Earlier this week Krystal Yee wrote an article on Moneyville about her experience using a mortgage broker to secure financing on her first home, and suggested anyone considering buying a home should try a mortgage broker to help them through the home buying process. The article quoted a recent CMHC survey stating that only 48 percent of first-time home buyers chose to use a mortgage broker.
I can see the benefits of using a mortgage broker; buying a home is stressful enough without having to worry about visiting multiple lenders and trying to understand the different rates, terms and conditions of your mortgage. If the mortgage broker is doing their job, they will find you the best rate and terms according to your needs.
That all sounds pretty good, so why aren’t more people using a mortgage broker when they buy a house? Let me share 4 reasons why I don’t use a mortgage broker, and probably never will:
1. They Push the 5-Year Fixed Rate
Most of the mortgage broker ads I’ve seen claim you will save money using their services because they can locate the lowest 5-year fixed rates in the market. The problem is, home owners would have been better off opting for the variable rate instead of the 5-year fixed rate nearly 90 percent of the time.
Using a mortgage broker to obtain the lowest 5-year fixed rate likely ensures that you will be worse off financially in 5 years while your broker and your lender make money.
2. I Had a Good Relationship With My Bank
Even though I recently became fed up with my full service bank and switched to no fee banking, I actually had a pretty good relationship with my bank. Walking into my branch and asking about mortgage rates was not an intimidating process for me as a first-time home buyer.
Now that I’ve moved into my 3rd home and gone through several mortgage renewals and a mortgage refinancing I’ve received plenty of perks for staying with one lender, including waiving home appraisal fees and interest penalties. And my variable interest rate mortgage has always been within 0.10% of the best available rate in the market.
3. Bad Reputation
My first impression of a mortgage broker was not at all positive. They send out flyer’s in the mail encouraging people to refinance and use the money to take a vacation, buy a new car, or increase their amortization and consolidate debt. They post rates on their website claiming their mortgage rates are more than 2.00% lower than the big 5 bank rates, even though they are clearly displaying the banks’ posted rates and not the best available rate online.
Mortgage brokers are also quick to spread fear over pending interest rate hikes while strongly encouraging home owners that they need to “lock-in” now. Much like mutual fund sales people, mortgage brokers get paid (or get paid more) if you buy a particular product. Yes, their services are free to you, but you need to understand how they are being compensated for your business.
4. Do It Yourself
Mortgage brokers promote the fact that they are a one-stop shop and work with hundreds of lenders to save you time and money. But mortgage rates are accessible by anyone online, and by using a tool like Rate Supermarket you can easily compare mortgage rates in your area with just a few clicks. Once you narrow down your list of potential lenders you can simply request a call back and most of your research is done. That doesn’t sound like a big hassle to me.
There’s nothing wrong with using a reputable and trusted mortgage broker to help walk you through the home buying process. Just remember that not everyone is looking out for your best interests, especially when there are incentives in place for both the mortgage broker and lender to gain your business. Make sure you do your own research and understand all of the fees, terms and conditions that your mortgage broker is negotiating on your behalf.
For clarification regarding point 1 above as a former exec with 2 lenders that dealt exclusively with brokers lenders typically pay brokers more the longer the term BUT brokers are paid same commission on a 5 yr FIXED as a they are paid on a 5 yr VARIABLE rate.
Canadians historically have chosen (for whatever reason) a 5 yr fixed rate whteher dealing with a bank directly or via broker approximately 60% of the time according to stats from Cdn Association of Accredited Mortgage Professionals (www.caamp.org) as well as Cdn Bankers Association.
@Eric
Thanks for your comments. It’s interesting that the commissions are the same, even though the lender will clearly make more money on the fixed rate term.
Check out a good post regarding how the lenders recently lowered the discount from prime on variable rate mortgages at http://bit.ly/nDS4Am Cheers! Eric
Another strike against mortgage brokers: they are often tied in with a given real-estate agent. It was terrible when, by mistake, our real-estate agent called in our mortgage broker (she referred us to) to check on our borrowing capacity, while we were in the room meeting with our mortgage broker.
