When looking for a good mortgage rate, there are two main options: going directly through a bank or working with a mortgage broker. Each can be a good option, depending on your financial situation. So how do you decide which one to try? Let’s look at the difference between banks versus mortgage brokers, their pros and cons, and how to figure out which is best for you.
The Difference Between Banks Versus Mortgage Brokers
The big difference between a bank and a mortgage broker is that a mortgage broker can provide you with mortgage products from several different lenders, while a bank can only give you the mortgage option from their own company. Mortgage brokers have access to a variety of lenders and rates, which means they can find the lowest possible rate for you and any specific terms you’re interested in, and brokers may even enjoy volume discounts, since they regularly do business with a variety of lenders.
Advantages of Banks
Here are some benefits of getting a mortgage directly from a bank:
- If you have been working with a particular bank for a long time, you may already trust your bank and be more familiar with it. This can be comforting in a large and important transaction, such as buying a home.
- If you have a pre-existing relationship with your bank, it may be possible to leverage your relationship to get a better rate or terms.
Disadvantages of Banks
Here are the drawbacks of getting a mortgage directly from a bank:
- Banks only offer their own products, so there is a limited selection that you can choose from.
- Some banks have a higher threshold for mortgage approval. This means that you may not be approved at a particular bank, and may have to shop around.
Advantages of Mortgage Brokers
Here are the benefits of getting a mortgage through a mortgage broker:
- Mortgage brokers compare products and rates from multiple lenders to offer you a wider selection.
- A mortgage broker may be able to offer you a discounted rate that you would otherwise not be able to acquire on your own.
- Mortgage brokers are legally obligated to work in your favour, so there is never any question about whether they are on your side.
- Mortgage brokers can access secondary lenders or “B-Lenders” who offer easier approvals, although sometimes at a slightly higher interest rate.
- The relationship between an experienced mortgage broker and a lender can help sway the process in your favour.
- The broker is paid by the lender who gets your mortgage business, so there is no cost to you for this service.
Disadvantages of Mortgage Brokers
Here are the drawbacks of getting a mortgage through a mortgage broker:
- Not every lender works with mortgage brokers, so you may still find a better product and rate by shopping around.
- Securing a mortgage through a broker may take longer and may require more paperwork, since you don’t have an existing relationship with them like you may have with a bank. This is especially a concern if you have a tight deadline for buying your home.
Alternative Options for Finding the Best Mortgage Rate
Generally, banks and mortgage brokers are the most popular options for finding a good mortgage rate, but they are not the only options. There are online comparison sites that can help you find a mortgage, or you can take a look at credit unions, trust companies, insurance companies and private lenders.
Should I Go Through a Bank or a Mortgage Broker?
In the end, deciding where to get a mortgage is a decision only you can make. Mortgage brokers can give you several options that you may not find on your own. Still, if you have a good relationship with your bank, it could be better to skip the middleman and go directly through your financial institution. Before deciding, take some time to shop online and compare lenders, which you can then use as leverage if your bank or mortgage broker does not find you as good of a rate. It is always a good idea to get several quotes and use the information to get the best possible deal for your mortgage.