There is an age old debate that exists in the mortgage industry. This debate is centered on what entity is the best mortgage provider. Some argue that it is the major banks that are the best option, while others are convinced that the mortgage broker industry is the best bet.
The reality is that the average person has limited to no knowledge of the mortgage industry. As a result of this, they may believe that there are no differences between banks and mortgage brokers and the mortgage products that they offer.
In fact, it is no secret that sometimes the mortgage broker industry is looked upon as a sub par option when compared to major banks. Unfortunately, the general public has a misconception that mortgage brokers are not looking out for the best interest of their customers. This friends, could not be further from the truth.
I can tell you from my first hand experience that obtaining a mortgage through a mortgage broker, in most cases is the best option versus obtaining a mortgage through a chartered bank. Here is the reason why:
Mortgage Brokers Work With Multiple Lenders
Mortgage Brokers like FamilyLending.ca have established relationships with multiple mortgage lenders. It is not uncommon for a mortgage broker to know and work with 40 or more different lenders. These lenders can be major banks, medium sized mortgage companies, or new, up and coming private mortgage lenders. Because the mortgage broker, in this case FamilyLending.ca, has multiple relationships with a variety of lenders, they also have the ability to pick and chose mortgage interest rates and mortgage terms for their customers.
Mortgage Interest Rates Offered By Banks
If a customer obtains a mortgage from a bank, the bank is going to offer this customer their available rates on their mortgage products. If the customer is not happy with the rate offered, and they are proactive enough to make a request for a reduced rate, chances are they may obtain a slight discount on the interest rate. Please note though that just because the customer asks for the discount here does not necessarily mean that they will obtain it.
Mortgage Interest Rates Offered By Mortgage Brokers
Due to the fact that Mortgage Brokers work with a large network of lenders, this allows them to have more flexibility when picking an interest rate for their customers. For example, if a customer asks to have the most competitive mortgage interest rate currently available, chances are that the mortgage broker will be able to deliver on this for their customer. This is simply achieved by the mortgage broker surveying their existing lenders in order to see who has the most competitive interest rate offer. Once it is determined which lender has the desired interest rate for the customer, the mortgage would be set up through this particular lender.
Mortgage Terms Offered By Banks
The mortgage terms offered by banks are pretty much set in stone. This is not necessarily a bad thing. Banks are very much set on their ways and don’t easily deviate from their business strategies. However, what this does mean is that there is very little to no flexibility at all when it comes to adjusting the mortgage terms. Examples of mortgage terms would be things such as the maximum amortization allowed on a mortgage. Most recently in Canada the maximum amortization length of a mortgage was reduced from 35 years to 30 years on March 18th 2011. As a result, this means that most, if not all of the major banks in Canada will only be offering a maximum amortization of 30 years. This is done by the banks in order to keep in line with the rule changes implemented by the Government.
Mortgage Terms Offered By Mortgage Brokers
Again, due to the fact that Mortgage Brokers work with many different lenders, this means that they also have many different options in picking the appropriate mortgage terms for their customers. For example, in using the example above, if a customer requests a mortgage amortization length longer than 30 years, chances are that the Mortgage Broker can deliver on this for their customer. The Mortgage Broker is not limited to selecting the mortgage products for their customers from traditional lenders such as banks. Therefore, they may choose to obtain the mortgage for their customer from a lender that offers amortization periods longer than 30 years. There are still some lenders out there that are offering up to 40-year mortgages, despite the mortgage rule changes that occurred on March 18th 2011.
Overall, I am personally a fan of obtaining mortgages through Mortgage Brokers. The majority of the mortgages that I have obtained have been through mortgage brokers, and I have been very happy with my decision regarding this. I can confidently say that mortgage brokers have helped to save me thousands of dollars. Not to mention, their advice has been instrumental in helping me to make thousands as well.
Best Regards,
Neil Uttamsingh
Neil Uttamsingh is the President of First Rental Property. He provides knowledge and confidence to individuals looking to buy their first rental property. Follow Neil’s blog @ www.firstrentalproperty.com
Contact FamilyLending.ca for more information.