Talk about back-door dealings.
@Fred
I’ve seen a lot of that here in Lethbridge as well. it wouldn’t exactly give me confidence that my broker is looking out for my best interests when they are on a bus bench ad (or flyer) with a particular real estate agent.
I can only speak for myself and not every other mortgage broker but I don’t work with any Realtor that expects any sort of kickback for referring me. The same goes for when I refer clients to Realtors. I prefer to surround myself with other professionals that have the clients best interest in mind as apposed to if their pocket will be lined or not.
Clients come first for me and the referral partners I work with refer me because they know I will look after our mutual clients.
In British Colombia any monetary compensation that is being paid by the mortgage broker also has to be disclosed fully to the client.
what exactly is wrong with a Realtor working with a mortgage broker? you should’ve asked your agent to leave then or told them you can take care of your own finances, not rant on a message board about it being “another” strike against us evil bad and incompetent brokers.
Eric is correct. Brokers are paid the same for either a fixed or variable. We’re paid based on the length of term and mortgage amount funded. We are also not paid commission on CMHC mortgage insurance fees.
Part of the reason many people are going with the fixed rates as well has to do with the way you have to qualify on the posted rates if they want to go the Variable route.
Some people don’t have the choice to go Variable and are forced to go to a five year fixed. The banks love the new rules introduced by the government because they make the most profit on a 5 year fixed.
You mentioned you have a good relationship with your bank. I’m guessing it’s not your bank but instead you’ve built a good relationships with the employees that work there and they have earned your trust over the years. This is great. That’s how people should go about finding the mortgage broker (or any business) they ultimately choose to deal with. Build a relationship and do business with the people you like and trust.
Sadly, so many mortgage brokers are just after quick transaction and give us all a bad reputation.
@Scott
Thanks for commenting, Scott. You bring up a good point about qualifying on the posted rate if you want to go variable.
You’re right, it is about relationships. If I had one with a good mortgage broker, perhaps I’d feel differently. But I’ve seen too many, as you’ve said, who are just out for the quick buck and have given the industry a bad reputation.
I am the same way Echo, I just found that I personally wanted to understand everything about the huge financial agreement I was entering into. If I was going to go through all the trouble of finding out what a pre-payment option etc, was, then I might as well do it myself. Really, there isn’t THAT much information to take into consideration for most buyers. I’m a pretty simple guy so I wasn’t looking at anything too intense anyway.
@My University Money
I had pretty simple needs, give me the best rate (within a tenth of a point) and I’m happy. I’m not moving again for a long time, so I wasn’t worried about the terms too much.
Yeah. Me neither. You can easily find a good mortgage deal on your own.
When I refinanced my mortgage, I went direct to the bank to negotiate the rate and term. In addition, I was able to negotiate some of the expenses in the closing costs.
Good post Robb! I think it boils down the the person. There are good mortgage brokers and bad ones just like there are good advisors and bad ones. Good Doctors and bad doctors. Good home builders and bad ones.
I think mortgage brokers have a place especially if they really shop for the best products and the lowest rates and are trying to act in the best interest of their clients instead of themselves. I’ve seen some mortgage brokers recommend taking out bigger mortgages instead of using cash or capital which is not always prudent advice.
It’s not surprising to me that you did not use a mortgage broker. You are a prime candidate for the do-it-yourself approach not just for mortgages but also for investing and personal finance. You have the drive to research, a high level of knowledge and the desire to do it. Not everyone is like you and some people need more help with their mortgage decisions.
cheers!
Jim
Thanks Jim! As with using an advisor or a real estate agent, no one cares more about your finances than you do, so it’s best to at least arm yourself with the knowledge of what you are getting yourself into. Sure, a good mortgage broker could be very beneficial in helping you make your decision, the challenge is finding that broker ahead of time.
