Bank Specialist vs Mortgage Broker SIMPLIFIED

[civicHB]

The question of whether to use a bank vs. a mortgage broker seems to come up every few weeks and this might help those that are unfamiliar with the pros/cons of each. .

BANK SPECIALIST
This would be the person you would use if you went to your local TD/BMO/RBC e.t.c. (Some of them even can come meet you...mobile specialists I believe)

Advantages

Convenience/ease of viewing current mortgage balance:
If you already do your banking with the bank you are seeing, then you have one central location for all your banking/mortgage financing needs. You can view balances online with the rest of your statements and such.

Mortgage might make you eligible for more perks/features with the bank:
As an example, RBC may waive the monthly account fees (for your ATM transactions and such) if you have a mortgage, visa and chequing account through them. You are also building a relationship with a bank and they do have lots of services that you may need later on, auto Insurance/ property insurance e.t.c

Possibility of less paperwork when applying for the mortgage:
If you plan on using the bank you already bank with, then they already see your direct deposit pay stubs and any other assets (rrsp's, saving...e.t.c). They would not require you to provide them with the info. This is a minor pro, but still a pro.

Disadvantages

Banks posted rates are typically higher than the competition:
Usually you have to negotiate with a bank; they don't come out firing with the best rate available. It is possible that they'll match what you get elsewhere...but why should they make you go shop for the best rate?

Bank Specialist works for the bank, NOT for you:
The bank specialist is employed by the bank and is looking out for the banks best interests. The specialist might also try convincing you to add on other of the banks products. I could go on about how much of a negative this is but I'll leave it at that.

You will need a separate credit check for each bank specialist you plan on visiting:
This is a minor negative, but still a negative. Also, if one bank disapproves you, then you will most likely be wasting your time by visiting other banks, thus possibly minimally affecting your credit score.

MORTGAGE BROKER
This would be the person helping you if you went to a mortgage brokerage office. Typical names that might be familiar are The Mortgage Group, CanEquity, AlbertaMortgageCentre..e.t.c

Advantages

Mortgage Broker works on YOUR behalf:
The broker is independent of the lending institutions and has no ties to any of them. The borrower can be confident that they are receiving the best rate accessible by that particular broker. There is no need to negotiate and wonder/ponder if you received the best possible rate.

Mortgage Broker has access to many lenders:
This is pretty simple, based on the information collected the broker will know which lending firm would be able to best cater to the individual. Some lenders like first time buyers, some like investment borrowers, some like sub-prime applicants e.t.c


Better access to your mortgage broker, most are available 24/7:
Most banks are your typical 9-5, but with a broker most are available pretty much any time. Kind of like a real estate agent.
I'm not sure how the bank mobile specialists’ work, but they may also be available 24/7.

One credit check:
The broker only uses one credit check and does not need to request multiple records for each lender that he decides to submit your application to.

Training:
Mortgage brokers usually undergo a much more rigorous training in order to be legally allowed to sell mortgage products. There is a governing body and there are rules/guidelines that have to be followed. Mortgage brokers also work with multiple lenders and should be knowledgeable in products offered by the various lenders they use.

Disadvantages

NoName/Unknown, Too many small/independent Brokerages:
There are very many mortgage brokerage companies out there now, some have no actual offices and have been in business for very short periods of time. This could be a concern incase complications happen two or three years after you have bought a house. Ideally you would like to have a well established company handling your biggest purchase.
Just ensure you do your research on the mortgage company you plan on using.

The other disadvantages of a mortgage broker are the exact opposite of advantages to using a bank specialist.

Convenience/ease of viewing current mortgage balance:
You would have to go to a separate site (possibly email or call the mortgage company) to get up to the minute balances. This is more of an inconvenience than a disadvantage.

Mortgage might make you eligible for more perks/features with the bank:
Most banks now have many non-banking related products, auto/property/travel/health&dental insurance. There may be discounts available if you have your mortgage and everything through them. Although, there are very knowledgeable mortgage brokers who can point you in the right direction for all your other needs.

I will update this if I can think of anything else, hopefully it is unbiased. If not, mods please advise me and I’ll make the recommended adjustments

Bemnet

[sputnik]

Nice ad.

Hope you are a Beyond sponsor.

However there is something you neglected to mention.

I have gotten my last 3 mortgages through TD and their mortgage specialists. They essentially work on commission for TD and will give you the same rates as the mortgage brokers can get.

All I did was fax them the latest rates from a competing broker (like those posted on your website) 30 days before my mortgage was set to close and they have matched the rates every time.

This gave me the ability to get the best rate available but still have the flexibility with my mortgage conditions that very often the smaller lenders don't offer.

