The Well

Rachel Surman | Blog,Mortgages

Big Bank Or Mortgage Broker: The Ultimate Guide To Choosing A Mortgage

March 29, 2018

You’ve found the perfect home. Now all you need to do is find that perfect mortgage! This leads us to the classic conundrum for many Canadians looking to buy a home: should you choose a big bank or mortgage broker?

There are pros and cons to both. Choosing a mortgage is one of the most important (and expensive!) decisions of your life. We understand this and want to help you make the right choice. In this blog, we’ll weigh the pros and cons when it comes to choosing a big bank or mortgage broker so you can make an informed decision.

We also know that regardless of who you choose, your credit score will play an integral part in determining the rate you receive. This is why it’s crucial to monitor and understand your credit score before you’re ready to make an offer. 

What’s the difference between a big bank and a mortgage broker?

You can use a big bank or mortgage broker to get a mortgage. Getting a mortgage from a big bank typically means going to one of Canada’s 6 major banks and applying for a mortgage through them. Typically (but not always) people choose the bank they already bank with. Your bank will connect you with a lending officer to present you with the bank’s mortgage rates.

A mortgage broker, on the other hand,  is a licensed professional who compares mortgages on your behalf from a variety of lenders to find the best mortgage rates available to you. It might be helpful to think of a mortgage broker as a middle person between you and the lenders.  

Let’s get to the pros and cons of both.

Big Bank

This is the more traditional route when it comes to mortgages. Your bank offers familiarity and comfort, which is invaluable for many Canadians.

Big Bank Pros

  • It’s familiar

If you’ve been a customer at your bank for years, there is a certain trust that is hard for brokers to compete with. Many people still like going to a bank and meeting with someone face-to-face. If you have a good existing relationship with your bank, then it may make sense for you to choose this provider. When you’re a long-standing client, you do have some negotiating power.

Banks offer special perks

Negotiating power = perks! Banks offer more than just mortgages. If you decide to go with a big bank, you should be able to get other perks, such as unlimited transactions or free e-transfers. Banks have deep pockets and can do a lot for you if you’re confident enough to negotiate.

  • The convenience factor

Convenience is another selling point for banks when choosing a mortgage provider. If you like having all of your dealings in one place, a big bank may be a good choice for you.

Big Bank Cons

  • Higher interest rates

Going to a bank usually means you’ll receive higher interest rates on a mortgage rate that’s lower than the lowest rate available to you. This is because you’re only able to compare rates with the singular institution. You can usually negotiate for a better rate, but the first rate a bank gives you certainly shouldn’t be the one you end up choosing.

  • Fewer options

A mortgage officer from your bank isn’t comparing offers from different institutions – they are only considering the in-house products they offer. Also, your bank will be paid based on commissions and may not be fighting for you to get the best deal.

  • Stricter approval conditions

Canada’s big banks have rigid rules about the qualifications a borrower must meet. For people with bad credit history, a mortgage broker may be a better option for you.

Banks can offer some exciting perks, but you may not get the best available rate. Let’s move on to the mortgage broker option. 

Mortgage Broker

A mortgage broker has access to many different lenders and can provide you with typically better mortgage rates. But there are a few things you should be aware of before making a final decision.

Mortgage Broker Pros

  • Save time and effort

Mortgage brokers have access to many different lenders, including the major banks, credit unions, alternative lenders, and private lenders. They can compare lenders and look for the most competitive mortgage without being obligated to pick from any singular lender.

  • It’s a personalized experience

Mortgage brokers will not charge you a fee for shopping around. A broker is paid a “finder’s fee” by the lenders and has access to show you many different options. Some brokers will throw in extras, like assisting you in completing the application or even paying for things like land appraisals out of pocket. This is usually done in hopes you will use them again or recommend them to a friend.

  • The process can be online

Online brokerages have become increasingly popular and are a simple way to apply for a mortgage. These brokerages allow borrowers to easily compare mortgage rates without having to leave their home (much like getting a low-interest personal loan through Borrowell!).  Banks also have online applications, however, they don’t let you compare rates.

Mortgage Broker Cons

  • They *might* be out to make commissions

We hope this isn’t the case but your mortgage broker may not be getting you the best deal. They may try to convince you to take the product with the highest commission, as opposed to the best product for you.

To compare different mortgage options, check out Borrowell’s mortgage calculator here.

  • A mortgage broker may have “preferred providers”

A mortgage broker has an obligation to find the best mortgage product for you. But there is the chance that they may not actually look at all of the possible options. Be sure to ask lots of questions and do your research to make sure your broker is doing what they said they would.

  • Varying degrees of quality

There are many mortgage brokers to choose from. This means you could get someone very qualified, but you may not. Making sure your broker has the experience you need is important. Some mortgage products that offer the best rates may have restrictions that could cost you a lot of money down the road if they’re not appropriate for your situation.

How do I choose the best mortgage for me?

There are many factors to think about when it comes to choosing between a big bank or mortgage broker. Both have different selling points, which can make the decision difficult.

Our advice? Shop around! It doesn’t hurt to compare as many mortgage providers as possible. If you’re thinking about going the big bank route, be ready to negotiate to help you get the lowest rate. If a mortgage broker is more your style, talk to as many different brokers as possible to ensure they have your best interests in mind. Whether you decide to go with a big bank or mortgage broker, it’s your decision.

A final word

Becoming a homeowner isn’t easy. But you know what is? Checking your credit score. Monitoring your score over time can help you improve it!  Be sure to monitor your credit score well before applying for a mortgage and choosing between a big bank or mortgage broker. This will ensure you’re getting the best possible rate. From us at Borrowell, happy comparing!

Are you ready to find the best mortgage providers in Canada? Start with getting your credit score for free.

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