My ex and I used a mortgage broker when we bought our house in 2004. In our case, we couldn’t qualify for a mortgage through a bank (should have been our first clue!), so we tried a broker as a last resort. They conveniently ignored all the debt in my name, putting only my ex’s name on the morgage so we would be approved. We were also strongly encouraged to use a zero-down mortgage, leaving us upside down when we got divorced and needed to sell. We ended up with a house we couldn’t afford, too many bills, and no lessons learned about responsible spending/saving.
Doesn’t sound like you have a beef with the broker but perhaps your realtor who slammed you into the place? and yourself for not having the foresight to know what you can and can’t afford? tough lesson, I know, but hopefully you have learned from it.
The broker encouraged a Zero-down option…and only used 1 spouse….that is not an issue with the Realtor but the broker…seems like all the broker cared about is getting the commission…which is often the case….”Get the deal, no matter how”
@Andrea
Sorry to hear about your poor experience with a mortgage broker. Hopefully things have turned around for you.
sounds like someone isn’t taking responsibility for their choice. No one twisted your arm in signing the mortgage did they?
Theres always a chance that interest rates will rise above the fixed rate though right? Thats what can make the variable rate such a dangerous thing if you can’t support a higher interest rate payment. If anything in my opinion those that go with the fixed rate likely do it because they are not willing to take a gamble on the future interest rates, i mean lets face it there is alot of uncertainty. My question is, what kind of gaps are we talking about between the fixed interest rate that these mortgage brokers are suggesting vs the variable rate.
-Jean
@Jean
Yes, of course there is a chance that interest rates will rise above the current fixed rate, that’s why people pay a premium for the peace of mind in case that happens. I take more of a methodical approach and note that 9/10 times you will save money with the variable rate, and since interest rate hikes will probably be gradual in the future, it might still work out in my favour if the variable rate is lower for 2 or 2.5 years of my term.
The gap between fixed and variable right now is about 1.25% or 1.50%
No it isn’t. The gap is closer to less-than-1%.
5yr fixed 3.39%
5yr variable 2.5%
I also think that as with all investments, “the past is no indicator of future results”. Yes, people in the past have saved in variable (according to many studies). Not to say it will ALWAYS happen, though.
I personally ask people about their investments, strategies etc. If someone’s loaded in GICs, then a fixed term sounds more proper. If they’re in RIM, GOOG, AAPL in their RRSPs, then perhaps we should talk variable.
Yeah if the gap is substantial like that, then yeah the variable rate will be something very much to look at. One thing my professor talked about is turning that variable rate loan into essentially a fixed rate loan. Essentially shielding yourself from the interest rate risk. By hedging your position, so that no matter which ways the interest rates go, you’ve essentially locked yourself into a ‘fixed’ interest rate at the time of purchase. Offcourse I’ve never looked into it personally to see what the market is offering and just how much of a premium you would have to pay to hedge yourself, and how much you would come out ahead of the deal. Offcourse the common person would not know about that. Anyways, knowing the way the market works, and how it takes out the imperfections and opportunities for arbitrage, its probably a negligible difference and that difference between the fixed and variable is what you would have to pay in order to enter into a futures/forward contract to hedge the interest rate risk.
Hopefully what I said made sense, and helps someone out there with an idea.
-Jean
@Jean – I have done that by fixing the monthly payments at $500 above the current variable rate minimum payment on my mortgage. So, it’s like I’m making payments at 4.5% or 5.0% rather than at 2.20%
Although I know this post is based on your experience, I wanted to counter it with mine (as a mortgage guy)
We don’t “push” 5-year rates. When a client asks for a mortgage, a 5-year time window is suitable for them, and just long AND short enough with enough flexibility down the road. That being said we always should (I do at least) ask what the client’s preference is, the ins/outs of shorter/longer terms. What’s so bad about a 5-year term anyways? And which broker pushes 5yr fixed these days? None that I know.
Consolidating debt is a fantastic way to use your equity (pay off higher interest cards). Vacations/cars is not. Don’t blame the guy in your area for selling his business, though. You don’t want it, don’t take it.
