Your 2020 Homeownership Resolution
There are different ways to get a mortgage, and as a home buyer, it’s good to know what to expect when working with mortgage brokers or going directly to the bank.
The "Big" Banks
Banks are public, licensed corporations, they are also regulated by the federal government-Office of the Superintendent of Financial Institutions.
Banks are a one-stop financial shop, they are familiar, and there’s also a trust factor associated. Banks have been the most convenient option because many of us already do some sort of banking.
Since the Bank already knows your account balances, credit card history and investments, their mortgage specialist or advisor will work with you to secure mortgage products and services. However, Bank’s mortgage specialists and advisors will only consider their in-house products when offering you a rate, plus they have stricter rules in place for approving mortgages.
Banks have opportunities and perks, including access to a home equity line of credit (HELOC), giving you a cashback bonus and may even pay for a home appraisal. Banks may also offer some discounting for consolidating your services with them. Nevertheless, Banks advertised rates are often higher than other alternatives and getting the best rate requires negotiation.
Brokers work as middlemen between banks, small lenders, insurance and trust companies, private funds and borrowers (you). They have access to a large pool of lenders and operate on the wholesale end to secure financing for you. Because Broker acquires high quantities of mortgage products, mortgage brokers can pass volume discounts directly on to you. That is why Brokers tend to have lower advertised rates than banks.
Brokers do the work of shopping around and comparing mortgage rates for you to negotiating on your behalf and securing your best rate. Brokers also access exclusive deals not available on the open market or lower application fees from the lender in some cases. For their services, Brokers get paid commission by the lending institution after the deal is complete.
Think of Brokers as your personal Google and Amazon for all mortgage products. They aim to keep homebuyers happy and try to make the process as painless as possible.
Another alternative is using a Credit Union. Most homebuyers overlook Credit Unions when shopping around for a competitive mortgage rate. Unknowing that Credit Unions often beat the banks when it comes to posted rates.
Credit unions are not-for-profit. Credit unions members own the credit union, and the goal of these cooperative financial institutions is to benefit their members. They, too, offer a lot of the same products and services of banks and have added benefits that accrue to their members. Another advantage of Credit Unions is that the B-20 stress test does not apply to them — meaning you can borrow more.
When looking for a mortgage, shop around!
You can begin by using a rate comparison website or ask your real estate agent or lawyer for their recommendations. You can also use the Canadian Mortgage App to quickly and easily compare mortgages — all from the comfort of your own home.
There are many options when getting a mortgage. When you get a good rate, make sure to do your homework and check the fine prints, penalty clauses and try to negotiate.