Mortgage broker vs banks: which one should you use to get a mortgage in the Greater Toronto Area? In this video, I’m going to share with you 3 very good reasons to use a broker.
So, you need a mortgage… maybe it’s to buy your first home, a rental property, or perhaps to refinance and get rid of high interest debt. Whatever the case may be, the question is, do you go to your bank or use a mortgage broker? To answer that, imagine this scenario:
Has Your Bank Ever Done This?
You go to your bank and meet with a mortgage specialist. They ask you a few questions about income and credit, and proceed to fill out an application. However, the banker stops and thinks for a moment, and says to you: “you know what, based on your situation, I don’t think our product is the best fit. However, if you go to the competing bank next door, they’ll have exactly what you need.” When in the history of Canadian banking has this ever happened?
And yet, this is basically how a broker works. Our objective is to find the best mortgage to suit your specific needs, from whichever bank that may be. In this video, I’m going to break it down into 3 specific reasons why you should use broker. Now, full disclosure, I am a mortgage broker. So, there may be some bias. But, if you’ve seen my other videos, I always try to be as objective as possible, showing the pros and cons. I don’t believe in a “one size fits all” solution… Hence, I will show you how I incorporate these 3 points to serve my clients.
Mortgage Broker vs Banks is Not Us vs Them
But first, you might be thinking… if it’s brokers vs the banks, why do banks do business with brokers in the first place? That’s a great question! But this is not about “us versus them”. Allow me to explain how banks get mortgage business. You see, banks take advantage of 2 main distribution channels: the retail channel, i.e., your brick-and-mortar bank branches (for example), and the brokerage channel, i.e., mortgage brokers with established referral partners (such as realtors). Both channels work very well, it just depends on your needs, and the level of service you want.
TD Bank Recognizes Importance of Mortgage Brokers
Now, this is a very smart move for banks, such as TD, Scotia Bank, and HSBC, as this creates multiple ways to attract and get mortgage business. They recognize that more and more Canadians are seeking the advice from mortgage brokers. Take this, for example, that shows how TD Bank values brokers. Recently, the bank introduced their Flexline product to the broker channel.
At the launch meeting, TD’s Vice President, Broker Services, Devon Ajram said: “There’s this huge validation here for the importance of the [broker] industry and its place in mortgage origination in Canada. To have a major Canadian bank make a substantial investment and bring one of its most important products to the channel, I think that’s a clear indication of mortgage brokers’ importance in the space.”https://www.canadianmortgagetrends.com/2021/10/mortgage-brokers-get-tds-heloc-at-last/
By the way, he also estimated that, out of over $400 billion in annual mortgage originations in Canada, brokers are on pace to account for up to half of that number.
CMHC Consumer Survey Recognizes Importance of Mortgage Brokers
And finally, to further illustrate up my point, I want to share these statistics from a 2021 CMHC consumer survey. Between February and March 2021, they contacted 3,502 recent mortgage consumers across Canada. They asked housing related questions of all kinds including consumer behavior, attitudes and expectations.
They asked mortgage consumers if they used a mortgage broker to take care of their mortgage negotiations. 42% said yes. So that’s not too far off from TD’s estimates, and shows why some banks want a piece of that market. But what stood out for me were these statistics:
85% felt that a mortgage broker would get them the best mortgage rate or deal. 85% said using a mortgage broker would be very convenient and save them time. 84% said they wanted to use a mortgage broker that provides advice and recommendations. 79% felt that using a mortgage broker would increase their chances of being approved for a mortgage.
Ok, so we now know why some banks use the broker channel. Let’s see what the fuss is all about and talk about the 3 reasons why you should use a mortgage broker.
Reason 1: A broker can save you money!
And in so many ways! I’ll mention just 3. First, your bank gives us “broker rates”, which are discounted below their posted rates. And the nice thing about it is, that there is absolutely no stress of haggling. That’s not to say you can’t go in yourself haggle at the bank, and strike a deal somewhere between their discretionary and posted rate. I mean, if that’s your cup of tea, then more power to you. But for the rest of us, with a broker, you get the floor rate upfront.
