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Bank or broker for your mortgage? Here are the difference you should know

One distinction is that brokers work for their clients, rather than representing one particular lending institution

Allison Cosgrove, the Blue Jean Mortgage Queen providing solutions and results for homebuyers in Mississauga, explains the difference between a bank mortgage and a mortgage secured by a broker.

“When you want a mortgage, typically you would think of going to the bank,” she notes. “That is the way mortgages were handled for years, so it is the default way of thinking.”

Allison continues, “However, things changed when brokers entered the picture. A broker is like a freelance agent that can form contracts with many different lending institutions, including banks. We brokers work for our clients, not for any one particular lender.”

She pauses to ponder an example. “Okay, think of it this way. A banker is going to sell you a bank mortgage and not present any other options. That’s okay because that is their job. But what if your situation doesn’t fit the bank’s lending profile? What if there was a lending solution with better terms and a better rate for your situation? That is where a broker comes in. We shop the market for you and match you with the best lending solution. It may be a bank – it may even be your existing bank – or it may be a lender that works with those rebuilding their credit, that specializes in rural properties, etc.”

But that’s not all.

“A broker has a more holistic view of your finances,” says Allison. “We consider your life now, and your goals for the future such as retirement, children, post secondary savings, entrepreneurship and more.”

Many people wonder if brokers charge for their services. Allison is happy to explain, “No. Brokers are compensated by the lending institutions after the contract is finalized between the lender and property owner. There are many advantages to this. It means anyone can use a broker risk-free; there are no charges, fees, retainers, etc. It also means we are always working to the advantage of our clients. We have no bank quotas to meet, no sales targets to reach for and no managers looking over our shoulder. We answer to our clients, not to the lenders.”

The final question people ask Allison is if brokers are regulated. “Yes, they are!” she is quick to assure. Since 2008, all mortgage brokers must be licensed with the Financial Services Commission of Ontario as per the Mortgage Brokers, Lenders and Administrators Act. Licensing requires training, testing, accumulating education credits annually to maintain the license and remaining a broker in good standing.”

According to a 2016 Canadian Mortgage and Housing Corporation survey, 51 per cent of first time home buyers choose a broker. If you would like to be one of them, give Allison a call. She will shop the market for you and explain all your options, ensuring you feel comfortable, educated and empowered every step of the way.

Visit her website today to get started.