Mortgage Broker vs. Bank: Which Is Best?

When it’s time to get a mortgage, Canadians typically turn to one of two sources for securing financing: banks and mortgage brokers.

If you’ve never gotten a mortgage before, it can be hard to know whether a broker or a bank is better suited to your needs as a homebuyer. Knowing the similarities and differences between the two can help you make this important choice.

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Banks and mortgage brokers: The main difference

Banks can only offer you their own mortgage products. Brokers, because they don’t work for a single financial institution, can recommend products from all their lender partners.

Working with a broker doesn’t prevent you from getting a mortgage from a major bank like TD, RBC or Scotiabank. In fact, Canada’s Big 6 banks do a lot of business with brokers.

If you use a broker and eventually sign a mortgage with a bank, it’ll be because you were able to weigh offers from other lenders and found the bank’s to be the best one.

» MORE: What’s the minimum credit score required to get a mortgage?

Why use a mortgage broker?

A mortgage broker is essentially a middleman. They are the mediator between the borrower (you) and various lenders.

A mortgage broker doesn’t sell a product. Instead, brokers offer services like financial analysis, product comparisons and negotiation. The relationships brokers have with lenders can help score you a better deal.

Approaching a mortgage broker, either to ask questions or get pre-approved for a mortgage, shouldn’t cost you anything, although brokers may charge fees in cases where the mortgage is especially difficult or the borrower isn’t especially creditworthy.

If a broker does successfully get you into a mortgage, their commission will be paid by the lender, not you.

Pros and cons of getting a mortgage through a broker

Pros

Variety of choice. Mortgage brokers can offer and compare mortgage products from multiple lenders.
Discounted interest rates. Brokers may also be able to negotiate discounted mortgage rates that you couldn’t access on your own.
They’re on your side. Mortgage brokers are legally obligated to work in your best interests.

Cons

You could miss out on some offers. Not all lenders work with every mortgage broker. The options you’re offered will depend on your broker’s lender network.
Fees. Even though mortgage brokers are technically free for creditworthy borrowers, there are still fees to be aware of built into your contract.
Quality service isn’t guaranteed. Not all brokers are superstars, so look for a full-time broker who has years of experience and a large lender network.

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Why get a mortgage from a bank?

If you go directly to a bank for your mortgage, you’ll be limited to their in-house mortgage products. A bank might offer competitive mortgage rates and interesting loan types, but if you want to compare them to what else is on the market, you’ll have to do that yourself.

Banks may also be more willing to negotiate with a mortgage broker who has sent them millions of dollars in mortgage business over the years, rather than an individual customer.

That’s not to say that you should avoid going to a bank for a mortgage. Canada’s largest mortgage lenders just happen to be some of its biggest banks. If you are a regular client of a Canadian bank, you could use that relationship to your advantage and leverage your loyalty to get a better mortgage interest rate.

» MORE: How to negotiate your mortgage

Pros and cons of getting a mortgage through a bank

Pros

Familiarity and trust. The comfort of dealing with a local branch or a national brand can take some of the stress out of buying a home.
You can leverage your relationship. It may be possible to get better deals and perks with the bank if you have a relationship with them, but you will have to negotiate those independently.

Cons

Limited selection. A bank will only offer its own products.
Stricter conditions for approval. Banks typically have higher eligibility requirements, which can make it more challenging to be approved.

Is it better to use a mortgage broker or a bank?

Ultimately, deciding whether to use a mortgage broker or a bank is a personal decision. It’s all a matter of what you want out of your next mortgage.

If you’re looking to save money, a broker may be your best bet. If you’d be more comfortable working with a brand you recognize, or feel the overall broker experience may not be for you, there are plenty of banks out there who can help.

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Mortgage broker vs. bank: Alternatives to consider

Big banks and mortgage brokers tend to be the most popular options that Canadians turn to when finding a mortgage, but they aren’t the only ones.

There are plenty of online comparison sites that can help you find a mortgage online. You can also look to credit unions, caisses populaires, trust companies, insurance companies and loan companies.

If you decide not to use a broker, remember to look closely at all of the mortgage offers you’re interested in — the rates, terms and fees — to find the best deal.

Mortgage brokers typically have two main advantages over banks. They offer access to a wider selection of mortgage products and they can leverage their relationships with multiple lenders to get their clients better rates.

Mortgage brokers won’t charge a fee to discuss your mortgage options or pre-approve you for a home loan, but some may charge fees if your mortgage proves to be particularly difficult. When a mortgage is completed, their commission is paid by the lender, not the client.

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