Do you need a bank for your mortgage

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Do you need a bank for your mortgage

As a mortgage brokerage, we “broker” mortgages for clients through various lending institutions to get them the best rate possible for their particular lending scenario. We deal with many different lenders including some of the Big 5 banks, credit unions and other “A” type lenders that don’t have branches such as ING (now known as Tangerine).

We still have many people out there that don’t know what a broker does as they are used to walking into a branch of a lending institution and obtaining a mortgage with that lender. Of the clients that come to deal with us as brokers, many of them still want us to place their mortgage with a “branch” so that they can walk in any time they want to discuss their mortgage. The general observation is they want to know “who” they are dealing with and if anything goes wrong, they want to go talk to their friendly banker at the local branch.

As a broker, the argument of booking your mortgage with a major bank makes very little sense in that it restricts your ability to get the best deal possible. Even though we can broker mortgages to the major banks this isn’t always the best option for our clients. The whole idea of having the safety of being able to go to a branch and know who has your mortgage can easily be debunked. Take into consideration the following points.

Home Insurance – where do you get your home insurance from? Most of us get it online or we go to an “insurance broker” to get our home insurance. This policy protects us with insurance from damage or destruction to our home. However, there are no branches of the companies that provide home insurance. Your insurance broker may get your home insurance through a company such as “Wawanesa”. However, these insurance companies don’t have branches nor do you hardly know anything about them. You are simply dealing with an insurance broker who you hope is giving you the best pricing and features you need. Now home insurance is way more important than your mortgage. Imagine having your home burn down. You now need to deal with your “insurance broker” and can’t walk into the branch of your insurance company. You are relying on the financial stability of this company to protect your investment that is worth hundreds of thousands of dollars all without even knowing where they are or how financially stably they are.

Life Insurance – where do you get your life insurance from? For most of us life insurance is an extremely important financial asset that is used to protect our families and look after them if we pass away. Again we end up dealing with insurance brokers who end up getting us a policy with a life insurer that has no branches or anywhere we can walk into. We can walk into the office of our insurance broker but not the actual insurance company that is providing us with this extremely important policy. Most of us don’t even recognize the names of these companies that provide us with insurance yet when we die we rely on them to provide our families and estates with much needed funds that we have been paying premiums on for many years.

Investments – many of us hold stocks, bonds and mutual funds from a variety of companies. At any given point in time we are not able to walk into these companies and check out what it is we actually own. We can talk to our investment broker who purchased them for us but don’t have access to any of these companies. These companies could become bankrupt or insolvent and we could lose all of our money yet we have faith in the person who recommended the investment to us.

Vehicle insurance – many people have their vehicles insured through private companies and in these cases again go see an insurance broker to get these policies. These private companies don’ have branches available to the public yet if we have vehicle damage we rely on them to take care of us.

Given the above 4 financial products that almost all of us have and can’t walk into a “branch” of our provider to deal with you would think that the mortgage business would be the same way. Consider the fact that all of the above four products are even more important than you mortgage. They either protect you and your assets or you have risked your own personal money. Mortgage lenders are actually giving you money and not vice versa like all of the examples above. The risk is actually on them and NOT you!

Did you also know that many banks and lenders don’t even hold some of their mortgages. Many lenders sell their mortgages to investors and mutual funds who actually carry the risk of the mortgage. They may administer the mortgage, however they no longer own it. So while you may think you have a mortgage with “ABC” bank it is actually owned by investors that you don’t even know.

You like the idea of being able to walk into a branch and discuss your mortgage. This is purely a psychological feeling of comfort that has been ingrained in us for years. We have been trained by our banks to react this way and in the future this marketing ploy will no longer hold much relevance. The reality is that most people never even touch their mortgage during its’ term. Most people only end up doing two minor things to their mortgage during the term. They either want to change the payment date/frequency or make extra payments. Both of these are easily done over the phone or online for your convenience. This makes your life simpler. Why should you have to make that appointment and drive to the branch for something that can take only 5 minutes of your time.

The reality is that most of us that want that comfortable feeling of “walking into a branch” to deal with their mortgage already have other financial instruments where we don’t have “branches” for the companies we deal with. In fact we deal with “brokers” in many different industries, including mortgages. We rely on the broker to get us the best deal in the marketplace and to provide top notch customer service. The next time you find yourself thinking you need to walk into a branch to deal with your mortgage think about all of the other financial products we listed above where you have much more risk at stake. You readily accept that you deal with many insurance & investment providers with all of the risk being placed on you as to their financial stability. Treat your mortgage the same way.

For more information on our mortgage products please visit our website at www.ymscanada.ca.

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About the Author:

Alex Kotai
Alex Kotai has worked in the mortgage lending business for over 10 years. His career started at HSBC Bank Canada where he spent most of his time in senior management roles which involved training and managing the sales staff at his branch. After leaving HSBC, Alex decided to open his own mortgage brokerage firm, Your Mortgage Source. Through his company, Alex has access to many lenders across the country with a very expansive list of products.