So I came across an article in the Globe and Mail the other day titled, "Mortgage seekers wonder: Broker or Bank?" And I gotta say, as a mortgage broker whom has come from the banking industry it has left me with a few unanswered questions. But lets see if we can break this article down a bit shall we?
"Among the many tough decisions first-time home buyers face is whether to use a mortgage broker or rely on a bank to secure a mortgage." Is how the article starts, so lets start playing with this puzzle shall we. This statement, '...or rely on a bank to secure a mortgage...", did the author of this piece not understand that mortgage brokers can use banks to secure mortgages for their clients? Several in fact. Myself here in Alberta, I can use TD Canada Trust, Scotiabank, Canadian Western Bank to name a few.
Another puzzle piece is in paragraph 3, "...The latest, passed last fall, requires those who are applying for an
insured mortgage to show they can afford to pay it back even if interest
rates rise...". This is referring to the Stress Test, that was one of the new rules put into place by the Federal Government recently - however to be clear, it was not put into place in regards to just paying back a mortgage. One of the reasons it was put into place was for if and or when interest rates rise, the homeowner would still be ok with making his or her mortgage payments going forward. To make sure that they are qualifying for a home they can actually afford long term. Because lets face it, for most of us, a mortgages is a 15-25 year commitment. However this only changed the way 5 year term mortgage were qualified, as all other terms and variable rate mortgages already had to qualify under this condition.The article goes on to quote something that I have stated over the years in various fashions, from a mortgage broker in Vancouver, "..."If you go to the bank, and if they provide their approval, they may not have the most favourable options. Or, if they simply decline the file, you have to start from scratch with another lender," he explains. "Whereas with a broker, we can take you to 40 lenders and it's only one credit check. Mortgage brokers have access to lenders that a bank doesn't, because a bank has access to just that bank...". Further into the article, it states "...A bank, however, can help clients paint a wider financial picture...", quoting the vice-president of home equity finance at Royal Bank of Canada.
Maybe because Mothers Day is just around the corner, but I had to stop here as my mothers voice drifts through my head, "Darling how well do you think that will work out if you do not focus? Remember, 'Jack of all Trades - Master of None'". As she was making me focus on my homework one assignment at a time vs me doing parts of everything all at once and nothing being completed with my best work . Does anyone else remember hearing this quote? Or being in the same situation? A mortgage broker is licensed in mortgages - this is what we do and 'toot-toot', we do it well. Small example, I do not claim to know the best savings account that you should have your money invested in, or which lender has the best business accounts to help you run your new business... these are not my areas. I would refer my client to a banker in this case, as this is for sure an area they excel in. Investing, yes as a banker I had to have my securities exam completed - but I know that my referral partners that live and breath investments are the better choice here. Why? cause this is what they do. If your Financial Service Advisor says, they know everything about Mortgages, Investments, Insurance and Accounts - that may actually be the case (I definitely can not speak for everyone on Planet Earth), but for only that one Financial Institution that they work for. So is that one Financial Institution really the best place to have all your finances? Again I hear my mother, "Is it really good to have all your eggs in one basket?". So question to you, Is it?
Later into the article there is a quote from the vice-president of mortgages and lending for Canadian Imperial Bank of Commerce, "...You have to connect with somebody who looks at it beyond just the mortgage transaction..." - I have heard variations of this for sure and I agree. Financial well being is not just your mortgage transaction. While your mortgage transaction is one of the largest most people will do in their lifetime, it is not the only thing they will do. Cars, family, planning, retirement etc are all part of it and need to be part of the discussion and thoughts along the way. It is why you will never hear a mortgage broker state, "I can do it ALL!" ...or at least you never should hear that from a mortgage broker, for sure it would never be uttered from my mouth. However what I can offer my clients is access to my referral partners, Realtors, Life Insurance Brokers, Investment Brokers, Bankers (yes bankers because sometimes clients need their account sets up or access to other accounts), honestly sometimes I am even referring them to a Massage Therapist or Acupuncturist etc if it has come up in the conversation. No one person is the best at it all! Let me make it more simple, would you want your car engine fixed by your dentist? Or better yet, your teeth fixed by your auto repair person. I would hope not! Both are amazing at what they do best, because it is what they do day in and day out. And if your dentist can fix the car engine, well, one is the profession and the other is a hobby. There is a difference.
The article does ends well. "...As with any major financial decision, buyers need to educate themselves to a certain extent...", True, but I do not know what the author means by 'certain extent'. Everyone will want to know something different, as there are no two instances that are the same. So what should first time home buyers know - to what extent?
If I was in the market for a home, my very first one especially, I would want to have someone in my corner that can advise me on what would work for me, my family and my future. As I mentioned above, for most of us this is the largest purchase we will make in our lifetime. Since we are talking mortgage, I would want someone that is licensed and lives and breathes this business, not just their 9-5, 5 day a
week commitment. I would want someone that would say, "You know that is not my area of expertise, but I can refer you to someone that it is theirs!". Those of us that have been in the industry for quite some time have lots of contacts that we routinely use to help our clients with the Big Financial Picture, because we know that finances are not only about your mortgage. We have Realtor partners, Insurance Partners, Investment Partners - so that we can help our clients with the whole financial picture. Banks are not the only ones with the corner on this market, the difference is, as a mortgage broker with referral sources, we are not cemented to deal with only one institution, because all financial pictures come in a kaleidoscope of colors.
Plus if you are wanting a First Time Home Buyers Guide, to help you with information, let me know - I can forward one to your inbox today!
Blog Post was written Referring to: https://beta.theglobeandmail.com/report-on-business/mortgage-seekers-wonder-broker-or-bank/article34786155/?ref=http%3A%2F%2Fwww.theglobeandmail.com&service=mobile
