In the past, prospective home buyers turned exclusively to their banks for their mortgage needs, but you now have more options at your disposal with the growing presence of mortgage brokers. Independent mortgage brokers are licensed mortgage specialists who have access to multiple lenders and mortgage rates. They essentially negotiate the lowest rate for you, and because they acquire high quantities of mortgage products, mortgage brokers can pass volume discounts directly on to you.
| Bank | Mortgage Broker |
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|---|---|---|
| Market share1 |
60% | 40% |
| Description | Chartered banking institution with personal banking, credit card, loan and mortgage services. | Licensed mortgage specialist with access to multiple lenders and mortgage rates. An intermediary whose commission is paid by the lender providing the mortgage product. |
| Lender | Yes | No |
| Puts application together | Yes | Yes |
| Examples | TD, RBC, BMO, CIBC, Scotia, ING |
The Mortgage Centre, Dominion Lending, Safebridge Financial, True North Mortgage |
| Pros | Banks allow you to consolidate your services with a provider you have an ongoing relationship with and have deemed trustworthy. | Mortgage brokers essentially 'shop' around, negotiate for you, and present the lowest rate on the market. Volume discounts achieved by mortgage brokers are passed directly to you. |
| Cons | Banks can only access and offer you their own rates and products. Banks will regularly give discounts on their posted mortgage rates; however, you are responsible for this negotiation. | Mortgage brokers are a less familiar avenue, and first-time home buyers would not have pre-existing relationships with them. |
According to the Canadian Association of Accredited Mortgage Professionals (CAAMP), mortgage brokers represented 40% of total mortgage originations in 2009, up from 26% in 2003, with an even higher usage among first-time buyers (45%). This on the heels that mortgage holders reported that, on average, they obtained 1.96 quotes when they obtained their current mortgages.2
So, the increased number of quotes acquired reflects prospective home buyers' inclination to 'shop' around, a role essentially taken on by a mortgage broker.
In addition to the points introduced in the comparison chart above, there are other factors to consider when deciding between a bank and mortgage broker.
Although banks can offer some discounting for consolidating your services with them, there are many advantages to using a mortgage broker that many Canadians are unaware.
One of the main benefits of using a mortgage brokers is that they have access to, and knowledge of, the entire mortgage market. They can advise which lenders will consider your case and which will not based on your individual circumstances. This is particularly useful for people with poor credit ratings. Mortgage brokers have access to lenders who specialize in servicing people with adverse credit, and can leverage relationships with mainstream banks.
Mortgage brokers can also access exclusive deals not available on the open market, or negotiate a better interest rate or lower application fees from the lender in some cases.
In addition to banks, other financial institutions such as trust companies and credit unions also service mortgages. You can access these rates directly or through a mortgage broker.
Mortgage brokers will assist you in the application process, from pre-approval to home appraisal; however, it is important to note they are an origination service. A financial institution, not a mortgage broker, will provide and service your loan. The bank or lender will collect payments and provide customer service after the closing; however you can also reach out to your mortgage broker to help you throughout the life of your mortgage.
Many of the major Canadian banks sell through mortgage brokers including TD Bank, Scotiabank, CIBC and ING. In a recent survey conducted on our website, we asked our participating mortgage brokers which three lenders they work with the most. The most popular lenders were as follows:
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