Mortgage Brokers Have More Options than Banks
Updated: Apr 21
Article Courtesy:- Marianne Pierce
There’s rarely ever a bad time to purchase a new home. By and large, homes appreciate over time, and even if there’s a slump in the market having a home is no loss as you have a place to live. Once the market picks up again, you can sell. Investing in a home has been such a good bet in Canada that prices have gone up too much in some areas, creating barriers to home-ownership for some Canadians. This had led to the Government of Canada creating a number of different incentives for home buyers. One of the most innovative of these initiatives is the first-time home-buyers incentive, rolling out this September. Canadians meeting the criteria set out in the incentive can apply for a shared equity mortgage; the Government will provide you with 5% or 10% of the cost of the home. Once the home is sold, you’ll have to repay 5% or 10% of the home’s value - depending on which shared equity mortgage you obtained.
The shared equity mortgage is a great way of reducing the overall cost of your mortgage - you put down a percentage, the Government puts down a percentage, and you get a mortgage for the rest of the costs. The million dollar question (well, okay, the question usually averages about 450K in Canada) is this: who will you get your mortgage from? Mortgages are a complicated thing to navigate; closed, open, fixed, variable, and all the other variants and clauses you might see. They can be a bit daunting to understand, especially if you’re pursuing the knowledge on your own. That’s why you’ll usually go to someone knows about finances and you’ll likely choose between your bank and a mortgage broker.
Those who are immediately inclined to go with their bank should know that their desire is totally understandable - when you have a good relationship with your bank, and you’ve already planned out a lot of your finances with them, they can give you a lot of good advice. This article shouldn’t be understood as “don’t consult with your bank before getting a mortgage”. Going over mortgages with a financial planner can be a great way of making sure you’re getting a product that suits your needs. Rather, this article is designed to help you understand one important thing: mortgage brokers can offer many more mortgages than your bank can. Your bank can only offer you mortgages that fall under their banner whereas a mortgage broker can offer you mortgages from competing financial institutions. In other words, you quite simply have more options with a mortgage broker.
Some folks worry that mortgage brokers won’t give them the best product because one company might pay them more commission on one mortgage than another. This is a conflict you don’t have to worry about. Take the British Columbia Financial Institutions Commission for example: they state explicitly that a mortgage broker must disclose any conflict of interest that may arise. It makes economic sense, too; a mortgage broker who is known to offer the wrong mortgages to clients won’t be in business for very long.
In addition to more options, mortgage brokers can offer you more knowledge about mortgages. Banks are, by their nature, generalized; they’re dealing with every customer from the senior citizen who needs to know where their pension money is to the new business owner looking for a loan. Specialization is often good when it comes to finance, because it allows you to delve into the nitty gritty of policy; trust me when I say that reading the details of every possible financial offering is an overwhelming task. Mortgage brokers know mortgages, because they’ve spent the time analyzing all of the offerings available.
You know the advantages of comparative shopping; you can often get better rates and add-ons. You can often find one offering that’s almost strictly better than another; for your circumstances, one offering might quite simply be much preferable than another. Mortgage brokers also spare you the effort of doing this comparative shopping yourself; instead of going from bank to bank, they’ll do the research for you.
This certainly isn’t to say mortgage brokers can handle every part of getting a home for you. You’ll still need a team of people to help you get the best deal on the right home. You’ll certainly want a real estate agent to find the right place for you to call home. You’ll need to find a home insurance broker to find you the right insurance policy; mortgage brokers and home insurance brokers are mutually exclusive to avoid conflicts of interest. You might also find an experienced accountant to be an incredible asset as they can go over your finances with you, keep you abreast of tax incentives, and help you assess how a home could work into your overall investment portfolio.
You need a team of dedicated professionals to help you buy a home, and a mortgage broker is an extremely valuable asset to your team. You can talk to your bank about your financial situation, just as you’d talk to an insurance broker about what home insurance is best but your mortgage broker will help you find the best mortgage. Coupling their knowledge and the options they provide with the various benefits from the Government of Canada, a mortgage broker will get you the best mortgage possible .