Your relationship with the bank is noted – but, on the flip side – as a broker I intend on being one for many years to come (already at 8). So if the guy at the bank leaves, you’re starting all over again. Also, as a consumer of RBC and mortgaged by ING, I realized there was zero benefit going with RBC for everything. They did not give me the better rate or terms, so why give them the business? Now, say your “contact” at the bank leaves, then what? Like I said you’d be starting from scratch because you need to establish a new banking relationship all over again.
And finally, we don’t get paid at all when people lock their mortgages in. On the contrary, we lose the client for a longer time. So if a broker is suggesting you lock in from variable to fixed, perhaps you should listen to their advice because they see the bond market daily, hear what’s happening, and it may make sense to go fixed instead of variable.
You’re absolutely right – people who are educated are the best types of clients to have – and it’s easier to be educated, but I find fault with your post (and perhaps am too defensive about it because I couldn’t think of one reason why NOT to use a broker)
(truth be told have not read other comments yet but wanted to give my take before I did)
@Jake
I appreciate your input as an experienced mortgage broker, but you have to admit that your view might be a bit biased, no?
I’m sharing my experience as an un-biased home owner and I’ve seen plenty of shady dealings from mortgage brokers, enough to convince me that it was not in my best interests to use one.
I’m sure there are great brokers out there, but whenever there is a financial incentive tied to the equation, consumers should be aware that their best interests might not always be considered.
absolutely biased, perhaps I wanted to counter your posts with the thought that the good guys out there love their jobs, love working with and helping people.
@Jake
I thought I’d jump in here. I worked for a bank for over 25 years and was with them when we purchased our current house. Hoping to get a favourable employee rate I first approached them – no deal. I subsequently went to a mortgage broker who got us a fantastic rate. I have to mention that one of the offers came from a branch of my own bank and I refused to deal with them by then.
I had such a good relationship with the broker that I often referred clients to him when they didn’t quite fit our lending parameters and he was very professional and able to help them more often than not. Even though I’m no longer in the biz I still get a Xmas card and calendar from him.
I started using a broker about 15 years ago. My mortgage at the local bank that I did all my banking at was coming up for the 5 year renewal. Yes I had 5 year fixed because I fortunately had a 5 year fixed at 12% when the rates shot up to 18% in the late 70′s.
The broker offered 1% less than my bank, so I asked them for the same rate, they refused. I went to the broker, got 1% less and the kicker is that it was at the same bank. I then went back and while getting the same mortgage at the same bank for less and they had to pay the broker a fee, I questioned their method of doing things.
Bob
@Bob and Boomer
It sounds like banks were not very competitive with their rates 10-20 years ago, and I can’t believe they would offer a broker a better rate than their own customer (or their own employee, for that matter). Nowadays I don’t think they could get away with that, their best rates are posted online for all to see.
In the hotel industry you used to be able to find lower rates by going through various channels to get the best deal. Now they have rate parity across all channels, meaning they can’t offer a lower rate on their own website (or over the phone) than they post on 3rd party channels like Expedia or Travelocity. It works much better when the industry is transparent to all its customers.
As of September 15, 2011
CIBC is currently offering 4.04% 5 year fixed rates to their clients in the branch and through renewals.
Through the Broker Channel they are offering 5 year fixed at 3.59% and paying the broker for their services.
They bank on the fact that people walk into their branch every day and are comfortable with the bank. They advertise it based on their posted rate showing the 4.04% as a special rate.
With that difference in rate on a $250,000 mortgage over 25 year amortization the consumer will pay approximately $13,000 more in interest with the higher rate as opposed to the rate offered through the broker channel.
The Banks still follow these shady practices today.
PS. I am a Mortgage Agent in Ontario and a banking client at CIBC.
To Clarify.
The $13,000 is based on the 5 year term and does not take into account residual payment increases based on a higher remaining balance at the end of the term.
I Had a Good Relationship With My Bank – You mean with some employees – is that correct?
Corporations have no face, so, a borrower can not have relationship with it. Although, the retention departments are meant to give a consumer that warm feeling.
Not all the on-line shopping site can satisfy borrowers need, neither they post the best rate all the time.
