage Partner: CVE Mortgage Group
When it's time to renew or secure a home mortgage, finding the right partner to navigate the process becomes vital. At CVE Mortgage Group, we specialize in private mortgages, switching mortgages, pre-approvals, reverse mortgages, and more. Our team of dedicated experts has a deep understanding of various mortgage products from different lending institutions, ensuring we find the perfect match for your unique financial requirements.
Unlike traditional banks, we provide the freedom to explore a diverse range of options without limitations, offering you an abundance of choices and personalized solutions. With CVE Mortgage Group, you'll receive personalized attention, expert guidance, and a seamless mortgage application process, all while enjoying competitive rates and terms. Get in touch with CVE Mortgage Group today and experience the difference of working with a dedicated mortgage broker that puts you first.