http://www.bc-mortgage-brokers.ca/getting-your-mortgage-from-a-mortgage-broker-vs-the-bank/
Getting Your Mortgage From A Mortgage Broker vs. The Bank
Why should I Get My Mortgage from a Mortgage Broker?
There is a question that I am often asked when I meet a new client
for the first time. It is often something like this: what advantages do
I have in dealing with a mortgage broker instead of my bank? I then
tell them many reasons that it is advantageous to work with a mortgage
broker instead of the bank, and I have at many times thought “There must
be many different people wondering this question, maybe I should write
something about it.”
In commemoration of my shiny
new mortgage website,
I decided to stop procrastinating and put all my thoughts to paper in a
very real way. So, this will get to the heart of my thoughts unlike
some
fancy marketing material that most brokerages will provide (yes…that is my company website).
Before I do, I must also state that I also have banks and credit
union lenders available to me, and there are certain situations where it
is best for me to place them with those institutions. It is not my
intent to slam those institutions, and really they will do what they are
allowed to get away with, and the onus is on people to be aware and
prepared.
Mortgage Brokers Will Save You Money
Most often, mortgage brokers will have the lowest rates available for
fixed rate and variable rate mortgages. It is not quite how it appears
on
mortgage broker websites
though, with the broker claiming that the banks offer posted rates when
they do in fact offer discounted rates. The reality is that the banks
are competitive with rates, even if they are not the best in the market.
However, the REAL advantages of saving money come from other aspects
of arranging a mortgage. I am of the opinion that these tactics that
many of the banks often pull are “dirty”. Make no mistake, they are not
there for the client’s benefit. Here are some of the tactics I have
seen or heard about:
For example, when someone gets a mortgage from a bank to buy a home
and they are a new customer, they will often be enticed by a good
interest rate, very competitive with what my lenders will offer. It is a
commonly known fact that in the mortgage industry that, when the
mortgage comes due for renewal, about 70% of people will just sign and
send the form back in to renew without comparing rates. Often out of
just the convenience of renewing easily, they do not bother to see if
they can do better for themselves. This is one situation where the
banks will use the posted rates that are usually listed on mortgage rate
sheets!
In contrast, most of my “A” mortgage lenders do not have posted rates
at all…the rates they offer are usually equal to or lower than banks
“discounted rates”. When one of my lenders sends you a renewal, the
rate they offer you is almost always what they are offering to the
public at that time via mortgage brokers like myself. If you wish to
renew at that time, you are receiving a rate based on a transparent,
open and honest policy. You are a valuable customer to them even after
they have your business.
Be Careful with Variable Rate Mortgages!
Related to the first point, if you obtain a variable rate mortgage
from a lender, one of the privilages you are allowed within the mortgage
contract is to lock into a fixed rate at a time of your choosing. If
you are with a bank lender and decide to do this, however, they will
offer you a posted rate to convert to a fixed rate mortgage. Posted
rates are typically 1%-1.4% higher than discounted rates that are always
offered by most of my lenders.
In contrast, my mortgage lenders again offer my clients an open,
transparent policy of providing the same fully discounted mortgage rates
that are offered to the public via mortgage brokers. This will save
you a lot of money in the long term, and is often not a consideration
thought about when seeking an approval.
Save Time on Searching For An “A” Mortgage rate
Despite the growth in the mortgage broker industry in recent years,
many people still don’t understand the role of a mortgage broker.
Here is an analogy: you decide you want to go to Hong Kong to do some
shopping, but you have never been there before and you have no idea how
to get around or the best places to go. You can go place to place
yourself and take a guess at what place offers the best deal and what
lender offers the best quality and value, or you can have a local to
help you. Someone who knows the area, knows the shops, and can help you
find what you are looking for quickly and easily. Further, you do not
have to pay for their help, as they receive a commission from the shop
for bringing you there.
This is a good analogy to explain what a mortgage broker does, except
that the mortgage broker industry is tightly regulated. There will be
examples of dishonest mortgage brokers out there, however it is no
different than the banks, for example
here and
here.
When working with a mortgage broker, you have an expert on your side
at knowing who is most likely to approve your application and who will
do their best to give you the best rates. Best of all is that it for
most mortgages we receive compensation from the mortgage lender, and you
do not have to pay any fees, just like when you get a mortgage from a
bank.