[kkhakh]

Sputnik,

It doesn't bother you that they wont offer you the best rate on their own?

You have to back them into a corner before you get what you already deserve. So much for a long term relationship...

Our banks love to boast about how they are all about their customers however they don't act on those premises.

Talk-the-Talk but never walk-the-walk!!

[sputnik]

Originally posted by kkhakh
Sputnik,

It doesn't bother you that they wont offer you the best rate on their own?

You have to back them into a corner before you get what you already deserve. So much for a long term relationship...

Our banks love to boast about how they are all about their customers however they don't act on those premises.

Talk-the-Talk but never walk-the-walk!!

Not really.

For me the choice of lender and flexible conditions is more important than saving .10% on my mortgage rate.

So I pick my lender first (TD) and then grind them for another .10% if I happen to find a lower rate online somewhere.

The problem with mortgage brokers is that they give the impression to their clients that having the lowest rate is the most important part of their mortgage. When in reality I like having lenders that are flexible with things like amortization lengths, increasing payments or making larger lump sum payments.

When you go to a mortgage broker they show you the lowest rate and you are sometimes sucked into a mortgage that might have a low rate but has crappy terms or is with a little lender. That is not worth the .10% rate change.

Another thing that people have to recognize is that the banks "best rates" are usually the rates that they can hold for 120+ days. Meanwhile the mortgage broker "best rates" can sometimes only be held for 30 days.

[syeve]

All good points, just a couple of things...

First off, I still don't get why people think they can't view their mortgage info online if they go through a broker...I used a broker, she found a great rate at ATB, I now go to the atb website and view any mortgage details I want, again, the broker on BROKERS the deal. Once the mortgage is finalized your business is done. That leads to my second issue;

NoName/Unknown, Too many small/independent Brokerages:
There are very many mortgage brokerage companies out there now, some have no actual offices and have been in business for very short periods of time. This could be a concern incase complications happen two or three years after you have bought a house. Ideally you would like to have a well established company handling your biggest purchase.
Just ensure you do your research on the mortgage company you plan on using."

I couldn't care less if the broker I used goes out of business the next day, if he/she gets me the best rate, that's all I care about.

Other than that I think it's a pretty good summary.

[Mibz]

I got extremely flexible conditions through a broker. Honestly I don't see any difference between the two except that my buddy the mortgage broker gets the commission instead of that guy that works at the bank :P

If I had a friend who did mortgages at the bank I'd probably end up using him instead.

[Tik-Tok]

Originally posted by kkhakh


It doesn't bother you that they wont offer you the best rate on their own?

Does it bother you that car dealerships don't offer you the best price on their own? Or stores, or any private sales?

It's how people/business's make money If you think brokers are working solely in YOUR best interest, your out of your mind. They're making profit, just like anyone else.

Personally, it only took talking to 2 brokers, and 2 banks (my previous mortgage bank, and my daily banking one) to find a kick ass deal last spring (3.79%, 2% cash back, 5 year fixed).

[civicHB]

Very valid points sputnik, and this is why it is important to ensure that you are dealing with a reputable and competent mortgage broker. There are more important things other than the rate; pre-payment penalty, amortization lengths e.t.c and a competent broker would ensure that all aspects of your mortgage are win win...not just the rate.

As far as a little lender is concerned, as long as the loan conditions are appropriate, size of lender should not matter.

Bemnet

Originally posted by sputnik


The problem with mortgage brokers is that they give the impression to their clients that having the lowest rate is the most important part of their mortgage. When in reality I like having lenders that are flexible with things like amortization lengths, increasing payments or making larger lump sum payments.

When you go to a mortgage broker they show you the lowest rate and you are sometimes sucked into a mortgage that might have a low rate but has crappy terms or is with a little lender. That is not worth the .10% rate change.

Another thing that people have to recognize is that the banks "best rates" are usually the rates that they can hold for 120+ days. Meanwhile the mortgage broker "best rates" can sometimes only be held for 30 days.

[civicHB]

10 questions to ask your banker


1. What long-term mortgage strategies do you propose for your customers and why?

2. What are your accreditations as a mortgage professional? For how long have you been arranging mortgages exclusively? How many mortgages do you arrange in a year?

3. How many different mortgage products do you offer? If I don’t like the products you offer, what other options can you give me?

4. What kind of follow-up service do you deliver after the mortgage has funded?

5. What tools do you have that will help me pay off my mortgage quicker? Is there a penalty if I pay my mortgage off too quickly?

6. If I take a variable rate mortgage, and choose to lock into a fixed mortgage, what will be involved? What type of rate guarantee will you
offer on conversion?

