Mortgage Broker vs. Banks:
Which One is Right for You?

This Page's Content Was Last Updated: August 24, 2022
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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.
Bank
Mortgage Broker
Value Proposition
  • Builds long-lasting relationships with clients
  • Comprehensive services: many other financial products are readily available at the same bank (HELOC, insurance, credit card, other loans, etc)
  • Comprehensive mortgage advice
  • Lower rates (67% of mortgage broker renewers used a mortgage broker again to get the best rate)
  • Time savings in shopping for the most suitable mortgage
Service Quality
  • 35% of mortgage lenders followed up with home buyers after the transaction
  • 78% of people who renewed their mortgage with a lender were satisfied with their overall experience
  • 46% of mortgage brokers followed up with home buyers after the transaction
  • 83% of people who renewed their mortgage with a broker were satisfied with their overall experience

Mortgage brokers are an intermediary between borrowers and financial institutions. Brokers do not lend you money themselves. Instead, mortgage brokers work with financial institutions, such as banks, 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 or to 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. 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 many small lenders directly.

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.

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.

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.

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.

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 2020 consumer report by Mortgage Professionals Canada found that 54% of Canadians went directly to a Canadian bank for their mortgage.

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. 40% of Canadians went with a broker for their mortgage in 2020, which shows that a broker can be a legitimate option for many borrowers.

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