If you think a mortgage specialist at a bank is the same as a mortgage broker, you need to know the differences.
Ask any mortgage broker and they will tell you that there are a handful of misconceptions that the public has about working with a mortgage broker. From questioning their credentials (mortgage brokers are all regulated and licensed within their province) to assuming that the broker does not have access to the same rate as the banks (they do in fact – plus access to even more lending options) – mortgage brokers have heard it all!
With the recent changes to mortgage rules, which now mean everyone will have to go through a stress test or qualify using a minimum qualifying rate, the landscape is changing.
MYTH #1: Independent brokers don’t have access to the rates the banks do.
FACT: Not true. Lenders have access to MORE rates and lenders than banks. The bank brokers only have access to their own rates. A mortgage broker has rate access from Tier 1 banks in Canada, credit unions, monoline lenders, alternative lenders and private lenders. The extensive network of lender options allows brokers to ensure that you are not only getting the sharpest rates but that the mortgage product is also aligned to your needs.
MYTH #2: The consumer has to negotiate a rate directly with the lender.
FACT: Not true at all. Your mortgage broker will shop the market to find the best overall cost of borrowing for you. Brokers will look at all angles of the product to ensure it suits your unique and specific needs. You will not be expected to shop around or speak directly to the lender. This is a key difference from the bank where you are limited only to the bank rates and are left to negotiate with the bank’s mortgage specialist – who is paid by the bank. Working with a mortgage broker should not cost you a dime; the mortgage broker gets their commission from the lender.
MYTH #3: A broker’s goal is to move the mortgage on each renewal.
FACT: A good mortgage broker will present you with multiple options to secure the optimal product for your needs. This entails the broker looking at more than just the rate, but also specific elements of the product such as prepayment options, portability, penalty to break the mortgage, and mortgage charges. If the broker determines that the current lender is the most ideal for their client, then they will advise them to remain with their current lender. The end goal of renewal is simple: provide clients with the best advice at the time of renewal, just as they do at the time of origination.
MYTH #4: The broker receives a trailer fee if the client remains with the same lender at renewal.
FACT: This is determined on a case-by-case basis. At times, there is a small fee given to the broker if a client opts to renew with their current lender. This allows for accountability between the lender, broker and customer. However, this is not always the case and the details of each renewal will vary.
MYTH #5: If a broker moves a mortgage to a new lender upon renewal, then a full mortgage commission is paid to the broker, allowing the broker to obtain “passive income” by constantly switching clients over.
FACT: To clarify, if a client chooses to move their mortgage at the time of renewal after a broker presents them with the best options, then it is in fact considered to be a new deal. This means that the broker approaches the mortgage as a new file and takes the necessary steps associated with any new deal. The broker will earn a commission on this deal as if it were for a new client, which is paid by the financial intuition receiving the mortgage, not the consumer.
MYTH: 6: It costs a client more to renew with a mortgage broker.
FACT: Completely false. Clients SAVE MONEY when they work with a mortgage broker. A broker has access to a variety of lenders and can offer discounts banks can’t. Additionally, most mortgage brokers offer continuous advice and information to their clients and will be problem-solvers and advisors.
I’m not for or against banks or brokers, but I do tell my clients to explore all options and keep an open mind. There’s nothing to lose, only to gain. If you are in the market for a mortgage, allow me to introduce you to a mortgage broker from Gulfstream Financial (a Dominion Lending franchise in my office). Our mortgage broker will answer all your questions, help you with your mortgage, renewal, and anything in between.
Thanks for reading!
Rhonda
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