Mortgage broker or bank: how do you choose?

Two ways to find financing

When you want to finance a property purchase or renew a loan, two doors usually open: the bank or institution where you already hold your accounts, and the mortgage broker. Both can lead to good financing. They do not work the same way, and the difference starts with how many offers you see.

With a bank, you see that bank’s products. With a broker, you see what several lenders are willing to offer for a file like yours, at least among those the broker works with. Neither route is superior in every circumstance: the useful question is not “which is preferable?” but “which suits my file and my way of proceeding?”.

This article describes each one’s role, the situations where one or the other is generally more comfortable, the questions to ask both, and how to check the licence. It contains no rate and recommends no one. A person registered with the body that oversees them can apply these ideas to your situation.

What a broker does

A broker gathers your situation: income, debts, down payment, project. They then present your file to several lenders and explain the offers received. They act as an intermediary between you and the lenders.

It is worth understanding what “several lenders” means. A broker works with the lenders that accept their files, not necessarily every lender in the market. Some institutions do not deal through brokers. So ask which lenders they compare, and how many they actually consult for your case.

What a broker can bring you:

• an overview of several offers, presented against the same criteria;
• an explanation of the differences between products, beyond a single figure;
• help assembling the file and gathering documents;
• knowledge of different lenders’ acceptance criteria.

Their pay is, in most cases, provided by the lender when the loan closes. That does not mean they are less able to serve you, but it is information worth knowing. Ask them to explain how they are paid before you commit.

What a bank does

A bank presents its own products. If your accounts are already there, the process can be quick: the institution knows your history, your deposits and your repayment habits. For a simple file, that speed has value.

The flip side is that you see only one offer at a time. To know whether it fits, you need a point of comparison, which you must seek yourself, from another institution or a broker.

Points to keep in mind about a bank:

• an existing relationship can ease some steps;
• the offer covers the institution’s products, not the whole market;
• advisers may have internal targets tied to selling products: ask how they are paid, as you would with anyone;
• nothing obliges you to accept a first offer, or to stay with the same lender at renewal.

At renewal, your current bank often sends an offer. It is a retention offer: it can be negotiated, provided you have a point of comparison to talk on equal terms.

Simple file, complex file

File complexity is one of the best clues for choosing. It does not depend on the size of the sum, but on how easily a lender can assess your situation.

A simple file means stable, verifiable income, a clear down payment and an ordinary property. In that case both routes work, and the choice often comes down to available time and the wish to compare.

A more complex file may involve:

• self-employment or variable income;
• a down payment from several sources, such as a family gift;
• an unusual property (cottage, revenue property, land, major renovations);
• a credit history that has seen difficulties;
• a recent arrival in the country or a changing job situation.

In those cases, a broker often has access to a wider range of financing options, which can help find a lender whose criteria match your situation. There is however no guarantee: eligibility depends on each lender, and no one can promise you an approval.

Questions to ask both

Whether you meet a broker or a bank adviser, the same questions apply. Put them the same way to both and ask for written answers, which makes the comparison fair.

• How are you paid for this loan?
• What penalties apply if I repay early, and how are they calculated?
• Which prepayment and extra-payment privileges are included?
• Is the loan transferable or portable if I move?
• What fees come on top (appraisal, notary, file)?
• Which lenders do you compare, and how many offers will you obtain for my file?
• What could change the offer between today and signing?

A vague answer is information in itself. Likewise, insistence on signing quickly or reluctance to put anything in writing is a reason to slow down.

The comparison is not limited to one figure. Look at the conditions, the privileges, the future penalty and the product’s flexibility. That is often where the differences that matter most to your situation lie.

How to check the licence

Before entrusting your file to someone, check that they are authorized to practise. The check is free, takes a few minutes and commits you to nothing.

First ask for the person’s full name and their licence or registration number. Then consult the public register of the body that oversees them. Depending on their role, that may be the Autorité des marchés financiers (AMF), the Organisme d’autoréglementation du courtage immobilier du Québec (OACIQ) or another body. If you are unsure which to consult, ask the person to tell you, then verify by yourself.

Points to verify:

• the person’s name and that of the firm or agency;
• the type of licence or registered sector, which must match the proposed activity;
• no disciplinary measure or restriction on record.

Type the register’s address yourself rather than following a link supplied by the person. If they are not in the register, or their details do not match, the conversation ends.

The check matters all the more since you are about to hand over sensitive documents: bank statements, notices of assessment, identification.

A hypothetical scenario

Imagine Inès and Thomas, who are both self-employed and about to buy their first property. Their accounts have been at the same bank for years, and an adviser has already mentioned a pre-approval.

They decide not to stop at that first offer. They first ask their bank what it can propose, with the terms in writing. They then meet a broker, whose registration they check before handing over documents.

To both, they put the same list of questions: pay, penalties, privileges, portability, fees. They note that the broker explains which lenders they consult and why, and that the bank details what its product covers. They compare the answers side by side, without limiting themselves to a figure.

This scenario is fictional, has no figures, and guarantees no outcome: eligibility depends on each lender. It shows an approach: compare two routes with the same questions, verify the licences, read the conditions, then decide. The final decision is entirely Inès and Thomas’s.

Mistakes to avoid

A few mistakes come up often when choosing between a broker and a bank.

• Accepting the first offer without a point of comparison, simply because it is easy.
• Looking at a single figure and ignoring privileges, fees, penalty calculation and portability.
• Assuming a broker compares the whole market, without asking which lenders they consult.
• Assuming the opposite, that a broker is necessarily better or that a bank is: neither claim holds in every case.
• Not asking about pay, out of embarrassment or habit.
• Handing over documents before checking the licence.
• Waiting until the last week before a renewal date or an offer to purchase, which cuts the time to compare.
• Staying silent about an upcoming plan (a move, a renovation, a job change) that could make the contract unsuitable.

None of these mistakes is serious on its own, but they accumulate. A conversation with an authorized person helps spot them in your file before the decision.

What comes next: compare without committing

Nothing obliges you to pick a single route. You can ask your bank for an offer and compare it with one from an authorized person before deciding. Getting an offer commits you to nothing until you sign.

Here is one possible sequence:

• gather your documents (ID, proof of income, bank statements, notices of assessment);
• note your plans for the coming years so offers are compared on the same basis;
• ask for written offers from at least two sources;
• compare all the conditions, not just one figure;
• ask your questions, then take time to decide.

CompareTaux shows no rate and makes no decision for you: the service connects you with an authorized person who can obtain proposals from lenders and explain them. For neutral references, consult the resources of the Financial Consumer Agency of Canada (FCAC) and the Canada Mortgage and Housing Corporation (CMHC).

Whichever route you take, keep a copy of all documents exchanged: they will be useful at renewal. Set a reminder well before your renewal date so that you can repeat the comparison calmly, with the same questions, rather than answering a letter at the last minute.

Frequently asked questions

Sources

• Autorité des marchés financiers
• Financial Consumer Agency of Canada
• Canada Mortgage and Housing Corporation
• OACIQ