Even though property rates are skyrocketing as the years go by for Canadians everywhere, it’s still one of their life goals to own a house. But when searching for a mortgage company, you will find that there are either banks (otherwise known as direct lenders) or even mortgage brokers that’ll help you out. 

But which one of these offers you a better home loan? Sometimes, a consumer with a high credit score might make a choice that’s different than those with low credit scores.

Let’s have a closer look at this bank vs mortgage broker tug of war and see which option suits you best. 

Bank vs. Mortgage Broker: The Basics

How Does a Bank‌ ‌Work?

By far the simplest trick of applying for a mortgage loan is to go right into your credit union or local bank and get in touch with a loan officer. That officer will examine your application, and hopefully, offer a vast range of different loan options that will help you out in your financial situation. Of course, you might be able to get a very good deal, especially if you’re already a reliable and competent customer. 

Small credit unions and local banks usually come up with the best mortgage rates. The only problem, however, is that they only offer their services to those with a seamless credit. It’s not a good choice for those who don’t have an elaborate credit history as of yet. 

If your bank does decide to give you a loan, you can’t be certain it’s a good deal unless the rate is lower than the national average. And until you get one, you shouldn’t finalize anything with your bank. Instead, just go to another bank to get a different quote or simply try a mortgage broker.

How Does a Mortgage‌ ‌Broker‌ ‌Work?

A mortgage broker shops around for quotes from a huge line of lenders so they can present you with the ones that best suit your financial needs. Of course, you can do some online research of your own to find current rates. However, a very competent, qualified, and trustworthy mortgage broker can provide plenty more information at your desk. 

That information involves finding out which lenders in your area can loan you money, which ones provide a special kind of mortgage that you like, and which ones either avoid or encourage loan applications for certain properties like condos, multi-family homes, or co-ops. 

Some lenders work only with mortgage brokers, giving borrowers access to those loans they would have never heard about otherwise. So rather than applying for a different lender individually, you can deal with several lenders through only one person and that is the mortgage broker. And once you’ve decided on a loan, the broker will even help you out with your application. 

Mortgage brokers are typically charged based on the amount of the mortgage loan that can also influence their research and advice. Same as with certain commission-based financial planners, certain mortgage brokers work alongside some lenders who inform you about the choices they provide you with. 

The next step in our mortgage brokers vs banks discussion is to weigh the pros and cons of both banks and mortgage brokers

Pros and Cons of Using a Mortgage Broker

Pros

• They’ll do all the research on your behalf
• They have more lender options than a bank, thereby increasing your chances of getting the lowest possible rate
• Mortgage brokers establish their own profit margins and make it easier for borrowers to negotiate with 
• They compare wholesale mortgage rates from several banks and lenders at the same time 
• A broker’s compensation is openly disclosed on the borrower’s closing statement

Cons

• Brokers have less control over the mortgage loan process since they don’t work for the lender 
• Might not have a longtime/personal relationship with a broker
• Sometimes could charge higher fees
• Closing delays
• False promises are possible
• Might not understand your financial situation all the way

Pros and Cons of Using a Bank

Pros

• Banks can offer better deals for those with long-standing relationships with their customers
• Can provide lower interest rates in some cases
• Save up on fees that a mortgage broker would otherwise charge
• They work on loans from start to finish
• Some people prefer going to a brick-and-mortar building where they can discuss details about their mortgage in-person
• Banks provide customers with a variety of financial services such as HELOCs

Cons

• False promises
• Less flexible requirements
• Unlike brokers, banks never disclose what they make on your loan
• Rates aren’t as competitive as alternative banks that brokers may have access to
• Conservative banks might not approve borrowers even if they’re a good candidate for financing

How To Choose Between A Bank vs. Mortgage Broker

There isn’t really a straightforward answer as to whether a bank or a mortgage broker is what’s best for your financial situation. Both options have their own share of ups and downs, and it really boils down on what you feel is more comfortable and beneficial in the end. Purchasing a property is perhaps one of if not the biggest milestone in a person’s life. That’s why you need to find the ideal tipping‌ ‌point‌ in this mortgage broker vs bank quarrel where one option works more favorably for you in the long run than the other. Sometimes, a private mortgage lender is a better option since they interact directly with the borrower and have a transfer approval process than traditional means.

Trust Loans Geeks, Your Online Loan Aggregator

We here at Loan Geeks will take as much time as we need to understand a consumer’s financial situation just so we can give them the most appropriate loan at the lowest possible interest rate. We also work closely with our clients to ensure there is no miscommunication and that they’re left completely satisfied with whatever loan option they get in the end. Whatever questions they may have regarding their mortgage loan, our staff members are up and ready 24/7 to address them without missing a beat. 

Conclusion

Now that that’s all settled, we hope you have a more cautious approach when it comes to making a clear-cut decision in this extensive bank vs mortgage broker Canada debate. Remember, it all falls on you what best fulfills your financial needs.

Frequently‌ ‌Asked‌ ‌Questions‌

Are mortgage brokers better than banks?

In some situations, yes. But not exactly all the time. Sometimes, a bank offers a better solution than a mortgage broker. So it really depends.

Why use a mortgage broker over a bank?

Mortgage brokers provide a vast list of lender options than those offered by the bank, and that too at possibly the lowest interest rate

Is it safe to use a mortgage broker?

Not every mortgage broker is good or even bad and the same is also true for banks. But with a broker, you might get a more consistent experience since it’s just one person as opposed to thousands of employees in a bank.

Why shouldn’t you use a mortgage broker?

Unlike a bank, a mortgage broker doesn’t know you as well as your bank does and might not make the best decision for your financial situation.