In the past, people went almost exclusively to their banks for their mortgages. Now we have many more options for anyone when they looking for a mortgage, including a mortgage broker. A Mortgage broker is basically the middleman, they will negotiate the best rate for you. You may be asking “but isn’t that what a bank does as well?” We can highlight some differences between the two for you. What are some of the differences between the banks and the brokers?
The licensed mortgage broker has access to multiple lenders and mortgage rates. Which can be a plus for you, since you won’t have to do the shopping around yourself. Both the bank and the broker will put the applications together for you but the way they handle your application with possible lenders is what makes the big difference. Banks will not usually negotiate with the lenders to get the best rate.
Pros for Banks and Mortgage Brokers
Pros of being with a bank might be that you already have a trusting relationship with your bank. A pro to going with a mortgage broker is that in the end, you might get a better rate because they do the shopping around for you. It’s important that if you don’t go through a mortgage broker to shop around and ask other financial institutions for rates so you know what to expect. After getting rates with other institutions you can return to your bank and notify them of the information you obtained and see if they can match the rates that you found.
Cons for Banks and Mortgage Brokers
Cons to going with a bank, you won’t get access to a bunch of different rates made available from other avenues. Banks will give discounts on their posted rates, however, it is up to you to negotiate with them. Cons to going with a mortgage broker, brokers seem to be a less familiar avenue, and first time home buyers won’t have that pre-existing relationship with them. This can seem a little daunting but considering that even getting 1% less on your interest rate can save you thousands, it is always a good idea even to get a quote from a mortgage broker.
The Mortgage brokers are becoming more popular, but still are the “less familiar route.” People tend to stay within their comfort zone, but in this light, your “comfort zone” could cost you greatly.
The Mortgage broker will help you with the application process; but, it is important to remember they are an origination service. A financial institution will be the one to provide and service the loan. The bank or lender will collect payments and provide customer service after the closing; however, you can also reach out to your mortgage broker to assist you throughout the life of your mortgage and any questions you have about your renewal.