Mortgage Broker vs. Banks:
Which One is Right for You?
What You Should Know
- Mortgage brokers help negotiate rates, find the best mortgage that suits your needs, and guides you through the application process.
- Banks can only offer their own services, while a mortgage broker can compare and connect you with multiple lenders.
- You won't have to pay out-of-pocket for a broker's services, and you may even get additional discounts through mortgage buydowns.
- Going directly to your preferred bank would be a good option for those that prefer to keep their everyday banking at the same bank, have a good credit score, and want additional products that brokers do not provide.
Top 10 Brokers vs. Banks in Canada
| Broker | Best 5-Year | Bank | Best 5-Year |
|---|---|---|---|
Citadel Mortgages Check More Rates 4.5/5(106 reviews) | 4.69% | Laurentian Check More Rates | 5.04% |
Butler Mortgage Check More Rates 4.7/5(863 reviews) | 4.69% | CIBC Check More Rates | 5.04% |
Hypotheca Check More Rates | 4.89% | Peoples Bank Check More Rates | 5.09% |
MortgagePal Check More Rates 4.9/5(156 reviews) | 4.89% | BMO Promo Rates | 5.09% |
Mortgage Alliance Check More Rates | 4.94% | RBC Check More Rates | 5.14% |
Marathon Mortgage Check More Rates | 4.99% | TD Check More Rates | 5.15% |
Dominion Lending Check More Rates | 4.99% | Equitable Check More Rates | 5.19% |
Rocket Mortgage Check More Rates | 4.99% | ICICI Check More Rates | 5.24% |
Pine Check More Rates 5.0/5(101 reviews) | 4.99% | Canadian Western Check More Rates | 5.24% |
QuestMortgage Check More Rates | 5.09% | Tangerine Check More Rates | 5.44% |
Bank | Mortgage Broker | |
|---|---|---|
| Value Proposition |
|
|
| Service Quality |
|
|
Source: CMHC Mortgage Consumer Surveys
When getting a mortgage, you’ll need to choose between going to a mortgage broker or going directly to a bank. There's quite a big difference between mortgage brokers vs. banks, so it's important to understand each of them before making a decision.
Mortgage brokers are an intermediary between borrowers and mortgage lenders. This means that mortgage brokers do not lend you money themselves. Instead, brokers work with financial institutions, such as banks or mortgage investment corporations (MICs), to find the best mortgage loan for their client. Brokers also provide guidance throughout the mortgage application process, such as sorting out required documentation for a mortgage.
Mortgage brokers can help you in the following ways:
- Guide you through the entire mortgage application process
- Negotiate interest rates and terms with lenders
- Find the best mortgage for your needs and financial situation
- Compare different mortgage offerings from different lenders, and may find lower rates not accessible to the public
How exactly are brokers different from banks, and is it better to go with a broker? CMHC's 2019 mortgage consumer survey found that mortgage buyers were satisfied with the services of both banks and mortgage brokers and that the two main criteria they used to decide between going directly to the banks vs. mortgage brokers was the level of service and the interest rate offered.
Federally regulated lenders, such as banks, are required to conduct a mortgage stress test to determine if you can afford your mortgage payments. B Lenders, credit unions, and private lenders are not required to conduct mortgage stress tests and can have less strict requirements. By going with a broker with access to B Lenders and private lenders, you may be able to get a mortgage even if you don't qualify for one through a bank.
Going through a mortgage broker gives you more flexibility and options; however, it doesn't mean that you need a mortgage broker to reach less known lenders. You might be able to reach B Lenders and private lenders directly yourself.
The 2019 Mortgage Consumer Survey also found that most mortgage buyers contacted around 3 mortgage lenders and 2 mortgage brokers when looking for their mortgage. Shopping around with many lenders and brokers can help you find not only the lowest interest rate, but the best mortgage product that is suitable for your financial situation.
Who Uses Mortgage Brokers The Most?
According to a 2023 survey by the Canada Mortgage and Housing Corporation (CMHC), mortgage brokers are more popular with younger borrowers, namely those between 18 and 44 years old, as well as first-time home buyers and those looking to refinance their mortgage.
Meanwhile, banks are more commonly used by those aged 55+, as well as those looking to renew their existing mortgage.
Banks and Mobile Mortgage Specialists
Mobile mortgage specialists are bank employees that operate similar to mortgage advisors. Canada’s major banks all have mobile mortgage specialists, such as BMO mobile mortgage specialists and CIBC mobile mortgage advisors. Mobile mortgage specialists are paid a commission based on the sales that they make. Mortgage specialists are different from mortgage brokers because mortgage specialists can connect you to other lines of business that the bank offers, such as for credit cards, savings, or retirement products.
However, unlike mortgage brokers, mortgage specialists can only offer products that their bank offers, while brokers can connect you to a variety of mortgage lenders and banks.