Mortgage is not all about rate. There are more to it. A broker helps to understand various aspect of a mortgage
@Sudip
Yes, of course the relationship was with some employees…but I had excellent service from multiple employees at that bank over the last decade.
True, a mortgage isn’t all about the rate. But for me, it’s 95% about the rate and 5% about convenience.
95% about rate? Wow.
What about:
prepayment penalties?
approval time?
knowing the bank well enough to know they will fund the deal on time?
dealing with conditions?
payment frequency terms?
pre-payment allowances?
porting timeframe allowances?
what kind of mortgage is it?
how is it compounded?
will the lender be around when you’re looking to port?
none of that matters, but rate? 95% of it is just rate?
A client recently left me for 0.04%, or $6.22 per month in savings. $6.22! Incredible. 4 days before closing. I learn from each time that sort of thing happens but when comparing apples to apples, look beyond rate and you’ll see a world of difference.
@Jake
I would be much more concerned with those criteria from a lender I’ve never heard of than from the bank I’ve used for 20 years.
When I say it’s about rate for me, I mean that if I’m in the market for a mortgage and I know that I want a prime minus X variable rate, then I’m going to narrow down my selection based on the lenders who can offer something in that ballpark. I certainly wouldn’t argue over 0.04%
At the time I was ready to renew, I saw that prime-0.9% was available. I asked my bank if they could do that and they said no, but they could offer prime-0.8%.
I just built a house, I’m not moving for 10+ years (hopefully 20). I knew I could double my monthly payments with them if I chose to, which worked for me.
I have no doubt that good mortgage brokers can add value for some people, but I’m just saying they are not neccesary in every situation.
Hi, another mortgage professional here, so there may be some bias, but long before I was a broker I was a consumer who used brokers.
Your views are respected, because I know there are always two sides to the coin.
That being said, you are broadcasting your opinions across the internet and are financially sophisticated. You are demonstrating that you have the means to make educated and financially secure decisions. Your goal with this blog seems to be to educating people on making smart decisions with money. Perhaps you should be suggesting how to find a good mortgage broker or how to negotiate a better rate with your bank, rather than painting all mortgage brokers with the same negative brush.
You obviously have enough experience with mortgages and are comfortable with conditions because you knew how important it was that you could double your payments when you wanted to. Not everyone has that as a concern, or the ability to qualify for a variable rate mortgage, but are looking for other ways that their mortgage can help them achieve their long and short term goals.
Especially in these current conditions, is it not more important than ever to find a team of advisers that you can trust to help you reach your goals? I for one, love helping people clarify their goals with respect to real estate and give them the means to help attain them. Sometimes that means a five year fixed, but that is NEVER the first choice.
The banks satisfy their shareholders with immense profits by selling five year fixed mortgages 70% of the time.
@Randy – thanks for your comment. When I originally wrote this piece, it was in response to an article that was giving reasons to use a mortgage broker. It basically suggested that it was stupid for anyone NOT use a mortgage broker.
At the time I was receiving flyers from questionable brokers looking for people to refinance, and some of my broker “friends” on Facebook and Twitter were urging people to make an appointment to “lock-in now” as rates were headed up.
I was annoyed and felt the article deserved a response. I have never used a broker and have been a home owner (in part) since I was 19. I’m satisfied that I made the best deal on my own, although my situation is not very complex (not self-employed, no danger of being relocated for work).
I know that people can do it on their own without a broker, though I will admit that there are plenty of excellent brokers out there who are providing value for their clients. I certainly didn’t intend to paint all brokers with the same negative brush.
I like your idea of writing a post on how to negotiate the best deal with your bank.
And if you would like to guest post here and give the readers a different perspective on how to find a good broker, or what qualities to look for in a good broker, I’m open to that as well.
Thanks!
Hey it’s $6.22 in their pockets…why would I not want an extra $6.22 in my pocket?
For the most part lending institutions have fairly similar terms…compounding, pre-payment options and payment frequencies are very similar for the most part….often the savings in rates will beat a small convenience in terms
Agreed.
Let us put it this way – it is 95% about carrying cost of a debt (mortgage).
