How to get the best deal on your mortgage.

In order to realize your home ownership dreams you need a good financial partner.Owning your own home is one of the most important decisions anyone will make. With interest rates near historic lows, market affordability is allowing many Canadians to realize their home ownership dreams.

In order to make this dream a reality, you need a good financial partner. Someone who can get you the best deal and look out for your needs over the life of your home’s amortization. Thankfully there are some excellent options available.

So who can help you get that deal, and what are the pros and cons of dealing with them?

Bank

Mortgage Broker

Pros

  • Banks are a known entity that you likely have an existing relationship with.
  • Banks offer products specifically geared towards bill & debt consolidation that can help improve cash flow & minimize borrowing costs.
  • By understanding your needs & requirements, mortgage brokers are able to shop the market for the best possible mortgage and rate.
  • Brokers negotiate with lenders on your behalf, and secure the lowest rate for the type of mortgage you need.

Cons

  • Banks have limited flexibility, and are restricted to the products they offer.
  • Banks may reduce their posted rates, but only if you are in good financial health and are willing to negotiate.
  • Some new home buyers and renewing mortgage owners are hesitant to use brokers because of loyalty to their banks.

The first key to consider in getting a better mortgage deal, is how important is getting access to the entire mortgage market? If this is important, then you might want to consider a mortgage broker.

 

47% of all Canadian new mortgage borrowers in 2012 obtained their financing through a mortgage broker.

47% of all Canadian new mortgage borrowers in 2012 obtained their financing through a mortgage broker, and brokers were involved in 25% of all mortgages combined.

Source: CAAMP Annual State of the Residential Mortgage Market in Canada, Fall 2012

 

A broker will save you the time and energy needed to apply to multiple financial institutions on your own. Based on your unique situation, brokers will search the marketplace for suitable mortgages – and help you develop strategies to pay off your mortgage sooner.

When brokers arrange a mortgage through a financial institution, they do not charge you anything. Instead, the lender pays the broker a fee when the financing is in place. The broker helps you research the market and only gets paid once everything is delivered.

Often banks view mortgage brokers as a necessary sales channel to their retail branch operations. For these reasons, the mortgage brokerage industry has seen tremendous growth over the past few years.

When looking at Banks versus Mortgage Brokers, there are a number of key things to consider when deciding who you want to work with:

Bank

Mortgage Broker

Independent Advice

  • Banks can provide expert advice, but only about their products and services.
  • Because brokers negotiate mortgages from various lenders, you are not tied to one lender or one type of mortgage – and they have a tendency to be objective and unbiased in their recommendations.

Mortgage Choice

  • Banks are limited to the rates and products they sell.
  • Through established relationships and electronic access to most major lenders in Canada, mortgage brokers offer a wide range of rates and features.

Competitive Rates

  • Banks rarely lead with their best rate, but will offer a discount depending on your financial profile or current status.
  • The size of the discount will depend on your financial health and how hard you negotiate.
  • Brokers are focused on getting you the best possible rate by leveraging their extensive lender network.
  • Brokers are motivated to get you the lowest rate possible to earn your business, trust, and referrals over the long haul.

Specialized Knowledge

  • Banks have a good understanding of their products, features, and rate availability. However sometimes their products have limited options or a bias towards the banks – potentially leaving you in an uncomfortable financial situation down the road.
  • Through training, certification, and experience, mortgage brokers have a good understanding of the products, features and rates available in the market.
  • They also strive to explain the complex industry terminology, so you know exactly what you’re getting into.

Reputable Lenders

  • Banks have a high degree of dependability, and are very reputable.
  • Brokers only deal with reputable and established Canadian financial institutions – plus they have access to competitive rates and features that may not be found at your local financial institution.

Bill & Debt Consolidation

  • Banks can improve a customer’s cash flow and minimize borrowing costs by customizing a unique borrowing strategy – taking into account all the mortgages, credit cards, and lines of credit held with them as part of a comprehensive bill & debt strategy.
  • Mortgage brokers can combine all of your high-interest debt – including debt from credit cards, auto loans and personal lines of credit – into one low-rate mortgage loan, even lower than a personal line of credit. Brokers are able to do this by using the equity in your property.

In SummaryWho's in the strongest position to get you the best mortgage deal today, and in the future?

In order to get the best deal on your mortgage, start by deciding who’s in the best position to help secure the lowest possible mortgage rate – who has your interests at heart, and who will take the time to understands your unique needs and requirements?

Then you will truly be in an strong position to get the best mortgage deal today, and in the future.