Think of this as how can Amazon sell you the same product for a lower price then your store? Removing the staff, building, advertising and other overhead means less costs for the company and these savings are passed onto you in way of a lower rate.
A bank works with 120 day rate hold periods where brokers can operate with 30, 45, 60, 90 and 120 day rate holds. Usually the less time a rate needs to the held, the lower the rate can be. Think of this as last minute seat sales for a trip versus booking longer in advance. As time progresses closer to your closing date, more possible savings can be had.
Also, I can shop around your mortgage up until 10 business days before your closing date to see about beating the current offer in place. When you may have moved on to other things after signing the mortgage commitment, I am there in the background working to save you more.
Lastly, there are more options with a broker then just your bank and more options mean the possibility of finding a lower rate. When your bank has looked at one lender option, being their own, I have explored dozens of lenders including most likely your bank as well. Think of Trivago, Booking.com and Expedia but for mortgages. Tons of selection, discounted prices, free service, more convenience. Without these sites, you are left to contact hotel after hotel to get their price and to hear their own biased opinion on if they are the best hotel for you.
Please let me know as that can be great ammunition with the lenders I have to save you more. Banks work off a reactive model where they will offer a rate and only lower it if you tell them a more competitive offer you have found. This is a great profit building strategy for the bank and assists them towards their billions of dollars of annual profits. You may hear from your bank, “Here is your rate and if you find something better, come back and we can match it.” This translates to, “Here is a rate that helps the bank shareholders and my income, bonus, etc. We have lower rates, but I will only show you them if you find out for yourself what the lower rates are first.” Not a very proactive client focused model unfortunately.
At each renewal with the matching strategy, you will have to talk to your bank, then a broker to find out the real rates you should be offered and then back to your bank again to match. This may get tiring at each renewal with the extra work needed to assure a low rate.
The broker works for you not the bank and not the shareholders of the bank. The more money saved and in your pocket upfront is my goal.
A broker is there merely to hand you the mortgage product for your consideration, just like a clerk at a store can hand you a product off the shelf. You do not have a sign a contact with me, just like you do not have to sign a contract with the clerk at the store.
You are signing the bank’s, for example, mortgage contact and will then be a client of that bank. The mortgage would be subject to the terms and conditions of that bank’s mortgage contract.
What do I have to pay you?
As with the previous example with the clerk, you do not have to pay them to hand you the product and you do not have to pay me for bringing you a mortgage option for your consideration.
Just like when you are shopping for a house, you do not need to pay the realtor assisting you, the seller pays them separately. You do not have to pay me to find you a mortgage, the lender pays me separately.
Do I have to use you once the process starts?
Just like when shopping from bank to bank, you are not forced to use one bank, even once a bank has approved you. You are not forced to use my services if you find a more favourable solution elsewhere.
That is a bit more of a U.S. focused question and would be very rare to see here in Canada. Lending is Canada is highly regulated. It would be more likely that a larger company would buy the smaller company such as when Scotiabank bought ING and changed it to Tangerine. The clients however during this time were not left stranded, they got to live our their mortgage contract and then renew with Tangerine, Scotiabank or any other lender of their choice. Many of the smaller lenders are associated with larger lenders and banks such as the previous example of Tangerine and Scotiabank.
I have been in the industry for over 12 years and look forward to many more to come however if things change, not to worry. The mortgage is not tied to me in anyway. You are the lender’s client now. At renewal you can renew with them, your own bank, another lender, call another broker to assist and so on. Just like if your real estate agent left the industry while you are living in your house. If needing an agent’s services again, you are welcome to call upon another real estate agent.
Yes, I am accredited with the Better Business Bureau and have an A+ rating.
Banks are business that offer a service and make money.
In life to have the most amount of options and savings, sometimes more then one company is needed as not every company will have a mortgage on sale at the same time. Just like not every grocery store will have Cheerios on sale at the same time. More grocery stores to choose from, more options and therefore more savings. Staying loyal to one bank can be compared to staying loyal one grocery store, clothing brand, hotel chain or car company. You would start to feel quite limited if you could only ever shop at one clothing store for the next 25 years.
I may have access to your very own bank and can explore unadvertised rates with them so you can stay there if you prefer but with a better rate.
With your credit card, personal loans and day to day banking, it’s great to be with one bank for convenience and having everything on one banking phone app. However, it may cost you more if you don’t expand past just one bank for your mortgage shopping. As a mortgage is visited usually every 5 years, its doesn’t need to be like your credit card where having one company forever is best, such as to build more travel points.
You can be loyal to your mortgage broker, just like you may to your investment advisor, or company like Booking.com. That broker can be your one stop shop, but within that one stop shop you can use all different companies, with whoever has the best rate and options for your needs. An investment advisor will look to put you in the most profitable investment portfolio which usually means more then one stock and mutual funds in the portfolio. You have the one person to call, the broker, and they can manage all the companies to save you more. If only allow to invest you in one stock your whole life, you may not see the return possible with access to different stocks.