Mortgage Broker vs Bank: Pros & Cons

The main difference between a mortgage broker and a bank is that a mortgage broker can access multiple lenders, whereas the bank can only offer you their lending products.

The number of Canadians with mortgages has increased by almost 10 percent in the last year.

That is a rate not seen in at least a decade, according to CMHC.

While 79 percent of mortgages have been taken out from banks, is it a good idea to go directly to your bank? Is there another way to find the best deal?

Did you know that when you’re in the market for a mortgage, you have several options? Going to your local bank is no longer the only way for you to buy a home.

An alternative to banks is seeking the help of a mortgage broker.

One of the critical differences is banks can only offer you their products.

On the other hand, mortgage brokers can find you the best rates and options from various lenders.

Let’s look at the pros and cons of each option.

Mortgage Broker Bank
Pros
  • One-stop mortgage shopping
  • Lenders pay brokers, not borrowers
  • Access to multiple lenders
  • Leverage existing relationship
  • Easier application process since you’re already a client
  • Comfort of a familiar institution
Cons
  • Don’t have access to all lenders
  • May require extra documentation
  • Higher rates
  • A bank can only offer you their mortgage products

Using a Mortgage Broker

A mortgage broker is a mortgage specialist who has access to various lending options.

They are a valuable resource to work with as they have access to many lenders, including banks, credit unions and more.

They often have their hand on the pulse of the mortgage market and are a wealth of information and advice.

This can be an important reason to choose a mortgage broker for new home buyers.

A mortgage broker can tell you which lenders will be willing to work with you and which ones won’t based on your financial situation.

This can be a significant advantage for those just getting into the lending market or people with a lower credit score.

Couple moving in after working with mortgage broker

Advantages of Using a Mortgage Broker

Working with a mortgage broker offers several advantages, such as:

Knowledge

Mortgage brokers are in the know, and the best ones have built up good relationships with lenders.

You can leverage their network to find exclusive offers that may not be available anywhere else.

Streamlined process

Working with a mortgage broker is easy to find the right mortgage for you.

In most situations, you’ll only have to meet with them once.

You can then complete the application and supporting documentation via email.

Negotiating power

Additionally, mortgage brokers can negotiate on your behalf and may be able to get application fees reduced or convince a lender to give you a lower rate.

Free

Using a mortgage broker won’t cost you anything extra.

They are paid by lenders, not by borrowers.

Discounts

Even if you’d like to get your mortgage through your bank, going through a broker can give you access to discounts.

Many banks will offer discounts to mortgage brokers.

They encourage brokers to send homebuyers to them rather than competitors.

And these deals can be passed along to you.

Comparison

You can easily compare different lenders and find the right one for you with a mortgage broker.

Disadvantages of Using a Mortgage Broker

While there are several advantages to using a mortgage lender, there are some drawbacks too, including:

Right fit

You may not click with the first mortgage broker you meet.

And it can take some time to build up a rapport with your broker. 

Limited lenders

While your mortgage broker has access to various lenders, they won’t work with all lenders.

So, if there is one that you have in mind and are hoping your lender can connect you with, you should check first.

Ask the broker if they work with that lender before moving to the application process.

Additional documentation

Unlike going to your bank, a mortgage broker may need extra information and documentation about your financial situation.

This can take a little extra time and effort but may be worth it if you’re able to access competitive mortgage deals.

Going directly to the Bank or other Lender

Applying for a mortgage with your current bank is straightforward.

They already know you and have a clear picture of your financial situation.

It may take less effort on your part because you won’t have to provide some of the documentation required when starting a relationship with a new lender.

Advantages of Going Direct

Applying for a mortgage through your bank has been the traditional way of buying a home, and it still offers some advantages, such as: 

Simplicity

If you’re already a customer at the bank, you may be given special rates if you take out a mortgage as you’ll be adding to your portfolio of products with them.

Additionally, you’ll have all your financial products in one place, which seems to be a big sticking point for many.

Insight

A mortgage advisor at your bank will be able to offer you financial guidance based on your overall financial picture.

However, they may not have mortgage-specific knowledge. 

Easy application

In most cases, your bank already has essential information and background on you, making the application process more manageable.

You won’t need to provide them extra documents regarding your assets for example if they are already held at the same financial institution.

Comfort

Buying a home can sometimes be a stressful, albeit exciting, time for you.

If you’ve been banking at the same financial institution for a long time, there may be sense of comfort there built over the years.

You’ll be working with familiar faces and people with whom you’ve already established a relationship.

Disadvantages of Going Direct

Along with the advantages of applying for a mortgage directly through your bank, there are some drawbacks you should be aware of, including: 

Higher rates

It’s unlikely you’ll get the best mortgage rate by applying directly at your bank or financial institution.

Your bank is interested in offering you their specific mortgage product.

They’re not as interested in getting you the best rate.

Moreover, if it’s time to renew your mortgage, you’ll pay higher rates through your bank.

Your financial institution will send you a renewal slip, making the process simpler.

However, if you were to do some comparison shopping, you’d likely find a better renewal rate elsewhere. 

Limited products

A bank can only sell you the financial products they offer.

This means you’ll be limited in what you can get from a bank.

Frequently Asked Questions

  • Is it easier to get a mortgage through a mortgage broker?
  • Do mortgage brokers charge a fee?

Chandra Philip is a freelance writer and content creator with over 15 years of professional experience. Coming from a journalism background, she’s worked in print, television, and on the web.

With a diverse writing background, Chandra has covered everything from breaking news to blogs to case studies. She enjoys covering topics about personal finance and technology.