Mortgage Broker/Agent Versus Banks

In the past, home buyers used to approach their banks for their mortgage needs. However, due to aggressive competition, more available options, and better solutions, home owners are willing to shop around.

 

A mortgage agent provides the technical expertise to bring together a borrower and a lender, out of a number of lenders, to complete a mortgage transaction without pulling multiple credit reports and providing the best negotiated discounted rates. The mortgage agent will search for the best available mortgage lenders and provide a mortgage solution best suited to the client’s current circumstances.

 

Depending on your credit history, a mortgage agent’s service may not cost you anything. Fees such as the mortgage broker/agent fee, the finder’s fee, are generally paid by the mortgage lender. As such, the borrowers do not pay any fee. In some cases, while dealing with private lenders, the broker will charge a fee. If there is a fee, the broker/agent disclose it well in advance before proceeding further to avoid any last-minute surprises.  

 

According to The Canadian Association of Accredited Mortgage Professionals (CAAMP) report:

“Mortgage broker market share is trending upwards for most market segments. This is particularly evident among repeat buyers where market share has increased from 32 per cent in 2012 to 42 per cent in 2015,” CMHC wrote in its recently released Mortgage Consumer Survey. “Over this time period broker share has also increased among First-time buyers (48 per cent to 55 per cent) and refinancers (27 per cent to 33 per cent). Among renews, broker share has remained stable at around 21 per cent.”

 

Why mortgage market share is increasing?

 

A bank’s Financial Service Representative/ Financial Advisor or Mortgage Development Officer (MDO) is an individual hired by the bank. They solicit business for their bank. So, their ability to give the best possible solution, including rates, is restricted to the bank’s products, which they are bound by through the terms of their employment.

 

A bank representative’s role is similar to that of a Mortgage Broker/Agent. There are several critical points of considerations that will help you in deciding whether a mortgage broker/ agent is ideal for selecting a mortgage solution suited for your needs.

 

Pros

Mortgage Broker

Bank Officer

Education

Must complete a comprehensive Curriculum as per Prescribed by FSCO    

No educational or Certification requirements. Banks provide in- house training.

Licensing

Must be licensed with Financial Service Commission of Ontario.

Not Required as a Bank Employee.

Legal Governance

Governed by the Mortgage Brokerages, Lenders and Administration Act (MBLAA)

Governed by the Bank Act

Mortgage Products

Multiple Mortgage Products from different Lenders.

Bank’s Products only because of employment terms.

Reporting

Must keep all files for review by FSCO in compliance with MBLAA

Files are maintained in accordance with the Bank Act.

Liability Cover

Must have Errors and Omissions Fraud Liability Insurance

Fall under the Bank Provisions

Disclosures

Brokers/Agents are required to Provide a detailed disclosure Document outlining all the terms and conditions of the mortgage, Including all the costs of borrowing,Effective Interest Rate and Cooling Off Period

Not required to provide a  detailed disclosure document.  In compliance with the Bank Act, they do not disclose effective  annual interest rates and are not as comprehensive.

Cons

Familiarity

Mortgage Brokers/Agents are less familiar considerations for some of the clients who are buying their first home or who already have an existing Relationship with their Bank.

Bank can only offer you their own rates and products. Banks will regularly give discounts on their posted rates and you are Responsible for this negotiation.

Accessibility

Mortgage Broker/Agent is accessible all the time.

Bank agents may have limited accessibility because of Bank Hours.