Every prospective homeowner will, at some point, come to one major crossroad: Do I go with a mortgage broker or a bank? A mortgage is a major life decision that will drastically impact your financial future, and who you choose to consolidate your business with will define the nature of that impact. The good news is that both banks and mortgage brokers have their own advantages, and as long as you understand your personal financial needs, the decision need not be a daunting one.
Rates
As the housing market fluctuates, so to do mortgage rates and loan approvals. For many people, getting approved for a mortgage has become increasingly difficult in recent years. In 2018 alone, the BC provincial government has made a number of changes to loaning and rating process. For example, loan approvals now require proof that payments can be made even if interest rates go up, and first time homeowner plans have been drastically altered or scrapped altogether. These are some of the many factors that have made mortgage seekers increasingly dependent on good mortgage rates. Both mortgage brokers and banks can offer some flexibility in this department. Banks have the power to offer discounted rates in some situations, and can help you understand how to settle on a mortgage rate that works in conjunction with your future financial goals. However, only mortgage brokers can compare mortgage rates between different lenders and provide a broader scope of market rates. Banks can only access their own rates. Mortgage brokers can also negotiate rates and loans for you, whereas any negotiations with a bank would fall on you and your own knowledge of the market. There’s no guarantee a mortgage broker can give you the best rate, but only mortgage brokers can access that rate and compare it with others so you can choose.
Trust and Expertise
One of the biggest reasons people consolidate their business with their bank is because they already know and trust the bank their financial advisor. Banks will also have a better understanding of your financial history and future, and can paint a broader picture for your mortgage in that sense. Some people are resistant of mortgage brokers because they may not be familiar with them, and may not feel comfortable stepping out of trusted territory. That being said, mortgage brokers are focused solely on lenders and mortgages. They understand the market and the process much better than any individual bank, and have a lot more negotiating power depending on your desires and needs. For those hoping to shop around the market and get the best deals, a mortgage broker is by far the more powerful and flexible option. While a mortgage broker is less inclined to provide you broader financial advice in the long term, they are the only one who can provide you with a broad picture of lenders and mortgage rate options specifically.
Financing
It is important to understand that mortgage brokers themselves do not act as lenders. Mortgage brokers finance mortgages through banks, credit unions and trusts. So at the end of the day, your lender is still from one of these sources, rather than your broker. For some people, this third party aspect is unfamiliar and can therefore feel like a drawback. The nice thing about having this third party is that they have your best interests in mind. A mortgage broker works to find you the best lender and rate available, and takes on the task of negotiating your needs to the lender. Once you’ve settled on a mortgage, you can start building your own relationship with the lender.