What are the advantages of using a mortgage broker vs a bank?
New clients often ask me, “Why should I get a mortgage from a mortgage broker vs. the bank? What advantages do you offer?”. I thought that there must be many people wondering about this.
Before I detail the advantages of working with a mortgage broker vs. bank, I will state that I also have banks and credit union lenders available to me, and there are certain situations where banks are the best choice for my clients. It is not my intent to slam those institutions, but they will do what they are allowed to get away with, and the onus is on mortgage brokers to prepare clients as best as they can.
You Will Save Money With A Mortgage Broker
When comparing mortgage brokers vs. banks, the first thing most people will consider is interest rates. Mortgage brokers will often have the lowest pricing available for fixed-rate and variable-rate mortgages. It is not quite how it appears on mortgage broker websites with the broker claiming that the banks offer posted rates when they do offer discounted rates. The reality is that the bank’s mortgage rates are competitive, even if they are not often the best in the market.
However, what is more important is that with a mortgage broker, you have an advocate that represents you. With the bank, you deal with employees of the bank, and their only obligation is to do the best they can for their employer. They are not there for your benefit. Here are some of the tactics I have seen or heard about:
When someone gets a mortgage from a bank to buy a home, the bank often will offer an interest rate that is competitive with what my lenders will offer. People in the mortgage industry know that when the mortgage comes due for renewal, about 70% of people will just sign and send the mortgage renewal form back in to renew their mortgage without comparing mortgage broker vs. bank rates. Often out of the convenience of renewing quickly, they do not see if they can get a better deal. This is one situation where the banks will use posted rates or less than the best pricing they can offer to increase profitability at your expense.
In contrast, most of my “A” mortgage lenders do not have posted rates. The rates that they offer are usually equal to or lower than banks “discounted rates.” When one of my mortgage lenders sends you a renewal, the interest
rate they offer you is almost always what they are providing to the public at that time. If you wish to renew with one of my lenders 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, not just when they are trying to get your business.
Be Careful with Variable Rate Mortgages!
If you obtain a variable rate mortgage, one of the privileges allowed is to lock into a fixed rate at any time. If you are with a bank and decide to do this, however, they will often not offer their best rates to convert to a fixed-rate mortgage. Most of my mortgage lenders will provide you with the best rates they have available.
Save Time on Searching For An “A” Mortgage rate
Despite the growth of the mortgage broker industry, many people still don’t understand the role of a mortgage broker.
When working with a mortgage broker vs. bank, you have an expert on your side, knowing who is most likely to approve your application and who will give you the best mortgage rates. For most mortgages we arrange, we receive compensation from the mortgage lender, and you do not have to pay me any fees, just like when you get a mortgage from a bank.
Creative Mortgages That Help You!
I make 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 receive from the bank. One example of a solution not available from the banks is a way to make your mortgage tax-deductible. This solution is capable of allowing you to be able to pay off your mortgage potentially years faster than traditional mortgage payment with no increase in mortgage payments!
This example is just one of the many ways in which I, as a mortgage broker provide additional value to my clients.
Mortgage Life and Disability Insurance
Another point of comparison between mortgage brokers vs. the bank is regarding the creditor insurance each mortgage provider offers. Many people choose the optional life and disability insurance that the bank provides with their mortgage. Banks and mortgage brokers both provide this service. However, the coverage provided by a bank is only valid for mortgages provided by THAT bank. In other words, it is not portable if you wish to change institutions.
This can prove to be a challenge for some people, particularly if they have had health issues since obtaining their policy. It often means they cannot leave their current mortgage lender, because it would mean having to re-qualify for a different mortgage insurance provider and being subject to either higher premiums or being refused coverage.
With a mortgage broker, our mortgage life and disability insurance are portable, allowing you to change lenders and obtain the best mortgage rates available while keeping your mortgage insurance coverage. This flexibility to have your mortgage where it is best for you is another transparent aspect of financing your home with a mortgage broker.
It’s Easy To Work With a mortgage broker vs. the bank
I am 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 to returning telephone calls and am available outside of regular business hours.