# Banks vs. Brokers?



## v_tofu (Apr 16, 2009)

Hi all,

I was wondering if anyone can explain the difference between the two, and why brokers seem to be able to lend at a lower rate?

Just spoke to a mortgage specialist from RBC, and they gave me (what I thought) was a ridiculous 5 year fixed closed rate. 4.15%. I immediately called a broker who is currently offering at least 3.75%. This is for a quick close of 30 days or so.


Both seem to have the same features, i.e 20% prepayments, portable mortgages, etc. So how come they lend at a lower rate? and who here has gone with a broker over a bank? your thoughts?

My only concern is that the company is based in Toronto, and I'm in Winnipeg. Other than faxing over info, I don't see why I shouldn't go with them, especially at a 0.4% difference.

cheers,


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## Rickson9 (Apr 9, 2009)

I was at a party last weekend and a woman who works in the mortgage department at one of the big Canadian banks suggested that I go to see a mortgage broker instead of going to the bank! That was funny!


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## prock (Apr 3, 2009)

Broker. I've never ever met someone who got a better rate with a bank. I just this month got 3.85 for 5 years.


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## Jane (Apr 4, 2009)

my friend recently renewing his mortgage, he phoned up many brokers and get the quote from them(he recommanded monstermortgage broker), then he went back to his own branch and request for rate matching, it's funny they actually agree...I'm going to try that with my own mortgage next week or two


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## ethos1 (Apr 4, 2009)

*having done many times in the past*

when renegotiating mortgages, ones that are up for renewal, my suggestion is to shop the market.

Try to get as many in the hand written quotes as you can, then when the folks who you are with give you their best renewal rate, you simply say - thanks, but I shall be switching.

Puzzled the current lender will always ask - why, your response will be because you have a better offer.

The lender most of the time will say if you have the written quote we shall either match it or beat it

You at this point would like to think you have the upper hand - then you tell the person on the other side that you have x% rate, and that if you want to keep my business please beat it

its theirs to lose & yours to switch - simply a negotiating & bargaining technique


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## v_tofu (Apr 16, 2009)

ethos1 said:


> when renegotiating mortgages, ones that are up for renewal, my suggestion is to shop the market.
> 
> Try to get as many in the hand written quotes as you can, then when the folks who you are with give you their best renewal rate, you simply say - thanks, but I shall be switching.
> 
> ...




Thanks for the reply all. Looks like I'll be going with a Broker. He's been nothing but helpful and attentive to all the details that I've overlooked. I think I could get my bank to match it, but to be honest, the mortgage specialist I've been dealing with makes us feel more like a thorn in the side. Maybe cuz we have 20% down and our mortgage is a mere 200k?

On a side note, Is it normal for a mortgage broker to ask for alot of personal banking info? i.e SIN number, photo copy of driver liscence, bank statements, work history, etc? I imagine he needs them for verification with his lender, but thats alot of personal info I'm faxing over!


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## DrStan (Apr 5, 2009)

Mortgage brokers are business people. So negotiate with them since it's your money and there are tons of brokers out there. They get a commission from the financial institution who will provide your mortgage. So I suggest bringing up a cash "kickback" to sweeten the deal. My brother-in-law negotiated $500 from his broker's commission (mortage: about $250K). You can't get what you don't ask for!


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## Shayne (Apr 3, 2009)

v_tofu said:


> Thanks for the reply all. Looks like I'll be going with a Broker. He's been nothing but helpful and attentive to all the details that I've overlooked. I think I could get my bank to match it, but to be honest, the mortgage specialist I've been dealing with makes us feel more like a thorn in the side. Maybe cuz we have 20% down and our mortgage is a mere 200k?
> 
> On a side note, Is it normal for a mortgage broker to ask for alot of personal banking info? i.e SIN number, photo copy of driver liscence, bank statements, work history, etc? I imagine he needs them for verification with his lender, but thats alot of personal info I'm faxing over!


The broker needs this information to pass onto the bank. May seem like personal information, but the lender wants to ensure that their $300K is going to an actual person for an actual property. It is very normal.


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## v_tofu (Apr 16, 2009)

Shayne said:


> The broker needs this information to pass onto the bank. May seem like personal information, but the lender wants to ensure that their $300K is going to an actual person for an actual property. It is very normal.


Thanks for the info.

Is there anyway to check if the broker is, how do you say, legit? I'm quite confident, as the company has been brought up on other forums, but yea, like I said, lots of personal info!


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## infomercialscams (Apr 28, 2009)

Hi guys !!!!!!!!!

The main difference behind the scenes is that a mortgage banker lends the bank's own money. The loan officer's employer -- the bank -- decides whether to underwrite the loan and at what rate and terms. A broker doesn't lend his or her company's money. The broker introduces the borrower to a lender and does much of the paperwork, but the lender decides whether to underwrite the loan and at what rate and terms. The broker doesn't make those decisions.

