Mortgage Broker vs Bank - The Benefits of a Broker
Working with a mortgage broker has benefits compared to working directly with a bank - and a better rate is only one of them.
If you’re reading this, you’re probably looking for a mortgage and trying to figure out why you would work with a broker over working directly with a bank. That’s a fair question - wouldn’t a broker charge for their time? In actuality, a broker is usually only paid a finder’s fee - and potentially a volume bonus - by the bank that funds your mortgage. If you’re pursuing the first mortgage on your new home or trying to get pre-approved, a broker traditionally won’t charge you any fees. In the event that a broker does charge you fees, it will be based on a percentage of the loan you are pursuing, and a mortgage broker charging their clients is extremely uncommon. This means that it is in the broker's best interest to work as hard for you as possible, in order to close the deal and fund your mortgage as fast as possible - dragging out the funding process doesn't benefit anyone involved.
Doesn’t that make brokers want to work with banks that offer higher finder’s fees?
Most lenders offer similar finder’s fees and volume bonuses, and any broker looking to work with clients long-term - which Myette believes is key to her success as a broker - will operate in good faith with their clients. If you’re uncomfortable blindly trusting that a broker will have your best interest at heart, as part of any mortgage brokering process a broker must legally disclose all conflicts of interest on what is referred to as a “Form 10”. This document must be signed by both the broker and their client(s), and gives the client an opportunity to ask their broker about why they chose that specific lender. If a broker does not disclose conflicts of interest to a client, they can be held liable by the Financial Institutions Commission of British Columbia (FICOM), with fines ranging in the tens of thousands of dollars.
But why should I work with a broker instead of directly applying to a bank myself?
There are many financial institutions in Canada that will finance your mortgage, but only one is the right choice for you. Not only do you have to consider which lender you want to work with, but also your own financial situation. Life happens, and frequently it can be expensive, and that can result in debt: credit card debt, car financing, student loans, recurring medical bills; the list goes on. No matter how careful you are with your finances, sometimes debt is inescapable, and for any lender existing debt will make-or-break a mortgage deal. A mortgage broker has a pre-existing knowledge of dozens of lenders, and after meeting with you and examining your financial situation and mortgage goals, knows exactly which lenders to contact. A broker will know which debts you can pay down to satisfy the requirements of different lenders - a bank won’t necessarily give you this kind of personalized service. Myette has worked with countless clients, almost all of which that have had some amount of debt, and with her guidance her clients have paid off the key debts that would have kept them from getting a mortgage, and realized their home-financing goals. Not only this, but brokers can negotiate exceptions to certain lender criteria, whether that's an exception on the maximum financing ratio of the property for a specific product, or even just how much debt is usually allowed; getting those same exceptions from a bank as an individual consumer can be difficult if not impossible.
Additionally, a broker knows who to work with - which credit bureaus will give an accurate and timely assessment of your credit score, and which appraisers will properly assess the subject property of your mortgage application in a time-sensitive manner. Having to wait on an appraiser to write their report when the completion date of your mortgage is fast approaching is additional stress you don’t need; work with Myette, she has a network of appraisers that she trusts to get things done properly and quickly.
Not only does Myette have an established network of reliable business partners, she also has a trusted network of private lenders. A private lender is just that - a private individual or business entity that lends money to consumers for different purposes.
Why would I get a mortgage with a private lender?
Private lenders operate similarly to banks, however they differ in that private lenders are often more flexible than the large banks that most Canadians get their mortgages with. With a private lender, your mortgage is just as secure as with a bank, and you have all the same legal protections. There are multiple reasons to work with a private lender, but the biggest reason is as previously mentioned: flexibility. A private lender usually doesn’t have the same rigid structure as a bank, with a uniform array of mortgage products on offer. Because of this, it can be easier to obtain a mortgage through a private lender if you’re new to Canada, have less-than-ideal credit, or are self-employed. Obviously a bank won’t mention the possibility of private lending to a consumer, which is another reason to work with a broker with an established network, such as Myette.
What happens if I get declined even if I’m working with a broker?
Being declined by a lender happens, but working with a broker lets you avoid stress by knowing that any successive applications are being handled by a professional. When applying to a bank yourself, in the event you are declined you will have to start from scratch with a different lender - a broker will have all of your documents on file and can apply to another lender as soon as possible. Remember, a broker only gets paid when your mortgage funds, so there’s no incentive for a broker to waste your time applying to lenders they know won’t approve your application. When Myette is handling a mortgage she works for you, her client, not the banks.
“I like helping people, that’s why I’m a mortgage broker. Let me help you find the lender that’s right for you, and realize your financial goals. I have over 25 years of experience, and I’ll use my experience in your best interest.” - Myette Raynes, mortgage broker and owner of Essential Mortgage Company
All information herein subject to change and all offers mentioned are subject to change and OAC.
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