Use a Mortgage Broker or Do It Yourself?
When researching mortgage brokers on the web you may likely find that many brokers advertise the fact that they have more than 50 lenders that they can access.
The premise is that the more lenders that you can access the better the chances that you will find a better deal on your mortgage. But, should you solely rely on a broker or should you do the contact work on your own?
One of the perks of using a mortgage broker is that they do have access to multiple lenders which is a huge advantage. But did you know that their pool of lenders has diminished over the past several years?
Why? The reason is that some of the banks have left the independent broker market as they are of the belief that they can enhance their own profitability by peddling mortgage directly to their clients on their own. Some of the bigger banks which have exited the independent broker market include the CIBC, BMO and ING along with several others and have been doing so since 2007.
Many mortgage borrowers also don’t realize that many brokers don’t compare all the lenders available to them. A survey conducted by Maritz Research revealed that typically for most broker that up to as much as 90 per cent of their volume generally goes to only 3 mortgage lenders.
The reason is that these brokers prefer to deal with a lender they know well versus a lender they only know partially. Another reason they do so is because they are likely to get a preferential rate and better service such as quick approval time from their main source of lenders. They also receive a financial incentive from a lender if they reach a certain volume.
This is not really a problem if the lender can provide the best mortgage for a borrower but it may not always be the case. One way to avoid this problem is to use a broker who has been established and is an experienced high-volume broker.
Here are some tips where you can get the best of both worlds and increase your odds of finding the best possible rates and mortgage deals.
- Contact non-brokers lenders on your own which includes BMO, RBC, ING, CIBC, HSBC, PC Financial and Manulife Bank.
- Use the services of a mortgage broker or obtain your own quote fro TD Bank, Scotiabank, National Bank, Canada Trust, Desjardins, Industrial Alliance, and the other major credit union banks.
- Use the services of a mortgage broker to obtain a quote from wholesale lenders such as Street Capital, MCAP, First National, Merix, MonCana Bank, ICICI bank, B2B Bank, Radius Financial and other similar wholesalers.
This approach allows you to spread your net further afield which can save you money on your mortgage.
The disadvantage in performing all this work by yourself is the time it take to do so. Another disadvantage of doing this on your own is that you could end up choosing a lender who has numerous restrictions cased in the fine print which might end up costing any savings you might have gained upfront.
Using comparison sites can also be risky because you will not be fully apprised of all limitations that come with them such as penalties, portability and policies which can affect mortgage increases.
Even if you think using a bank as the best route to go you might end up better off by using the services of an independent mortgage broker. A broker will likely have a better opportunity to find you a more flexible mortgage at a better rate and can offer you valuable financial advice on how you can save money on a mortgage.
Brokers are also a better choice if you don’t have a stellar credit history or if you are self-employed. Mortgage brokers also have a greater opportunity to find a lender which has a greater choice of features such as pre-paying a mortgage, extending your term before it is due, linked credit lines and lenders which have lower penalties and other advnatages.
Another thing about doing it on your own is that you have to have some degree of knowledge and expertise to conduct your own research in the first place. You have to know what questions to ask and the right questions to ask because the cheapest rate doesn’t always mean you are getting the best deal and could you much more than you expected.