Interest rate is a major part of it.
If you consider probability then there is a 70% chance that a Canadian has to pay pre-payment penalty.
There are a number of other factors which give a borrower higher debt servicing cost than interest alone.
It could be very well the case that you are in the rest 30%, but there.are other catches.
Great blog, I am a Mortgage Broker as well, I respect your opinion but differ as follows:
1. They Push the 5-Year Fixed Rate
The other way around is my experience. One of the ways my customers find value is by the broker understanding their needs and what they want to accomplish. I love the fact that as brokers we have many tools to fit what a client may need. No particular bank has the same set of tools.
2. I Had a Good Relationship With My Bank
Interesting point of view, I have accounts at different banks and I have been unable to keep a relationship with any person in particular. They do have my account but with my mortagage, visa, checking accoutn, even RRSPs the advisor has never been the same over the years. My experience is different as banks do not want a customer to have a relationship with the employee because they know if the employee goes to another bank (something very realistic) the account will follow.
3. Bad Reputation
My first time at this blog is not positive as I find information that is an opinion and can be taken the wrong way. At the same time I went and read other posts and I realize that it is a great blog. Instead of making a judgment with a first impression, I’d love if you get closer to the mortgage broker industry and learn more about us.
4. Do It Yourself
On this point, you mention a website where you go and within a few clicks your research is done. I would suggest to your readers the other way. Spend good time researching options and understanding how they can manage their mortgage better, when they focus their attention not only on a few clicks, they will find excellent ways to save literally thousands of dollars on a mortgage. In my experience you have 2 options, go only with the rate (quick fix) or have a well thought strategy according to your overall financial plan. A mortgage professional and broker can help you with this.
Great blog! Keep the good work.
@Camilo
Thanks for your comments. As I said in the title, these are reasons why I didn’t use a mortgage broker, not necessarily reasons why people shouldn’t.
It’s not that I think your industry is evil, in fact I know that having an expert on your side can really help people (especially first time home buyers) through the process.
But some of us choose to understand and manage our own financial decisions, home ownership being one of the biggest. I know what I wanted and went out and got it myself. I’m not sure how a broker would have added value, in my case.
Thanks for having an open mind and checking out our other articles. If I knew mortgage brokers half as passionate as some of the ones commenting here, perhaps I’d feel differently.
Sometime I wonder about the fact that I don’t have a good enough relationship with a bank for them to give me a special deal. Then I remember this would probably means they have made so much profit from me that they feel bad and want to give some back. I prefer financial intermediaries who don’t have to feel bad about how much they’re taking from me
I had a small investment account with a major bank and closed it when we bought our house (fees were too high). I had to go in to do this and when I mentioned that I had arranged a mortgage through a broker the rep said “you should have come to us… I don’t even know how mortgage brokers work”. On the other hand with the broker I could have an informed conversation about how to approach the lending market and even the benefits of a larger downpayment vs investing more (not just “you should try our XYZ fund, it did really well last year!”).
I’m sure there are plenty of mortgage brokers who are clueless so I even shopped around for a broker and found one in another city that didn’t need to advertise for new clients and had good relationships with lenders that had rate specials on.
It’s interesting that you trash mortgage brokers without ever having used one and then have the gaul to collect money from two mortgage brokerage companies for advertising (on this page) and on the side-bar have Ratesupermarket.ca (another brokerage firm)advertise. You lost your credibility as soon as I looked at the blog when I saw, “why I don’t use mortgage brokers” and then directly beneith it you show two advertisements from mortgage brokerage companies….something about biting the hand that feeds you comes to mind….
@kata
To quote the end of my article, “There’s nothing wrong with using a reputable and trusted mortgage broker to help walk you through the home buying process.”
How is that trashing mortgage brokers? I’m simply pointing out reasons why I chose not to work with one.
Regarding the advertising, those ads are placed contextually by Google, meaning the ads match what the article is related to. If I wrote about reasons not to buy gold right now, there would likely be advertisements on how to buy gold in those spots.
