Navigating how to apply for a home or commercial mortgage can be confusing and overwhelming. It’s why you need useful information to pick a trustworthy person to lead you through the process of acquiring your financing.
When you buy a home, you have the choice of applying for a mortgage through a Canadian banking institution or mortgage broker. But what is the difference between the two?
Bank Mortgage Manager
The bank mortgage manager works for the bank. Given they are a bank employee, they will be representing the bank’s interests first when extending you a mortgage contract. They may require you to be a customer of their bank. The bank’s mortgage manager only accesses products and mortgage funds available from that bank for your mortgage application. They can offer a range of interest rates and terms under the parameters dictated by the bank.
Having a mortgage with a regular banking institution may make it easier to refinance to one of their products or change terms of the loan in the future. The bank’s rates and penalties for a bank mortgage may be higher than other lenders. Bank mortgage managers may deny residential and commercial mortgages if the applicant doesn’t meet criteria under their lending terms. For example, bad credit scores or unusual payment arrangements.
Various banks have different terms and interest rates. So, it is up to the customers applying for mortgages to get information to make an informed decision.
Your bank mortgage manager will rarely refer you to another lender unless you don’t meet any of their conditions.
The majority of Canadians are still using banks as their primary mortgage lenders. The reason may be that they have already established a working relationship with their bank. Sometimes the process can be smoother, as the bank has access to all the financial data for the applicant.
Some people who have built a relationship with their bank may opt to go that route. They feel confident because the main banks have a long-standing history of lending, backed by government assurances.
A mortgage broker is a licensed professional who works with many banks and other lenders to obtain the best mortgage for you. They can get you into a mortgage agreement with a bank, but also have other lending options available. Because of the options to choose from, they may get you approved even if other lenders deny you.
Mortgage brokers usually take a 1 or 2% commission on the mortgage from the lender on finalized contracts. This payment generally comes from the lender and is not an out of pocket fee for an applicant. If fees in the contract are too pricey, terms can often be negotiated to lower them.
The mortgage broker’s search scope includes a wide range of financial institutions and lenders, like credit unions and independent lenders. They collect information from you and try to find the lender that best fits your mortgage needs and terms.
Looking outside the traditional lenders can be very helpful to people with poor credit, or other reasons banks declined their application. Mortgage brokers do the legwork of sifting through various lenders’ terms and interest rates and present options to you.
They may include established banks in the line-up of lender choices. A mortgage broker will go over all the information so that you can make an informed choice. Often a broker will work flexible hours and adjust schedules after banking hours to meet client needs.
They will negotiate the terms of your final choice with the lender, possibly saving you money. A mortgage broker’s expertise in the field helps them help you with terminology and negotiating tactics.
Be aware that the final mortgage contract is just between you and the lender.
As with all legal documents, clients should read the final negotiated contracts carefully before they sign.
Anyone dealing with mortgages, whether it is your bank or mortgage broker, has to be licensed with the Real Estate Council of Alberta. It is important to check into this before you retain their services. Some fraudulent mortgages have left people with a severe financial loss. Financial lenders are also regulated and monitored by the federal government.
The Alberta government licenses financial lenders and a list of licensed lenders can be obtained at your local registry office, or checked on the Alberta government website.
If you would like a free consultation with a Calgary mortgage broker, our licensed and professional staff at The Mortgage Group will be happy to answer any questions.