Two, did you know the big 5 banks are not the only place to get a mortgage? For example, there are banks that deal exclusively with the broker channel. And then there are monoline lenders, whose sole business is mortgages. That’s all they do. They don’t have a store front and don’t advertise to the public. So, they pass those savings onto you. Oh, and on a side note, they won’t try to upsell you on other products. They have nothing else to upsell. So, in essence, we have access to a much broader market, beyond the mainstream banks. This increases our chances to find you the best solution.
Thirdly, we save you money by looking at the bigger picture, or what I call, the lifecycle of your mortgage. What is the cost of the mortgage long term? Sure, it might have a low rate today, but at what cost? For instance, are you giving up important features that could later cost you tens of thousands of dollars in penalties? You see, it’s more than just the lowest rate today. There’s no “one size fits all” mortgage. Otherwise, the bank that offers the lowest rate will always win. Rather, I help my clients find the best rate and lowest overall cost mortgage that’s the most suitable to their needs.
Reason 2: A good broker has your back!
This means we go the extra mile to get your approval. Unlike mortgage specialists that are bank employees, we are independent. A bank only pays us if they fund your mortgage. That motivates us to be fast, responsive and go out our way to help you. Let me give you an example of this in action.
Oftentimes, applications are declined because the lender doesn’t see your whole picture. The key to getting approved is on how you structure the deal and present your case. And filling out a simple application doesn’t afford you the opportunity to do that. So, before we even start talking product or rates, I get to know your unique financial situation. What are your goals, both short and long term? What are your needs vs wants? And what are your financial challenges? In other words, what really matters to you?
Coupled with my experience on how I handle similar cases, I’ll know which lenders are more likely to fund your mortgage, and I’ll ensure the lender hears and understands your story. Plus, and I can’t speak for all brokers; but I personally don’t usually take “no” for an answer from the banks. We can always go back to the table and find a solution that works. As I like to say, I leave no stone unturned. And that’s how I have your back!
Reason 3: You get expert advice.
Now this is a bit tricky to explain, because I want to remove any bias. The fact is, I’m sure many banks have excellent training programs for their mortgage specialists. I’ve personally met some bankers who are just as passionate about their business as some brokers. So, I’m only going to mention one key difference that stands out. And it’s as follows:
Unlike banks, mortgage brokering is regulated by FSRA. As per their website, their mandate is to “protect the rights of consumers by promoting high standards of business conduct and transparency.” So, here’s the thing. To become a broker, you must have at least 2 years’ experience as a licensed mortgage agent and must complete and pass a broker education program.
In contrast, bank employees do not need to be licensed. And by the way, continuing education is a requirement for maintaining our license. So, we regularly meet with lenders to discuss things like, changes in regulation, lending guidelines and new products. And not just with one lender, but various lenders, because each lender has their unique strengths and ability to cater to specific needs. So, if you have great credit and looking to buy your first home, there are lenders for that. If you’re self-employed or have less than perfect credit, there are lenders for that. Looking to buy your 5th rental property? There are lenders for that. Having a deep understanding of the entire market helps us quickly determine how to deal with different situations and challenges.
The Mortgage Broker vs Banks Debate Conclusion
So, there we have it. Three good reasons to use a mortgage broker: 1) to save you money, both immediately and in the long term; 2) because we have your back, and will go the extra mile to get you approved, and 3) to get expert advice from someone who’s fully focused and immersed in the mortgage industry.
No Cost to use a Mortgage Broker
But I have to mention one more reason. Let’s call it the icing on the cake. I’m sure you’re wondering, how much would this service cost? If there’s ever a fee, it would be clearly disclosed before you make any decisions. But, as I mentioned earlier in this video, your bank pays us for the business. So, in most cases, there is no cost to you, so why not take advantage?
If you found this information useful, please like, share and subscribe! Navigating all these mortgage rules can be complicated, but I’m here to help! Feel free to contact me if you have any questions or you’re just looking for advice.