Mortgage Broker vs. Bank – Which is Best?

To obtain a mortgage you either have to decide between mortgage broker vs. bank. People who want a direct route can opt for a bank. 

Both these choices have pros and cons. But how to decide which one is the best? In this blog, we will compare both these options and explore their advantages and disadvantages.

By the end, you will be able to pick the right choice that suits your needs and convenience. So, let’s start by uncovering the differences between Mortgage brokers and banks.

Why use a Mortgage Broker or a Bank?

Mortgage Brokers and Banks both provide financial assistance. Both of these have a totally different approach and way of lending. Let’s begin with mortgage brokers first.

Mortgage brokers are like middlemen between borrowers and lenders. They don’t sell any particular product. Rather they provide brokerage services. You might be wondering how? It is because they have a solid relationship with the lenders.

You go to a broker to get loans. Although consulting costs nothing attaining a difficult loan for you might require a huge fee.

What about banks? Here is why you use a bank. The loans and services offered by banks are interesting as well. They compete with the loan officers quite well. Being a regular client, you have the maximum chance of getting everything done faster.

Did you know that in Canada, the largest brokers are also the largest banks?

Pros and Cons of Using a Mortgage Broker or a Bank

Now let’s have a look at the pros and cons of using a mortgage broker and a bank.

1. Pros & Cons of using a Middlemen

  • Variety of options to choose from. You can choose any broker you want and compare the interest rates.
  • Discounted Interest Rates are always available for the customers.
  • From the very start, they are on your side both legally and financially.
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Here are the cons:

  • Choosing one broker might cause you to lose the benefits provided by another broker. It’s like an opportunity cost.
  • The fee can become a burden sometimes.
  • Not every broker is a star. So be prepared to compromise quality in some cases.

2. Pros & Cons of Using a Bank

  • Since banks are familiar with and work as per norms, a level of trust is maintained.
  • If your relationship with the bank is great, then you might be able to leverage it to get better deals and offers. 

Here are the cons:

  • With banks, you don’t get a plethora of options. They only sell what they have.
  • The eligibility and approval might take time. Rules are stricter as compared to brokers.

Difference between a Mortgage Broker vs. Bank 

Think of a bank vs mortgage broker as a traveling agent vs. booking your ticket. One is getting advice and services from a professional while the other is researching on your own. The same is the case here.

Below mentioned are some of the key differences between Mortgage Brokers and Banks.

  1. Banks are the direct lenders whereas brokers are just the middlemen between banks and borrowers.
  2. The bank will straightaway give you the money to buy a home. Whereas brokers will just connect you with the desired bank/financial institution to get money.
  3. A bank will only sell the products it has but the broker will offer you so many deals and offers.
  4. If you choose a bank, you will do all the research and comparisons yourself. On the contrary, the broker will do all the work for you.
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Below is a table that highlights some more major differences between banks and mortgage brokers.

CategoryBankBroker
Market Share in Canada57%43%
Do they Lend?YesNo
Application AssistanceYesYes
ExamplesTD, RBC,Tangerine, ScotiaCanWise Financial,Safebridge Financial,Dominion Lending

Popularity: Mortgage Broker vs. Bank? 

Which institution is more popular? Is it the banks? Or the brokers? 

The 2023 CMHC Mortgage Consumer Survey showed the following results: Out of the total mortgage, 43% was from mortgage brokers. Whereas in 2022, it was 55%. As you can see, there was a decline in the current year.

The main reason that came out was higher interest rates. Nonetheless, the customers are constantly opting for a middleman. If we compare the data from 2003, 2009, and 2023, there is a significant rise in the number of customers. 

Is it fair to say that even though banks are popular, mortgage brokers are gaining popularity too?

Mortgage Broker vs. Bank- Which one is better? 

The ultimate decision of deciding between mortgage broker vs. bank is in your hands. It is totally your call and you should do it depending on what you expect out of your mortgage.

If saving money is what you want then choose a broker. But if you want trust & the comfort then there are many good banks in Canada at your disposal.

What do you think about banks vs. brokers? Comment down below. 

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