Is It Better To Get Pre Approved With A Bank Or A Broker?
Has this ever happened to you? You took the advice of your Brother in law and got into a heap of trouble. Looking back you realize now that he had no business advising you. You’ve also realized that doing your homework and talking to an expert could have saved you a ton. Let’s see how this dynamic affects your Mortgage Pre Approval.
Mortgage Pre Approval Advisors
I’m surprised at the amount of Canadians whose primary financial advisor is a family member. Especially when this relation’s career isn’t in mortgages. Their advice usually goes something like this…go talk to my gal at RBC, TD, Scotia, CIBC, or BMO and they’ll sort you out.
And there is a chance that this will play out true. The other side of it is there are too many instances where taking this route can be very harmful down the road.
As was said of the Matrix – the wool has been pulled over our eyes to keep us blinded from the truth. Let’s not think for one moment that we are smarter than a complex financial system. Banking has been honed over many generations to squeeze every dollar out of our economic livelihood.
Yes, you will say that I am biased as a Mortgage Broker. But there are real traps and pitfalls in beginning the Mortgage Pre Approval process with the big banks.
Getting Pre Approved With The Bank
What is most deceiving about getting your Mortgage Pre Approval with the bank is that on the surface everything looks good. But once you move ahead and secure your mortgage with them you have become subject to their contractual obligations. Here is where things become dangerous.
Variable Rate Mortgage Lock In
If you are considering a variable rate mortgage – know that if and/or when you do lock into a fixed rate that you will be paying the bank’s posted rates at that time and not their best rates of the day. The difference today is approx. 2% on your interest rate for the remainder of your term.
Quick example: If you had a 300K mortgage with 3 years left – you will be paying an extra $12,000.00 based on not knowing the bank’s policy. The time to clarify this is before you sign your mortgage documents.
Fixed Rate Early Payout Penalty
A surprising amount of my clients who are looking to break a bank mortgage are floored by the early payout penalty. The reason here is that you are securing an interest rate based on a discount off of the bank’s posted rate and consequently when you break the mortgage – the penalty is not discounted. This is a huge disparity and creates artificially high penalties to break a mortgage early.
Quick example: You have a 300K mortgage at 2% with your bank. With 3 years left you need to break the mortgage due to a marital breakdown. The bank explains that the penalty is calculated based on an interest rate of 4.79% or the posted rate. Your penalty just went from 3K to 15K and I can guarantee you this wasn’t explained properly when you sat down to talk about a Mortgage Pre Approval.
Find out more about all the things you need to know about your Mortgage Pre Approval.
Getting Pre Approved With The Broker
I just finished reading a story about one lady’s bad experience with a Mortgage Broker. The main takeaway in my mind is that not all brokers are created equal. It takes full time commitment to keep abreast of the changes that affect your best Mortgage Pre Approval. My clients enjoy this level of service from me.
The main question that is on the mind of most borrowers when considering using a Mortgage Broker is…Is it worth it to add another party to the transaction? Translated: Will it cost me more time and money?
The Cost To Pre Approve With A Broker
Adding a knowledgeable, full time broker to your team of financial professionals is a smart move. A good Mortgage Broker will streamline the approval process and be there every step of the way to advocate for you with all your lending options. I will save you time and do the legwork for you with an expert eye.
As far as the cost of using a broker, typically the compensation for services is paid in a finder’s fee from the lender. This is paid out of the bank or lender’s annual marketing budget and does not increase your interest rate or cost of borrowing.
Fully Reviewed Mortgage Pre Approval
At the end of the day, you want your Mortgage Pre Approval to be a smooth process. One that doesn’t cost more time and money. And you want to be able to rely on the information provided to stand when you go out and make an offer.
You have so much to gain and absolutely nothing to lose by leveraging my expertise. Let’s get your Pre Approval started by contacting me today!