Thanxxxxxxxxx..


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## Shayne (Apr 3, 2009)

v_tofu said:


> Thanks for the info.
> 
> Is there anyway to check if the broker is, how do you say, legit? I'm quite confident, as the company has been brought up on other forums, but yea, like I said, lots of personal info!


Your province should have a Real Estate Board you can search. Here in Alberta realtors, mortgage brokers and appraisers can be searched at www.reca.ca You can also try www.caamp.org http://www.naylornetwork.com/caampdirectory/Index2.asp


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## Mike H. (Apr 15, 2009)

Mortgage brokers can (usually) access lower rates than bank branches for one simple reason: They are a very low cost distribution channel. The lender only pays for completed loans. No salaries, benefits, or office overhead; therefore the lenders prefer brokers.

TD Canada Trust lends through brokers; as do Scotia, BMO, CIBC, Laurentian, National Bank...

Royal Bank doesn't lend directly through brokers, but instead finances a wholesale lender called Merix.

They all offer lower rates to brokers than through their branches.

It is pretty nasty to get a rate from your bank branch, get a lower rate quoted by a broker, then go back to your bank branch to have them match the rate. The mortgage broker has spent time, energy, and probably paid for credit checks on your behalf. A person should be fair to the broker and only go with the bank branch if they offer something better than the broker - not the same deal.

Another advantage to using a mortgage broker is the credit check. A broker can shop several lenders with a single credit bureau enquiry. If a person shops several lenders on their own, each will do a credit enquiry. Each enquiry knocks a few points off the credit score. The lower the score, the higher the rate....


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## DrStan (Apr 5, 2009)

Mike H. said:


> Another advantage to using a mortgage broker is the credit check. A broker can shop several lenders with a single credit bureau enquiry. If a person shops several lenders on their own, each will do a credit enquiry. Each enquiry knocks a few points off the credit score. The lower the score, the higher the rate....



A series of credit inquiries made by different lenders in a short period (i.e., when you are shopping for a mortgage) will only count as one "hit" on your credit score.

And as for going back to the bank in order to have them match the broker's rate... that is nasty, and kind of pointless. You want them to beat the rate.


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## Mike H. (Apr 15, 2009)

DrStan said:


> A series of credit inquiries made by different lenders in a short period (i.e., when you are shopping for a mortgage) will only count as one "hit" on your credit score.


Sorry Dr. Stan, but that's exactly wrong. 

I own a mortgage brokerage, and we are Equifax "members". The exact formula to calculate their Beacon score is a trade secret, but they have been very clear with us that multiple enquiries from multiple lenders in a short period of time is very negative. It's a possible sign of financial hardship.

Every credit report we look at does have short explanations for why it is less than perfect. One of the most common is "TOO MANY ENQUIRIES LAST 12 MONTHS".

We've worked with many customers to improve their credit ratings. Aside from the obvious (make your payments on time!) it also helps to reduce the number of open credit accounts and to keep outstanding balances below 75% of account limits. We also frequently see credit cards reported as R9 (skip, default, written off) for very small balances. This is really bad for credit ratings and often results from paying off a card in full, then ignoring it. Then the lender charges a few dollars in service charges or deferred interest; and it's not paid. A wise consumer will examine their credit report at least once a year, and get any errors corrected.


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## DrStan (Apr 5, 2009)

Mike H. said:


> Sorry Dr. Stan, but that's exactly wrong.
> 
> I own a mortgage brokerage, and we are Equifax "members". The exact formula to calculate their Beacon score is a trade secret, but they have been very clear with us that multiple enquiries from multiple lenders in a short period of time is very negative. It's a possible sign of financial hardship.
> 
> ...


**********
This is from the MyFICO site (http://www.myfico.com/CreditEducation/CreditInquiries.aspx). It's American but I believe the scoring system is the same in Canada.

"What to know about "rate shopping." 
Looking for a mortgage, auto or student loan may cause multiple lenders to request your credit report, even though you are only looking for one loan. To compensate for this, the score ignores mortgage, auto, and student loan inquiries made in the 30 days prior to scoring. So, if you find a loan within 30 days, the inquiries won't affect your score while you're rate shopping. In addition, the score looks on your credit report for mortgage, auto, and student loan inquiries older than 30 days. If it finds some, it counts those inquiries that fall in a typical shopping period as just one inquiry when determining your score."

There is also an interesting article here: http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2008/05/credit-scores-a.html
that basically says the same thing.

"When a bank or mortgage professional initially checks your credit score, your score goes down. 
According to a source at Equifax, your score can drop anywhere from roughly 5 to 20 points on the first mortgage inquiry. 
After the first inquiry, a 30-day clock starts ticking. During this time you can have multiple mortgage inquiries without negatively impacting your score." 

So mortgage inquiries will not kill a credit score. Then, I would not be "exactly wrong", would I? 

