When I got back into the world of lending and finance, I had a choice: take a job with one of the Big Five banks, or join an independent brokerage.
It didn't take me long to decide.
In my previous career as a Financial Advisor at one of the Big Five, I had processed hundreds of mortgage applications. Of those, maybe half were approved. The other half were turned down because they didn't fit into the neat little box that my institution was trying to fill. Mortgage brokers, on the other hand, don't expect financial circumstances to fit into neat little boxes. But more than that, a broker's work is based on what you want rather than what the lender wants, because the broker isn't employed by the lender -- he's employed by you.
In the past, brokers were seen as an alternative only for clients with poor credit, who needed to use private lenders to secure a mortgage. However, this has changed tremendously over the past few decades. Regardless of your credit rating, and regardless of your stage in life, mortgage brokers offer many advantages over traditional banks.
For instance, working with a broker can give you the benefit of having more options on who you want to deal with for one of the most significant assets in your financial portfolio. While a bank only offers the products from their particular institution, licensed mortgage brokers have access not only to hundreds of private investors, but also to over 90 institutional lenders, including credit unions, trust companies, and, yes, even Canada's largest banks. In fact, quite a lot of business is done with the chartered banks, and a mortgage broker can get far better terms than you would get at your local bank branch. This is because brokers arrange millions of dollars in financing a year, and because we make the lenders compete with each other to get those funds. A lone individual walking into the local bank for a new mortgage or renewal just does not have that kind of clout.
Each lender has different ways of structuring a mortgage that takes your unique circumstances into account. Some will be able to do a deal that others will not; some will allow you to pay off much more at certain times throughout the term than others; and some will even allow you to do a zero-down mortgage, despite the new mortgage rules (and no, you will not be paying a large premium for this). Or how about the fact that the banks get to decide what you can and cannot afford based on inflexible ratios and calculations? Have you ever wondered if there was a lender that would actually trust that you know how much you can afford? And again, not pay a premium for this? Yup, there's a lender for that, too.
These are not fly-by-night companies. In fact, most of these companies have been around for decades. And in most cases, the ones that do "disappear" are actually acquired by chartered banks looking to expand their client base and increase the CDIC insurance they can offer on investments.
So these are many of the reasons that I decided to go the independent brokerage route. But of course, before you decide to trust someone to handle your mortgage, there are a dozen questions you should be asking -- which will be the subject of my next blog post.
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