Choosing a mortgage provider is an important decision to be made as part of your real estate purchase. But should you use a mortgage broker or a traditional bank?
For homebuyers, the mortgage broker vs. bank choice includes factors like getting the best mortgage interest rate, choosing a lending institution that is convenient to work with, and personal comfort in negotiating mortgage particulars. Mortgage brokers are like personal shoppers for mortgage loans, and generally present multiple different options from different lenders. Banks, on the other hand, offer only their own mortgage products, but can sometimes incentivize homebuyers by bundling banking services or creating other attractive discounts.
Read on to learn all about the basic differences between mortgage brokers and banks, including the main benefits for current and future homeowners.
Why Use a Mortgage Broker?
A mortgage broker is a licensed professional who works with a diverse pool of lenders to find you the best mortgage rate. They look at multiple different lenders and search out the best mortgage offers for your unique situation. They get to know your housing needs, credit history, whether you want a variable or fixed or open or closed mortgage, and then do all the necessary work and negotiating to get the most advantageous mortgage.
Unlike a bank that wants to sell you their specific product, mortgage specialists have access to a large network of potential lenders, including banks, online mortgage lenders, trust companies, credit unions, and more. This wide spectrum of financial contacts is especially useful for people with poor credit trying to get a mortgage. Mortgage brokers are familiar with special programs and lenders who specialize in offering mortgages to those with lacklustre credit histories and they can often secure mortgages for people that traditional banks would refuse.
There is no fee on your part to use a mortgage broker. Rather, the broker receives a referral fee/commission from the lender who provides you with the mortgage product. A broker’s payment is totally dependent on securing you a mortgage, so you know they’re going to work very hard to make you happy and to get you to sign on the dotted line.
Why Use a Bank to Get a Mortgage?
While using a mortgage broker has many benefits, there are also perks to using a bank to get your mortgage. Going to a bank for a mortgage can create an extra level of comfort and security if you’ve been with the financial institution for many years. You may even have a personal, long-term relationship with one of the bank’s financial representatives – which could help you get the lowest mortgage interest rate possible.
Although banks don’t have the same incentive to get you the lowest, most favourable rates like a mortgage broker does, if they are your regular financial service provider, they have a better overall picture of your entire financial health and goals. Because banks are anxious to provide mortgages (because it helps secure a long-term and profitable relationship), they will often entice clients with perks like paying the home’s appraisal fee, giving you a cashback bonus, and making it easier for you to get a home equity line of credit.
Finally, it can be nice to have all your financial services overseen by one institution. It can be handy to have only one company to work with that handles the majority of your financial affairs. If a bank appeals to you more than a broker, it’s also worth considering alternatives like an online bank or credit union. For instance, credit unions are a solid option: they offer a variety of financial products and services similar to traditional banks, but often have better rates.
Mortgage Broker vs Bank: How to Choose!
There is no clear-cut answer as to whether a mortgage broker or bank is best for you. It really comes down to choosing the option that makes you the most comfortable and suits your financial circumstances. Buying a house is one of the biggest purchases you’ll ever make, so be sure that whatever method you choose to procure a mortgage is one you trust and can live with in the long term.
For questions please don’t hesitate to contact me, I’m always here to answer your questions.