Understanding the Difference Between a Mortgage Broker and a Lender

Your options for financing a home can be broken down into two main categories: mortgage brokers and lenders. Knowing what the differences are between them will help you decide which one works best for your situation.

Mortgage Lenders

A mortgage lender is anyone who is willing to provide a large loan for the purposes of buying a house. Whether they are a bank or a specialized lending institution, they will have a variety of mortgage products available. The actual terms will vary according to the borrower’s credit history and how they want the payments to be structured.

Going through a bank or a credit union that you are a member of may give you access to special deals, such as a preferential interest rate. A lending institution employee will also have access to all of their mortgage products available, giving you lots of nuanced choices.

The drawback of going through a lender is that you will have to put in a lot more work. You are not likely to find the perfect offer at the first place you apply, so you will have to shop around quite a bit.

Another problem is that when talking to a large mortgage or banking company you may have an inconsistent experience. There can be thousands of employees working there, and getting in touch with the exact same one may prove difficult — if not impossible.

Mortgage Brokers

A mortgage broker is an independent agent who secures mortgages for their client. When you hire a broker, they set to work calling as many lenders as possible trying to find you a deal that meets your needs.

Obviously, this service can be a huge advantage over hopping from bank to bank looking for the best deal. However, a broker may not have looked through as many specific plans for each institution as you could on your own. They may not have asked the right questions or have had enough information on hand to let the lender know you have access to a special program.

On the other hand, brokers tend to have built relationships with many of the lenders they call. They are also tough negotiators. These two factors combined mean they will often fight to get you a better rate than you could on your own.

Finally, a broker acts as your personal agent. You get to interact with the same person and they are generally much easier to reach.

There are clearly enough pros and cons to each option so that they balance each other out. Picking which one will help you finance your Okotoks real estate purchase depends on your needs and expectations. Always hold out for the best interest rate possible and walk away from any unfair terms or conditions.

For more advice on buying a home, take a look at our buying page.

Categories

Buying