All Things Home asked Ottawa mortgage broker and ATH columnist Nick Bachusky to explain some of the benefits of using mortgage brokers. Here’s his insightful response.
For many Canadians, mortgage brokers have become the go-to source for financing, according to a 2017 survey by Canada Mortgage and Housing Corporation (CMHC). For example, 55 per cent of first-time buyers in the survey counted on a broker to secure a mortgage for their home purchase.
The same survey found that the majority of those who used brokers – also referred to as agents – did so because they wanted a better deal or the advice and recommendations they felt a broker could provide.
All that being the case, why do some Canadians still turn to traditional lenders like banks instead of checking out a broker when it come to securing, renewing or refinancing a mortgage?
Even I didn’t know what a broker did
I think the number one reason for going the traditional borrowing route is not knowing what a mortgage agent can offer.
To be honest, before I became one I had no clue what a mortgage agent was or could do. I was working at a major bank and we were told that brokers only dealt with people who had poor credit and could not qualify at a major bank. It was only after meeting several former bank employees who had left to become mortgage agents that I realized what an incredible service it was. I immediately left the banking world to become a broker, who basically deals with a number of reputable lending institutions to secure the best mortgage rate and terms possible for a client.
The profession has only been around for roughly 30 years, so many older people have not learned about the benefits of using an agent. Luckily, our association, Mortgage Professionals Canada, is stepping up its game by educating Canadians about what we do.
We ourselves are also taking more training than ever. As well, becoming an agent is increasingly challenging. For example, we have to be re-certified with the Financial Services Commission of Ontario (FSCO), the provincial watchdog, every two years and pay a fee.
What about financial security and fees?
Another reason people might hesitate to meet with a mortgage agent is the perception that a bank is a safer option. This is not true.
Many of the mortgage-only lenders that we deal with have been in existence for decades and hold billions of dollars of mortgages in Canada. They are able to offer lower rates in many cases because, unlike a bank, they do not have multiple, costly physical locations or a large, expensive staff.
People may also think that using a mortgage agent will cost them money. That is not the case. We are paid a commission by the lender that does not affect the rate. Commissions are generally the same from all lenders.
Rates and restrictions
Some think that because mortgage brokers focus on getting great rates, the mortgages they arrange have terms and conditions that are more restrictive than a routine bank mortgage.
That’s wrong. The terms and conditions from non-bank lenders are usually more generous. And because those lenders are mortgage-only companies, the response when you call their help line for guidance is far better – the people on the other end deal only with mortgages all day, every day.
Also, the Internet portals for mortgage-only lenders are far more user-friendly as they are not focused on sales. They focus on one thing, your mortgage.
One other thing. It’s true that some banks will not use mortgage brokers. However, brokers have established relationships with other financial institutions so we can stay up to speed on their rates and products.
Also, banks will sometimes call on us to assist if they cannot approve a mortgage for a client. That way everyone knows that they are doing the best for the client.
Customer service
A major bonus I see of working with a broker is the speed with which they interact with clients and follow up after a mortgage closes. For example, I email or call every client at their annual mortgage anniversary to let them know what the current rates are and, if rates have increased, see if they can increase their payment to at least match the current rate. Increasing payments means the client is, in essence, already paying at the higher interest rate and isn’t sidelined when it’s time to renew their mortgage at a higher rate. It also helps pay down the principal on the loan.
Another bonus that many clients enjoy is not having to meet with a broker in person. The main reason to go into a bank in person is so they can present you with more products that they offer. I see this as major time wasted when you can call us on a lunch break or after work.
How much can you save with a broker?
You can save thousands of dollars with a quick phone call. For example, a bank recently offered my client a five-year fixed rate of 3.39 per cent. I was just shocked. I was able to offer 3.14 per cent with much better pre-payment terms. On an average home purchase of $429,600 with 10 per cent down, that means a saving of $53.13 a month and $4,828.20 less in interest over five years. Now who wouldn’t want that?
By the numbers
According to CMHC’s 2017 Mortgage Consumer Survey:
- 76 per cent of mortgage consumers turned to online sources to find out about mortgage options and features.
- The number of people who used mortgage brokers when renewing their mortgages grew from 26 per cent in 2016 to 35 per cent in 2017.
- 40 per cent of those refinancing their mortgage in 2017 used a mortgage broker.
- As in previous years, first-time buyers lead the way in using mortgage brokers, at 55 per cent.
- 54 per cent of consumers who used a broker and 31 per cent who used a lender were contacted by their mortgage professional following their mortgage transaction.
- The majority of consumers who used a lender (79 per cent) or broker (72 per cent) were satisfied with the experience.
Related
