Mortgage Broker vs. Bank: Which Is Best for Your Next Mortgage?

When it’s time to get a mortgage, Canadians typically turn to one of two sources for securing financing: banks and mortgage brokers.

If you’ve never gotten a mortgage before, it can be hard to know whether a broker or a bank is better suited to your needs as a homebuyer. Knowing the similarities and differences between the two can help you make this important choice.

Banks and mortgage brokers: The main difference

Banks can only offer you their own mortgage products. Brokers, because they don’t work for a single financial institution, can recommend products from all their lender partners.

Working with a broker doesn’t prevent you from getting a mortgage from a major bank like TD, RBC or Scotiabank. In fact, Canada’s Big 6 banks do a lot of business with brokers.

If you use a broker and eventually sign a mortgage with a bank, it’ll be because you were able to weigh offers from other lenders and found the bank’s to be the best one.

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Why use a mortgage broker?

A mortgage broker is essentially a middleman. They are the mediator between the borrower (you) and various lenders.

A mortgage broker doesn’t sell a product. Instead, brokers offer services like financial analysis, product comparisons and negotiation. The relationships brokers have with lenders can help score you a better deal.

Approaching a mortgage broker, either to ask questions or get pre-approved for a mortgage, shouldn’t cost you anything, although brokers may charge fees in cases where the mortgage is especially difficult or the borrower isn’t especially creditworthy.

If a broker does successfully get you into a mortgage, their commission will be paid by the lender, not you.

Pros and cons of getting a mortgage through a broker

Why get a mortgage from a bank?

If you go directly to a bank for your mortgage, you’ll be limited to their in-house mortgage products. A bank might offer competitive mortgage rates and interesting loan types, but if you want to compare them to what else is on the market, you’ll have to do that yourself.

Banks may also be more willing to negotiate with a mortgage broker who has sent them millions of dollars in mortgage business over the years, rather than an individual customer.

That’s not to say that you should avoid going to a bank for a mortgage. Canada’s largest mortgage lenders just happen to be some of its biggest banks. If you are a regular client of a Canadian bank, you could use that relationship to your advantage and leverage your loyalty to get a better mortgage interest rate.

» MORE: How to negotiate your mortgage

Pros and cons of getting a mortgage through a bank

Is it better to use a mortgage broker or a bank?

Ultimately, deciding whether to use a mortgage broker or a bank is a personal decision. It’s all a matter of what you want out of your next mortgage.

If you’re looking to save money, a broker may be your best bet. If you’d be more comfortable working with a brand you recognize, or feel the overall broker experience may not be for you, there are plenty of banks out there who can help.

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Alternatives to banks and brokers

Big banks and mortgage brokers tend to be the most popular options that Canadians turn to when finding a mortgage, but they aren’t the only ones.

There are plenty of online comparison sites that can help you find a mortgage online. You can also look to credit unions, caisses populaires, trust companies, insurance companies and loan companies.

If you decide not to use a broker, remember to look closely at all of the mortgage offers you’re interested in — the rates, terms and fees — to find the best deal.