Mortgage Broker vs Bank: Which Gets You the Better Mortgage?
You can get a mortgage by walking into your bank, or by going through a mortgage broker who shops many lenders for you. Both are common in Canada, and both can get you a good deal. The difference is how many mortgage quotes you see, who pays for the advice, and what happens when your file isn't simple. Here's how to compare them.
Key takeaways
- A bank's mortgage specialist offers that bank's products. A broker compares many mortgage lenders — banks, monolines, credit unions and alternative lenders.
- On standard residential mortgages, brokers are usually paid by the lender, so the service costs you nothing.
- Mortgage brokers are licensed and regulated provincially. You can check a licence on the regulator's public register.
- Whichever route you take, compare at least two written quotes on the whole mortgage, not just the rate.
How each one works
A bank lends its own money. Its mortgage specialist works for the bank and can only offer that bank's rates and products, though they may have room to discount, especially if you bring other business.
A mortgage broker doesn't lend. A licensed broker assesses your file, sends it to the lenders most likely to approve it at the best terms, and manages the process through to closing. Most brokers work with dozens of lenders, including some of the big banks, monoline lenders that only deal through brokers, credit unions, and alternative and private lenders.
Side by side
| Bank | Mortgage broker | |
|---|---|---|
| Lenders compared | One | Many |
| Who they work for | The bank | Arranges your mortgage with a lender; duties set by provincial law |
| Cost to you (standard mortgage) | None | Usually none — the lender pays |
| Credit checks | One per bank you visit | One, shared with the lenders the broker submits to |
| Self-employed, bruised credit, unusual property | May decline | Can route to a lender that fits |
| Bundling with chequing, credit cards, investments | Yes | No |
| At renewal | Sends a renewal offer | Can re-shop the market |
How mortgage brokers are paid
On a standard residential mortgage, the lender pays the brokerage a finder's fee when your mortgage funds. You don't pay a fee, and the rate isn't marked up to cover it.
On alternative and private mortgages, a broker or lender fee can apply. A licensed broker must disclose fees in writing before you commit. If anyone asks for an upfront fee on a standard mortgage, ask why — and get it in writing.
Because lenders pay brokers different amounts, ask any broker how they're compensated and whether any lender relationship affects their recommendation. Provincial rules require brokers to disclose conflicts of interest.
Licensing: how to check a mortgage broker
Mortgage brokering is regulated by each province. Agents and brokers must be licensed, complete education and continuing education, and work through a licensed brokerage. Examples of regulators:
- Ontario — Financial Services Regulatory Authority of Ontario (FSRA)
- British Columbia — BC Financial Services Authority (BCFSA)
- Alberta — Real Estate Council of Alberta (RECA)
Each regulator lets you search its register. Before you share documents, check that the individual and the brokerage are licensed in your province. Lendmax is a licensed mortgage brokerage (#13398).
When a bank may be the better choice
- You have a long relationship and the bank will discount to keep it — get the offer in writing and compare it.
- You value having your mortgage, accounts and investments in one place.
- The bank offers a product you specifically want, such as a particular readvanceable mortgage setup.
When a broker usually adds the most
- You want to see several mortgage quotes without applying at several banks.
- You're self-employed, have variable income, or have bruised credit.
- You're a first-time buyer who wants the process explained.
- Your mortgage is up for renewal and you'd like to know if you can do better than the renewal letter.
- You need equity — a refinance, HELOC or home equity loan — and want options side by side.
How to compare mortgage quotes
Whether a quote comes from a bank or a broker, ask for it in writing and compare:
- Rate and term — and whether it's fixed, variable or adjustable. See fixed vs variable.
- Rate hold — how long it's guaranteed.
- Prepayment privileges — lump sums and payment increases allowed each year.
- Penalty formula — especially whether the interest rate differential uses posted or discounted rates.
- Portability and assumability — can you take it with you if you move?
- Registration — standard or collateral charge, which affects switching later.
- Fees — appraisal, legal, lender or broker fees.
How mortgage rates are set explains why two quotes with the same rate can cost very different amounts.
Sources
This article is general information, not financial advice. Broker compensation, fees and licensing rules vary by province. Mortgage financing is subject to lender approval.
Frequently asked questions
Often a broker, because you see more lenders' pricing. But not always — a bank keen to keep your business may match or beat it. The only way to know is to compare written quotes.
Not usually on standard residential mortgages; the lender pays. Fees can apply on alternative or private mortgages, and must be disclosed in writing before you commit.
Search your provincial regulator's public register, such as FSRA in Ontario or BCFSA in British Columbia. Many brokers work remotely across the provinces they're licensed in, so you don't need one down the street.
Generally one. The broker pulls your credit once and shares it with the lenders they submit to.
Sometimes. Some of the major banks accept mortgages through brokers; others only lend directly. A broker will tell you which lenders they can access.
See your options from many lenders at once
Lendmax compares banks, monolines, credit unions and alternative lenders on one credit check. No cost on standard residential mortgages.