If a person opens 10 credit cards in a short period, that's a different story because it indicates possible hardship. But mortgage inquiries don't indicate hardship and it's logical that they wouldn't drop the score if done within the specified periods. 

If you provide advice to people in this field, it probably would be a good idea to get the facts exactly right. I'm sure Equifax would be happy to give you a more precise answer about multiple mortage inquiries.


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## takingprofits (Apr 13, 2009)

v_tofu said:


> Hi all,
> 
> I was wondering if anyone can explain the difference between the two, and why brokers seem to be able to lend at a lower rate?
> 
> ...


Mortgage brokers in Winnipeg often offer lower rates by obtaining mortgages from credit unions. 

Bank mortgages calculate interest semi-annually and credit unions calculate monthly (at least this was the case when I last checked - confirm this with your broker).

When interest is calculated monthly what seems like a lower rate often is not.


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## Mike H. (Apr 15, 2009)

DrStan said:


> **********
> This is from the MyFICO site (http://www.myfico.com/CreditEducation/CreditInquiries.aspx). It's American but I believe the scoring system is the same in Canada.
> 
> "What to know about "rate shopping."
> ...


The source you quoted said that a second or third mortgage inquiry will not drop the score further than the first one, provided that the person making the enquiry has the letters "FM" in their member code. I've looked at the credit bureaus for several clients whom I know made applications at their bank branches before coming to me. Guess what? No FM code for those enquiries. It is also very common for people to contemplate buying a home or refinancing a mortgage for several months (or years). During these months, they may contact one or more lenders for rate quotes and drive down their credit score. I've seen it happen.

I stand by my earlier statement, that rate shopping to multiple lenders can damage a credit score.


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## roniaak (May 14, 2009)

*brokerage accounts*

usually brokerage accounts offers the exact same features as a normal bank account in addition to the brokerage services. Sometimes you even get better terms for the account if it is brokerage attached. For example if you open swiss bank account , you will enjoy no minimum balance or monthly fees with your bank/brokerage account, which are better terms than just a bank account that if you would like to brokerage with would end up costing you expensive fees...


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## Canadian Finance (Apr 3, 2009)

I got a 3.79% 5yr Scotia STEP through a mortgage broker. Would I have received the same rate if I went straight to Scotia? Maybe, but I wouldn't have known it was the best rate by myself. Mortgage brokers can find you the best rate by looking at everything available at one time.

My mortgage broker also helped us deal with a few issues we were having with Scotia when getting the mortgage set up and getting money transferred for possession.


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## ashby corner (Jun 15, 2009)

I just recently went through this exercise. Was 2 years into a mortgage, and we sold our house (to buy ina different 'hood). So, I went to my 'usual' broker, PC financial, and TD Canada trust.

TD Canada trust gave the BEST rate (3.6 for 5 years), and gave suggestions on minimizing penalty to the 'old' mortgage dudes.

Did I pay a penalty? Yes, but between the TD suggestion and the difference in rate, it was worth it. When this one is up in 5 years, I will shop around again, but I won't be so keen on a broker. Might end up going short term with PC financial.


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## svmagnum (Jul 21, 2009)

3 things you might consider: 
1. Broker has to use lawyer to refinance your mortgage, most banks dont (in-house legal department is cheaper).
2. Banks have more negotiation room to offer you lower rate. 


It depends on the person you will reach in both cases. Brokers have access to a large amount of lenders, however in most cases you can get the same rate if you go directly to that lender or you ask bank to match that rate. 

Brokers can buy down your rate without you knowing it. Either using points or part of commission. Meaning that they used part of their commission to lower your rate to prevent you from leaving. 

Majority of banks can udercut brokers by a lot however if you stumble upon a bank employee that earns commission on mortgage sales you have a much higher chance of getting lower rate then if you come to a salaried person who just dont care if you walk.

Suggestion: if you go to a bank ask for mortgage sales people. They earn commission and they will fight for your business. 

Big mistake: Asking a bank employee for their best rate. They can't quote best rate and will most likely not do it because rate discounts usually are approved by managers and without approval they cannot quote it. Ask them if they can match the best rate you heard of then you will hear different response.

I use http://www.ratebot.ca and then come to bank and tell them what i want. Works like a charm. I had a bank double the discount offered by them from posted rate.


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## Lephturn (Aug 31, 2009)

I've done the broker in the past, but my last go-round I had the best luck with TD. Without needing to show any other rates (although I had already spoken to a broker) the lady at TD (main branch downtown in Ottawa) beat them. .75% below prime for a 5 year variable. I was surprised to say the least.

I'll be going back to speak with the same mortage specialist at TD before I do anything else, I can tell you that!

I've never gotten a decent response from RBC, so it depends on the bank and who you speak to I suppose.


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## Berubeland (Sep 6, 2009)

Call Equifax and Transunion and get your own beacon score and credit report when you're shopping. 

You have the right to ask for one copy per year for FREE 

There is no need to have multiple hits on your credit.


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