Shopping around for the best interest rate will substantially affects the overall cost of your residence, or the returns on your rental investment. There are two ways to compare interest rates across lending institutions in Montreal: negotiating in person at various banks, or letting a mortgage broker handle the negotiations for you.
Here are a few points to consider, when deciding whether to engage a mortgage broker in securing your financing.
What does a mortgage broker do?
Mortgage brokers will ask you, as the borrower, to submit an overview of your desired loan amount, income, assets and debt information, and other information relevant to your mortgage request. After receiving your file, they will contact every available lender, to see which one will give you the best interest rate, conditions and terms.
How do mortgage brokers get paid?
As a buyer or investor you won’t be expected to pay a broker; they get paid a commission by the lenders, based on the mortgage product that you end up choosing.
The pros of using a mortgage broker
Mortgage brokers have relationships with multiple lenders, from conventional lenders (banks) to alternative lenders such as private lenders, online banks, and smaller lending institutions. Smaller lenders are sometimes able to provide cheaper rates, since they don’t carry the same overhead costs as big banks.
While mortgage specialists at banks will be able to provide you with guidance about various offered products, they won’t be able to help you when it comes to comparing one of their mortgage products to that of another lender. Mortgage brokers, on the other hand, are well versed in comparing the pros and cons of different offers across various lending institutions.
Working with a mortgage brokers will also help you access lenders geared towards tailored lending solutions, such as short term loans for real estate flippers.
Another advantage is that brokers are able to serve homebuyers who have been turned away from traditional banks, such as borrowers with red flags in their credit report, or self employed borrowers.
Certain mortgage brokers are niched in delivering customized information to a specific type of client. For example, there are brokers specialized in helping newly immigrated buyers attain loans, helping students, senior citizens, non-English or French speakers, investors with non-traditional borrowing strategies, and more!
Since brokers work independently, they are unbiased when it comes to the lending institution they match you with. They aren’t incentivized to offer you add-on products such as insurance, credit cards and other lines of credit the way direct sales specialists would be.
Brokers will also clearly delineate the terms and conditions of your mortgage, so that there are no surprises should you decide to switch lenders at the end of your term. The same can’t always be said about in-house loan specialists at large banks!
Lastly, most brokers will offer their services completely online or over the phone. Others will offer to come to you , so it’s a bit easier to fit meetings into your schedule.
Many buyers choose to work with their primary lending institution when requesting a loan, as it avoids having to form a new relationship with a different bank. Working with your own bank offers a certain comfort level which some buyers may prioritize over savings.
Not all brokers work directly with clients (some prefer to correspond by phone or by email), while banks conduct all business in person. A bank may prove favourable for those who prefer face-t0-face meetings.
Lastly, working with one’s own bank can offer efficiencies during the application process – for example, banks already have direct access to credit information, account information and credit histories.
Whether working with a mortgage broker or on your own, shopping around for a mortgage is never a bad idea. Take the time to consider different options and to choose a lending plan most suited to your particular situation.