Banks vs. Mortgage Brokers

Many consumers feel more comfortable dealing with one of the big Canadian banks. However, if they knew what we knew they would probably change their minds.

Here are a few reasons why you should be wary of getting your mortgage through a bank.

Interest Rate Differential (IRD)

Banks have posted rates and discounted rates. Here’s why that’s important: If you obtain a bank mortgage at 3.59% and the posted rate on that same mortgage is 5.99% you have to pay the difference if you want out of the mortgage. This could be $50,000 or much more, forcing you to stay with the bank. This is called Interest Rate Differential and it’s one of the ways banks prevent you from trying to find a better rate with another lender.

The worst part is that most bank employees have never heard of an IRD, so there’s little chance you’ll be made aware of this when you sign your mortgage contract.

Re-Advance Clause

All bank mortgages now have a re-advance clause. This authorizes the bank to register, on title, 100% to 125% of your home value. Even if you have a $150,000 mortgage on a $300,000 home the bank will register $300,000 or more. This pledges the equity of your home to the bank.

A re-advance clause means you will not be able to borrow money on your home without your bank’s permission. It is just another way the banks make it difficult (and sometimes impossible) to refinance your mortgage or switch lenders.

Mortgage Specialists

When you get a mortgage at a bank you’ll deal with a Mortgage Specialist. This person works exclusively for the bank and sells only that bank’s products. They are not licensed to broker mortgages in any province and their knowledge is limited to the interest of the bank.

A mortgage specialist is a bank employee. They will only be able offer you their own bank’s mortgage products and will not shop around for the best possible deal.

How is Different

The money that secures for mortgages comes from banks, trust companies, and some of the largest mortgage corporations in Canada. The difference is that while the banks only offer you their own products we collect offers from a number of different lenders in order to find you the best possible deal.

Not only will we find you the best rate, we’ll also work to find you a mortgage that allows you to easily refinance or switch lenders if you need to. And unlike bank employees, our agents are very experienced and knowledgeable when it comes to mortgages. We’ll be happy to answer any questions you have so you know for certain you’re getting the very best mortgage possible.