Your Credit Rating and HELOC Mortgages
You have spent a lot of time developing a good reputation for being
able to borrow money. You make your payments on time, you earn an
honest living and you are careful with money. You have some equity in
your home and you make the decision you want to be able to access some
of the equity in your home.
Many financial institutions offer Home Equity Line of Credit (HELOC)
mortgages, whether they are called a “Homeline Plan”, “Scotia Total
Equity Plan (STEP)” mortgage, etc. In Canada, normal mortgages are not
reported on the credit bureau. However, HELOC mortgages are. Try and
imagine the impact that a maxed out loan for the amount of your mortgage
will have on your credit. Approximately 30% of your credit score is
attributed to how much you have owing on your credit bureau and the
proportion of your credit balance to your credit limit.
Let us pretend for a second you have $15,000 of unsecured debt
normally reporting on your bureau and total limits of $30,000. That is
50% credit utilization on a total debt of $15,000. That is a reasonable
number and will be reflected in your beacon score. However, if you add
on a $300,000 mortgage including a HELOC mortgage it will show a
maximum limit of $300,000 and a balance of $300,000. Added to the above
you are showing total debts of $315,000 on a total credit availability
of $330,000. This can very much effect your score.
Why does this matter? I myself, if I was an outsider would believe
that the low score is quite explainable under these circumstances and
that when applying for credit in the future that the financial
institution would understand…
This assumption is WRONG…unfortunately for myself who has had many
mortgage applications that “make sense” only to get a decline. Most
financial institutions including the banks and mortgage companies have
investors that invest in these mortgages after they are funded. These
investors oblige all the mortgages in a portfolio they are invested in
to meet certain criteria. Essentially, mortgage criteria has to fit in a
box for it to be a qualifying investment. Most of the time, I do not
get an exception for these kinds of mortgages.
All the banks report any mortgage with a HELOC attached to the credit
bureau agency. However, I have lenders available who DO NOT report
HELOC mortgages on the credit bureau. This is a much more desirable
situation to be in.
Creative Mortgages That Help You!
I am often making suggestions to clients to help them finance or
improve their finances that are at least somewhat “out of the box
thinking” solutions that clients virtually never will receive from the
bank. One example of a solution that I offer that is not available from
the banks is a program to make your mortgage tax deductible called
TDMP. This solutions is capable of allowing you to be able to pay off
your mortgage over 10 years faster than traditional payment without you
spending any more money on mortgage payments!
This is just one example of the many ways in which I as a mortgage broker provide value to my clients.
Mortgage Life and Disability Insurance
Many people choose the optional life and disability insurance that is
offered to them with their mortgage. Banks and mortgage brokers both
provide this service. However, the coverage provided by a bank is only
good for mortgages provided by the bank. In other words, it is not
portable if you wish to change institutions.
This can prove to be a real challenge to some people, particularly if
they have had health issues since obtaining their policy. It often
means they cannot leave their current mortgage lender even if that
lender does not offer them a good mortgage rate because it would mean
having to re-qualify for a different mortgage insurance plan and being
subject to either higher premiums, or being refused coverage completely.
With a mortgage broker, this does not happen because our mortgage
life and disability insurance is portable. This allows someone who has
this mortgage insurance coverage to change lenders and obtain the best
rate available and still keep their mortgage insurance coverage. This
flexibility to have your mortgage where it is best for you is just
another transparent aspect of financing your home with a mortgage
broker.
Don’t Wait, It’s Easy To Work With A Mortgage Broker
I am very accessible to my clients, and can meet you at a time and
place convenient for you. You do not have to come to a branch to meet
with me. I am responsive in returning telephone calls and am available
on evenings and weekends. Please take one minute to complete some basic
information below and I will be in touch with you very shortly.
For more information or to get started with your next or first real estate investment contact:
Anne Brill
Centum Metrocapp
(416) 289-2224
I have a favourite
saying, which is “the only constant in life is change.” This certainly applies to the
mortgage industry over the past few years. 
The Smiths recently
approached their mortgage agent to inquire about refinancing. Their
application was strong, with a loan-to-value of only 75%. 
items
to charity. The task of putting your home in order may seem daunting
but will have long reaching impact, as the sense of harmonization is
deeper than material possessions.