If you’re planning to buy a house but you don’t know where to get a loan, what’s better between a mortgage broker vs bank?

Mortgage brokers are popular among bargain hunters, while banks are for people looking for secure, fast transactions. But which of these benefits fit your needs and budget better? Our experts will guide you all the way through this article.

How Do Mortgage Brokers Work?

Mortgage brokers are considered as the middleman between you and mortgage lenders. They help you search for a bank or direct lender—one that provides the home loan you’re seeking.

two women in discussion

They’re known as professionals. They take courses and examinations in reputable institutions such as Mortgage Professionals Canada (MPC). And they even need to have a valid license in order to work.

Most mortgage brokers may be working with financial institutions. But that doesn’t mean they are direct lenders. They are simply mortgage specialists who:

Some popular mortgage brokerage firms in Canada are:

mini house and key

Pros and Cons of a Mortgage Broker

PROS

CONS

How Do Banks Work?

A bank is a financial institution that provides you the mortgage loans you need. You don’t need a third party here—you can directly inquire from loan officers and get your home loan once you’ve filled out all necessary documentation, assuming if you got the approval.

Bank buildings

Private lenders typically…

Some CMHC-approved mortgage lenders in Canada are:

Personal Banking

PROS

CONS

How Do These Two Institutions Differ?

We’re done defining what these two do. Now, it’s time to differentiate a mortgage broker vs bank. Let’s see which one is best in each category.

Rates

Mortgage brokers require you to pay up to 2-5% of your mortgage value in commissions. But one of the mortgage broker pros is they have the ability to find a low-interest rate, or a much cheaper mortgage fee in general.

data and charts on a tablet

Banks, on the other hand, charge you application, underwriting, and origination fees. These also add up to 2-5% of your mortgage value. But they can offer discounts for loyal customers so negotiation can be possible here.

There, there is technically no real winner if we compare rates between mortgage brokers vs lenders. There are too many factors that can affect the final rate a homebuyer needs to pay.

Winner: It Depends

Market Share

Broker market share has actually been close up to 19.3% last 2020. It has been the highest share the broker market has ever achieved. The lending market share was down 7.5% so it plummeted down to 15.6%.

So which is better in this category, a broker or a bank? Obviously, the middleman is the clear winner here!

Winner: Mortgage Brokers

Types of Lender

Mortgage brokers aren’t lenders. But even so, they have contact with major banks as well as with monoline lenders. The latter are non-bank lenders that specifically only offer mortgage services.

in discussion with a client

They are unlike traditional banks that provide personal banking accounts or cards. They don’t have storefronts or advertisements. And this is exactly why a licensed professional is capable of introducing you to the hidden, cheapest value and the most competitive rates offered by a big bank and credit union.

On the other hand, in the case of banks, there are different lenders that exist. Big banks, credit unions, mortgage bankers, and other financial institutions are usually involved in mortgage loans. 

But you can only have few institutions look at your documents. Why? Because every time you inquire, it negatively affects your credit score. 

Overall, it is basically way easier to approach brokers when you want to know all offers of different types of lenders.

Winner: Mortgage Brokers

Flexibility

Not all brokers require you to visit a physical location to discuss mortgage matters. There are those who set meetings over the Internet — be it over a phone or video call.

woman smiling

And even if you have to meet up physically, you can both discuss the most convenient time and place for you two.

Meanwhile, banks have business hours [1]. So you’d have to contact them whenever they’re only available. Not to mention you have to come to the branch when needed. For our team, the brokers once again take the lead here.

Winner: Mortgage Brokers

Chances of Getting a Loan or Mortgage

Brokers know how to reach out to several lenders, even the unfamiliar ones. And they can even help those who have low credit scores. In contrast, banks usually have a stricter policy. So it might be harder for you to get approval, especially if you have a bad credit history.

Even if a bank happens to offer a lower rate than a broker, you’re automatically out if you have negative creditworthiness. Thus, you have a better chance of obtaining a loan with brokers.

Winner: Mortgage Brokers

Others

Good mortgage brokers guide you on managing fees: from pre-approval, home appraisal, underwriting, up to closing fees. On the other hand, banks can only fully support you if you have a long, existing relationship with them. And you have to be the one to do all the negotiation.

talking to a client

You’ll be able to save hundreds if brokers manage to get lenders to waive some of the fees. And you don’t want to miss that chance at all.

Winner: Mortgage Brokers

Conclusion

Both a bank and mortgage broker offer completely different services. It might be clear as a sky that mortgage brokers can provide you all the help you need. Just approach your real estate agent and they’ll recommend one.

However, a bank can be handy in times too, most especially to first-time homebuyers. Our professional team recommends a bank if you don’t want to risk your funds and if you don’t mind missing better opportunities. And use a mortgage broker if your goal is to score the cheapest mortgage rates and added convenience.

Foster Mendez

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