Mobile mortgage specialists have flexible working hours that they personally set, which means that you can often meet a mobile mortgage specialist outside of regular banking hours, such as in the evenings or on weekends. Mobile mortgage specialists will also come to you rather than make you come into a branch.
For example, mobile mortgage specialists with TD work out of their home office, but they also work with a team and through TD's sales management system. This allows mobile mortgage specialists to build their own business under TD's brand. As a borrower, you can benefit from the convenience and personalized service of an in-home mortgage specialist, as well as the familiarity that comes with being part of a major bank.
What Do Mortgage Brokers Do
A mortgage broker is a mortgage specialist licensed by a provincial authority. Mortgage brokers work for mortgage brokerages and have access to a large network of mortgage lenders in Canada, helping you get the most suitable mortgage for your financial situation. Beside the 6 big banks of RBC, TD, Scotiabank, BMO, CIBC and National Bank, mortgage brokers have access to many smaller lenders such as First National, MCAP and Equitable Bank, as well as private and subprime mortgage lenders.
1. Assistance with Mortgage Approval Process
Mortgage brokers assist clients with the mortgage pre-approval process and the mortgage application. The mortgage broker explains the details of your mortgage, such as the terms, conditions, risks, cost, and features. Your mortgage broker will submit the application paperwork to the lender and will assist you in the closing process of your mortgage. These services may be especially useful for individuals who lack sufficient financial knowledge, face language barriers, or individuals who are first time home buyers with a lack of experience with the mortgage process.
2. Low Mortgage Rates
Mortgage brokers have access to all the lenders' rates and requirements. Based on your financial situation, mortgage brokers will negotiate with the lenders and may also offer mortgage buydowns to get you the best interest rate on your mortgage. The customer saves time because the mortgage broker compares rates between different lenders for you.
3. Individuals with a Unique Financial Situation
Mortgage brokers help tailor mortgages for clients with unique financial situations. This may include individuals who are looking for a self-employed mortgage, and individuals who do not have a stable income or a non-existent/poor credit history. Mortgage brokers also aid new immigrant home buyers in the mortgage application process by connecting them with mortgage options for newcomers.
4. Offering very competitive rates by offering mortgage buydown
Mortgage brokers partner with almost all mortgage lenders in Canada and they always negotiate the best mortgage rates. However, some of them can even offer lower than their best available rate by giving a cut of their own commission to the borrower. This is known as a mortgage buydown. Without buydowns, mortgage brokers typically get a commission of 0.8% to 1% for a typical 5-year fixed mortgage.
Mortgage Buydowns
Mortgage brokers help lend out mortgages for mortgage lenders. In return, the mortgage broker is typically paid an upfront commission by the mortgage lender. Sometimes, the mortgage broker will choose to pass on a percentage of the commissions to the customer in the form of a mortgage buydown by offering the customer a lower interest rate on their mortgage.
Should I Go With a Mortgage Broker or Bank?
There are pros and cons to both working with a mortgage broker and going directly to a bank. It depends on your personal situation as to which route makes the most sense for you.
If you have a good credit score and know exactly what type of mortgage you need, then going to a bank may be the best option. Banks can offer additional products that brokers can't provide, such as HELOCs, which can complement your mortgage. You might already have a relationship with your bank, or you might prefer a physical branch to go to for your everyday banking. The majority of Canadians choose to go directly to a bank for their mortgage. In fact, a 2023 survey by the CMHC found that 52% of Canadians went directly to a Canadian bank or a financial institution for their mortgage.
Pros of Banks:
- Bundle with other products, such as credit cards, personal loans, and insurance, all in one place
- Familiar and easy to access, especially in-person
Cons of Banks:
- Harder to get approved since they have stricter lending criteria and will conduct a stress test
- Only the bank’s mortgages are available, which means you may not get the best deal without shopping around
On the other hand, if you're not sure what kind of loan you need or have less than perfect credit, then working with a mortgage broker may be a better choice. Mortgage brokers have access to a variety of lenders and mortgage programs, so they can help you find the best fit for your situation. This can be especially helpful if you don't quite fit the mold for a "traditional" borrower.
Brokers can also help guide you through the process and answer any questions you may have, as well as possibly access lower rates. On top of this, brokers usually don’t charge for their services directly, which means there is no out-of-pocket cost to you for using a mortgage broker. 43% of Canadians went with a broker for their mortgage in 2023, which shows that a broker can be a legitimate option for many borrowers.
Pros of Brokers:
- Access to more lenders and mortgage options
- Negotiates better rates and terms with lenders on behalf of the borrower
Cons of Brokers:
- No guarantee that the broker will find you the best deal – it all depends on their experience and relationships with lenders
- Not a familiar option as banks, which can be intimidating for some borrowers