7. Does my credit score affect the rate you offer, and if so, how?

8. What is the up-front charge for mortgage insurance? Should we include it in our mortgage or pay it in advance? Why?

9.If I didn’t do business with your company, which other companies
would you suggest and why?


10 questions to ask your broker



1 What is your opinion on the future movement of interest rates? why?

2. What long term mortgage strategies do you propose for your clients? Why?

3. What is your process for ensuring I am informed and prepared for each step of the process?

4. What are your accreditations as a mortgage professional? How long have you been arranging mortgages exclusively for? How many mortgages do you arrange in a year?

5. What tools do you have that will help me pay off my mortgage more quickly? Is there a penalty if I pay my mortgage off quickly?

6. Would you suggest a mixed or variable rate mortgage? Why?

7. What is the up-front charge for mortgage insurance? Should we include it in our mortgage or pay it in advance? Why?

8. What are some popular mortgage products on the market that you don’t have access to?

9. If I didn’t arrange my mortgage with you, who would you suggest and why?

[dezmarez]

Originally posted by Mibz


If I had a friend who did mortgages at the bank I'd probably end up using him instead.

or someone you met on beyond haha

all in all a good summary,

bank specialist is also able to give you overall advice not just on the mortgage side, when in reality, mortgages and investments go hand in hand...

IE) paying off your mtg faster or contributing to your rsp's,
they then can offer you advice on which type of investment to go into your rsp's so and and so forth... maybe you need a ULOC to furnish your home, the bank rep dealing with your mortgage knows your situation..better relationship...better chance of getting approved..

both have their pros and cons...

[ExtraSlow]

I got screwed on my last mortgage through a broker.
He set everything up with my bank, the same bank as the house I was selling. Assured me since it was the same bank for each one, I wouldn't get the termination penalty. He told me he'd worked that out with them. That was a major factor for me, since the penalty was large.
In the end, the bank hit me with the full, hefty penalty, and they refused to budge on it, despite the fact I was opening a new mortgage from which they would make much more money. My mortgage broker was extremely unhelpful, and eventually stopped returning my calls.

Lesson learned. Get everything in writing. "Relationship" is good for nothing.

[Mys73ri0]

Originally posted by ExtraSlow
I got screwed on my last mortgage through a broker.
He set everything up with my bank, the same bank as the house I was selling. Assured me since it was the same bank for each one, I wouldn't get the termination penalty. He told me he'd worked that out with them. That was a major factor for me, since the penalty was large.
In the end, the bank hit me with the full, hefty penalty, and they refused to budge on it, despite the fact I was opening a new mortgage from which they would make much more money. My mortgage broker was extremely unhelpful, and eventually stopped returning my calls.

Lesson learned. Get everything in writing. "Relationship" is good for nothing.

he got your commission and probably just ran with it... that's a big bonus to dealing with the bank directly... if something goes wrong at least you know where to find them, and if branch doesn't want to help you there's plenty of other branches that will...

out of curiousity, can you set up heloc's through brokers on your mortgages?

[quazimoto]

Here's the issue with mortgage brokers and why in time I am sure they will be phased out or significantly altered by CMHC.

When you walk into a bank and talk to one of their Financial Advisors with setting up a mortgage the person you are dealing with has no financial reason to give you a mortgage they know you can't afford.

Brokers in all honesty do not care about you, the home you are buying, the mortgage you want. They are there simply to collect a commission on your behalf for doing what is a rather simple job. The problem is that when a Broker is making thousands of dollars for setting up your mortgage they will do next to anything to ensure you get that mortgage.

Often times and this has been documentated they will lie and even submit false documents to obtain CMHC approval. Often this has more to do with misrepresentation of revenue from the people applying for the mortgage. Quite often they will set mortgages up for people knowing full well they are most likely not capable of affording the mortgage.

Quite simply the people at the bank will tell it to you as it is. They will tell you if you can afford it. They won't lie to force a mortgage through just because it does not benefit them in any way.

So while they might get you a rate that is .2% or .3% better they really don't care about your needs and interests just remember that.

[sputnik]

Originally posted by quazimoto
Brokers in all honesty do not care about you, the home you are buying, the mortgage you want. They are there simply to collect a commission on your behalf for doing what is a rather simple job. The problem is that when a Broker is making thousands of dollars for setting up your mortgage they will do next to anything to ensure you get that mortgage.

QFT

[civicHB]

Originally posted by quazimoto
Here's the issue with mortgage brokers and why in time I am sure they will be phased out or significantly altered by CMHC.

When you walk into a bank and talk to one of their Financial Advisors with setting up a mortgage the person you are dealing with has no financial reason to give you a mortgage they know you can't afford.

