For decades the process of selecting a mortgage has been the same – go to the bank, choose between a fixed and a variable, and don’t ask any other questions. What was once a simple practice however, is no longer as easy as it once was. A mortgage is no longer just a mortgage.
There are many things to consider these days when it comes to finding financing, the first and foremost is whether the bank you love for your everyday banking is actually the bank that is right for your mortgage needs.
We always suggest that a client who is seeking a mortgage starts with his or her own bank. Find out first what rates they will offer you without any haggling, you may find that these rates aren’t as attractive as the best rates available elsewhere.
Next, and the most important step, is to consult a mortgage broker. A mortgage broker is not to be confused with a mortgage specialist who is employed by a bank; a broker is an independent third party who deals with multiple lenders.
A good broker will not focus on getting you a better rate, but a better mortgage. They will talk about the strengths and the weaknesses of your bank in an objective manner. If they talk about only the weaknesses, then they are probably acting as more of a salesperson than an advisor.
Objectively finding a better mortgage is about finding that perfect combination of low rate and product features, and a broker is the best place to find that combination. The best mortgages have a low rate, usually within .20% of the best rate available on the market, but will also have no hidden fees, clauses, or surprises.
Many consumers, upon fully understanding the difference between their banks mortgages and mortgages available from other institutions, tend to pick lenders that they have previously had no relationship with. This is not to say that some consumers don’t pick their own banks, as many do, but in a large majority of clarity leads to alternative institutions.
The most common reasons consumers choose lenders other than their banks is to avoid common mortgage pitfalls like collateral mortgages (which tie up your homes equity), clauses that prevent you from paying off your mortgages, and higher payout penalties often found at big banks.
Most consumers also tend to gravitate towards mortgage brokerages that provide a plan for their mortgage. For example, our goal is to help our clients pay off their mortgage in 7-15 years instead of the 25 that clients usually sign up for. We are able to do so by providing sound advice that won’t make the client house poor.
In fact, we practice what we preach. We recently shortened our own personal mortgage from 30 years to 14 years and 9 months in the first two years of the mortgage. To find out how you can do the same, give us a call.