RateSupermarket.ca is an independent information source where consumers can get free, up to date information on mortgage rates and other personal finance offers. I recommend people use it to help make an informed decision on the product they’re buying.
Hi you all out there. i have read all your replies and contributions to Echo’s reasons for not using a broker.
Most of the time people think they know the details of a mortgage but they dont. brokers are trained to see what the untrained eye cannot comprehend. Trust me Ignorance is more expensive than the fees paid to brokers. i believe they are there to help those who can’t afford all the time looking for the best deals. Even if all rates are quoted in APR’s, who said its all (well most) about that.
the ability to understand the details of mortgage contracts is very important. if do not know, then pay someone to help you simple.
Echo,
You need to get educated and understand the wider view before commenting on the current mortgage system in place in Canada. There isn’t enough space here to do that but I would like to respond to your comments as briefly as possible.
1. Brokers push the 5 yr rate: This is ridiculous, there is no financial incentive for us to do this. In 11 years as a Broker, I have offered both fixed and variable terms to clients equally. If we wanted to increase our commission from the lender we would be promoting the longer term rates. ie 7-10 yrs.
2. Good relationship with bank and no fees: You haven’t seen the fees because you don’t understand how the fees are incorporated. For example, when your bank offered to waive your penalty ( I assume) for signing a new term with them early. Do you know how the penalty on the new term would be calculated if you didn’t complete that term? Did your ‘friendly banker’ explain that detail to you or how the investor on your mortgage will be compensated for you not completing the term?
3: Brokers promote debt consolidation and spread fear over interest rate hikes: As mentioned in the comments already, we are not compensated in any way to get a client to lock in a variable rate mortgage to a fixed term.
4: Rate supermarket: Great vehicle to get the conversation going with my clients. When a client asks me why there is variation in rates I now have the opportunity to educate on the finer points of mortgage terms and conditions. There truly is ‘no free lunch’. But you don’t need me to explain because apparently you are qualified to discern all of this. Now for the most important comment of all:
It seems in all your wisdom you have completely forgotten to mention the most important point. If all consumers stopped using a broker and went directly to a branch or on-line service, Mortgage Brokers would then become obsolete. What a great day for the banks and lenders! No more competition to keep them honest or competitive on rates. It doesn’t take a financial genius to figure out that lenders would increase the spread on the mortgages they offer and consumers will have no alternative. As evidenced by ‘the old days’ of lending before Mortgage Brokers became an option. I would like to read your comments after you go into your ‘friendly branch’ under these circumstances.
Thank you for allowing me to comment.
Laura
@Laura – thanks for your comments. I’m not sure why you feel I’m unqualified to post my opinion of mortgage brokers. I realize that I haven’t gone through the several weeks of training involved in becoming a mortgage broker, but I’ve been a home owner for 13 years and managed to negotiate several new mortgages and renewals on my own. I assure you that I understand the process completely.
I expected mortgage brokers to jump in and defend their industry, especially the good ones. If I wrote a similar post on travel agents or real estate agents, I’m sure the majority of the comments would be from professionals in those industries explaining why their jobs are necessary.
But don’t assume that I am ignorant and uneducated just because I believe people are capable of doing this on their own.
The mortgage industry is extremely competitive, as witnessed by the recent 5-year discounts offered by BMO and others. And yes, I am fully aware of the restrictions that came with BMO’s 2.99% promotional offer (that has now expired).
Mortgage brokers can play an important role in helping people through the mortgage process, especially first-time home buyers. A good broker definitely offers value for their clients.
But it is possible to do it on your own. At least that’s my uneducated opinion.
Echo,
Yes, you could do it on your own and you may get your wish in the near future. Welcome to a non-competitive rate world and terms and conditions that will undoubtedly favour the investor. Brokers are intermediaries that keep the system honest and working in favour of the borrower as best as possible.
By the way, ‘the weeks’ it took me to get my license did not make me the Broker I am today. I am still learning with each and every situation I encounter in an ever changing mortgage climate. My goal is to provide all of the information and let my clients decide which is the best for them. So I guess we have the same goal in that regard.