No financial reason? most bank mortgage reps are paid on commission. That is financial reason enough. In fact, banks use some of the shadiest methods to convince buyers to use them vs. brokers. I personally will not process an application that I think the applicant cannot afford, as having someone fall into financial trouble down the road is not my goal. Trying to make a few dollars by processing sub par applications is not worth it.

Originally posted by quazimoto


Often times and this has been documentated they will lie and even submit false documents to obtain CMHC approval. Often this has more to do with misrepresentation of revenue from the people applying for the mortgage. Quite often they will set mortgages up for people knowing full well they are most likely not capable of affording the mortgage.

True. This occasionally happens and the brokers involved in such activities have given the rest of us a bad reputation.
Setting a mortgage for someone that you know cannot clearly afford it is just plain wrong.

Originally posted by quazimoto

Quite simply the people at the bank will tell it to you as it is. They will tell you if you can afford it. They won't lie to force a mortgage through just because it does not benefit them in any way.

haha this is quite laughable. Mortgages are the bread and butter of banks and they are going to great lenghts to keep up with Mortgage Brokers. The number of mortgages processed by mortgage brokers is increasing for a reason.

I'm surprised there are no examples of bad stories that bank users have experienced.

Bemnet

[sputnik]

Originally posted by civicHB
haha this is quite laughable. Mortgages are the bread and butter of banks and they are going to great lenghts to keep up with Mortgage Brokers. The number of mortgages processed by mortgage brokers is increasing for a reason.

I think you misread him.

He was saying that banks have no incentive to get people with bad credit or questionable finances into a mortgage.

The last thing a bank wants is to have to foreclose and sell a house at pennies on the dollar.

Originally posted by civicHB
I'm surprised there are no examples of bad stories that bank users have experienced.

What would be the worst bank story? Paying an additional 20 basis points on your mortgage rate?

I have found my experience with the banks to be pretty rock solid and competitive.

[quazimoto]

No they are rock solid.

No the advisors at banks that setup mortgages DO NOT receive a commission. They do receive a yearly salary however which is not based upon how many mortgages they establish.

Banks do have Mortgage Specialists which are not attached to any branch that are more like mortgage brokers and even then this is where the shady deals come in.

The only thing a broker will do is save you a nominal amount of money. Don't kid around or lie brokers do not care about you, your mortgage rate, your monthly payment, if you can afford it or not. They are simply there to collect a commission.

If anything it is mortgage brokers that will continue to place people in the so-called housing bubble by attempting to force through mortgages through CMHC that shouldn't be done in the first place.

I don't know why you deny this or attempt to make the banks look bad. There are way more horror stories from people using brokers and getting products they never wanted. Heck I was forced into a huge HELOC without even knowing it by a broker.

If brokers were working on a FIXED annual salary all the sudden you would see how they were operating would be totally different as there would be no benefit to the broker to pass through shady deal. I mean come on I know a cab driver that got a $600,000 mortgage off of his salary and his wife's salary when they both combined barely gross $50,000 a year.

[quazimoto]

Originally posted by civicHB


haha this is quite laughable. Mortgages are the bread and butter of banks and they are going to great lenghts to keep up with Mortgage Brokers. The number of mortgages processed by mortgage brokers is increasing for a reason.

I'm surprised there are no examples of bad stories that bank users have experienced.

Bemnet

Banks actually try to push mutual funds and RRSP's above anything else as they are products that are extremely profitable for the bank. A 3% return on an investment is anything a major financial institution would be excited about.

[skandalouz_08]

Originally posted by quazimoto


Banks actually try to push mutual funds and RRSP's above anything else as they are products that are extremely profitable for the bank. A 3% return on an investment is anything a major financial institution would be excited about.

Its very true, mutual funds and other investment products are way more profitable to banks than any mortgage will be.

A majority of bankers work on salary so while they do try to give you a mortgage, most customers are more concerned about the rate they can get rather than the amount they can actually afford. If they can't get it at a bank, then of course they will go to a broker.

Banks try to push relationship building with customers while brokers are a one time relationship type of deal...for the most part. I know lots of brokers that work their butts off for their clients and will go great lengths to ensure the client is happy and will be a repeat customer.

[Toma]

Broker Hands down.

The obvious corruption in the system or kick backs sicken me, but I have owned multiple houses in this city, tried multiple banks, on multiple occassions, presenting the identical info, and EVRYTIME, the broker either got me a mortgage where the bank denied me, or at a better rate.

Once, it was even the same fucking bank that the mortgage ended up at!!

I dunno what kind of crooked BS goes on behind the scenes. And it does piss me off.

But it is what it is.