Buying | May 29, 2020

The Money: Mortgage Broker vs Bank

Unless you’ve already got hidden treasures, you’re going to need a mortgage for your new purchase. You could walk into the bank and talk to their mortgage specialist. Or, you could work with a trusted mortgage broker.

My advice? Go with the mortgage broker. Here’s why…

1. You’ll Have More Options

Ultimately, the bank (whichever bank it is) can only offer you their mortgage products, which are extremely limited. Meanwhile, a mortgage broker has access to each and every one of that same bank’s products plus a whole host of other lenders, too.

2. You Build a Long-Term Relationship

Obviously, you want to get the lowest mortgage rate possible, and in my experience, a trusted mortgage broker will always beat out a single bank’s products. But there’s a much deeper reason why I prefer my clients to have their own trusted mortgage broker.

This is your home. It’s likely — or likely to become — your largest asset, and your mortgage secures that asset. It’s an important piece of your financial health. There are advantages to establishing and maintaining a long-term relationship with a mortgage broker; one who will always be there for you, like a trusted dad or voice guiding you to make the right decisions as they come up along your journey of homeownership.

How many times in the past 10 years have you switched either your doctor or your dentist? You have a relationship with them. It will serve you well to have the same consistent relationship with your mortgage broker.

3. It Makes Future Decisions Easier

Fast forward five years to when your mortgage is due for renewal. Good luck finding that same bank employee who helped you years before! They’ve likely moved on, so now you’re dealing with a new representative at the bank. You don’t know them, and they don’t know you.

Now contrast this with your trusted mortgage broker. They have valued you right from the start and have likely stayed in touch with you, informing you of different trends in the mortgage industry. There is both value and power in having a strong relationship like this. There is potentially money-saving power too — and there is leverage.

4. You Can Leverage Their Relationships

The bank representative doesn’t ‘know’ you, nor are they the decision-maker. They pass your file up the chain and wait to hear back, having no control over anything. Your mortgage broker has a much more direct link to the decision-maker (the underwriter). Since they’ve done business together for years and years already, they have a very strong working relationship in place.

See, the lenders have rules they must follow surrounding all mortgages. But with that, sometimes certain exceptions can be made. We can’t predict the future, but it is a possibility that down the road you’ll be in a situation where a special exception will save you a ton of money. When such an exception is being considered, there’s a lot of weight in this relationship that your mortgage broker has with the lender.

Essentially, your mortgage broker is able to present your case and really stand behind it and convince the lender that you are worthy of the exception. Since we always do business with the people we like the most, the lender then pushes the mortgage application through as a special favour for his buddy, the mortgage broker. You’ve just leveraged their long-term friendship is what you’ve done here. That’s very smart of you!

Picture This…

It’s a Thursday heading into the Easter long weekend. A ‘one of a kind’ condo hits the market at a price too good to be true. You get in there the same day, start the offer process quickly, and Good Friday becomes Great Friday because you buy yourself the condo!

Your agent is miraculously able to negotiate the price down from the list price, which we all agree was a superb deal right from the start. That listing agent made a mistake and we pounced on it! This property was a bit of a stretch, though, in terms of numbers and qualifying for the mortgage. On the advice of your agent, you stayed clear of the boy at the bank and have already given your mortgage broker lots of info.

“This should be okay,” he advises that holiday Friday morning (the bank would have been closed, by the way). So that’s good to hear, but even better is the fact that we are able to slide in a financial condition protecting you! So in the event that things were not okay you were in no danger whatsoever. Excellent.

It sure wasn’t a slam dunk but your mortgage broker was able to work all his magic, leverage his lengthy relationship with the lender, and convince them to approve your financing. Awesome! A few days later we are able to waive your financing condition and the only thing left to do is have your lawyer approve the status certificate. Your real estate agent already has clients in this building and knew going in that the building reserves were very healthy and that the ship was not sinking here. Good, good!

The status certificate arrives verifying the financial health of the building, but with one surprise about the actual condo: The $812 advertised on the MLS listing was inaccurate. The correct monthly maintenance fee was $923! Not only did Captain Listing Agent screw up for his seller by listing the condo under full market value (which we worked to our gain), he also made a glaring mistake on the monthly maintenance fee.

As you can imagine, this comes as a complete shock to everyone, including Captain Listing Agent who claimed the $812 was the figure the seller gave him. He forgot to verify that with management when he listed (a major no-no!).

The mortgage approval was based on the $812 figure and we just barely squeaked through there, but the bigger concern was pointed out by the buyer, and he was right when he said, “We’ve lived in our first condo 10 years, and that’s at least our timeline here on this one, so $111 x 12 x 10 is $13,320, except since maintenance fees go up over time, the cost to us here is likely much more than that.”

Correct. Of course, I’m all over the listing agent and the deal is immediately being renegotiated to a lower purchase price to address this change of fact. The buyer certainly should not have to pay for this error. We negotiated in good faith and were just thrown a major curveball here.

But the seller has different ideas. He was obviously feeling that he had undersold the property that Easter weekend and had made a mistake by not having open houses. He was right on both counts, too. He was seeing the advantages of us pulling out of the deal, which we had full right to do.

We did manage to get the listing agent to make a concession for his error. There was a limit there, of course, because he controlled the listing. He really could have said no to that and just re-listed the property and sold it again to the next buyer should we not waive our condition. The seller even came around and relaxed his price a bit admitting that he made an honest mistake as the maintenance fee just comes out of his account and he doesn’t pay too much attention to it.

I was in close talks with the mortgage broker because the numbers had to be reworked and we were now going to need an exception on top of the earlier exception. With all that, we were still going to be a bit short.

Right here is why it’s really helpful to have a solid relationship with both your mortgage broker and your real estate agent, much like you have with your doctor or dentist.

We all agreed that we inked a terrific purchase price from the get-go, and I didn’t want to see my clients lose this amazing property over a few thousand dollars. The probability of us finding this same perfect space for the money we were paying I felt was extremely low. The market was moving higher at a good pace and there just weren’t enough three-bedrooms around (and still aren’t to this day!). Even if we could find this space again, that might be six months to a year down the road with no control over what price we might have to pay then. Too many unknowns.

It was my job here in this situation to step up and chip in a few dollars to make this workable for the buyers. We were 10 years into our relationship at this point and my aim is always to keep these excellent friendships. The mortgage broker jumped in and said, “I value their relationship too, so you do that Geoffrey, and I’ll do a little something on my end and I think I’ll be able to convince my lender friend that we can drive ahead here.”

See, the mortgage broker, because they do all the legwork on your application, is paid a fee by the lender. He saw everyone involved helping in the matter and he jumped in as well because he’s got your back too. He values you as clients and wants to keep you as clients going forward another 10 years and beyond.

Had it not been for your strong relationships with both your mortgage broker and your real estate agent, this perfect condo would have likely slipped right through your fingers.

There was all sorts of leverage at play:

  • A 10-year relationship with your real estate agent.
  • A 10-year relationship with your mortgage broker.
  • A 15-year history between your mortgage broker and your real estate agent.
  • The critical friendship that your mortgage broker has with the lender he chose for you.

Leverage on top of leverage on top of leverage!

It was Easter weekend. The bank was closed. This condo would have been sold to someone else by Tuesday when they reopened had we not jumped on it right away.

Fun Fact: At least a dozen times in 20 years I have helped a buyer who actually works for the bank. They always assume their employer will get them the best possible mortgage. Shocked, and upset they are to learn that my mortgage broker can get them a lower rate.

Leverage is a powerful thing.