When considering financing options for home buying, borrowers have two options: a bank or a mortgage broker.
According to the Eastern Morning Herald, Canadians are looking for the best possible mortgage rates. The statistics show that as Canada's housing market continues to recover from the global recession in 2008, mortgage brokers are favored for helping people with financing needs for their homes.
In one year, the National Bank Composite House Price Index was up 2 percent in April 2013. That's the smallest increase in 15 years. With the slow growth, tighter requirements and low interest rates, the mortgage market in Canada is becoming competitive.
The May 2013 Canadian Mortgage Market Report found that 25 percent of existing mortgages were through brokers and 57 percent were through banks, regardless of when loans were obtained. Since 2012, the use of brokers has been increasing with 31 percent of buyers obtaining a mortgage or renewal through a broker as opposed to 51 percent through a bank.
Why are people starting to lean toward using a mortgage broker?
A prime benefit of working with a broker as opposed to a bank is that they have access to a multitude of lenders, according to The Globe and Mail. Because brokers have considerably more options than single lenders, they have access to better pricing with lower penalties, more loan features and can help people who have special situations like bad credit or are self-employed.
The Globe and Mail said that taking the time to compare lenders on one's own can take a lot of effort and require some mortgage knowledge. Finding the cheapest mortgage rates doesn't always equal the best choice because payout restrictions, accelerated payoff privileges and refinance policies can add up quick. Having a broker do the legwork can save people headaches and confusion.
The report said that seven out of 10 mortgage holders would likely consult a broker when they next had to renew their mortgage, and that conversation strategies should be considered and encouraged. Additionally, 36 percent of first-time homebuyers would definitely consult with a broker when it was time to renew.
People who obtained a mortgage through a broker found them helpful, according to the report. Buyers found that brokers were 36 percent very helpful compared to 27 percent with banks. Also, four out of 10 buyers contacted their lender themselves when it was time to renew, making a proactive choice. Over half of people, 56 percent, negotiated their rate.