Spring may have had a late start in many parts of the country, but it looks like the real estate market is finally starting to pick up. And the timing couldn’t be better. Five-year fixed mortgage rates, popular among most Canadians, are at their lowest levels since 2017.
Whether you’re shopping for a mortgage for the first time or your mortgage is coming up for renewal, there are plenty of options out there. Your local bank branch may be your first stop, but it’s not the only option out there.
For many Canadians, their mortgage is the single biggest debt of their lifetime. You could potentially be leaving thousands of dollars on the table by not shopping around. Thanks to the internet, shopping around for a mortgage has never been easier.
Let’s take a look at the pros and cons of the main ways to shop around for a mortgage: banks, mortgage broker and mortgage rate comparison websites.
The biggest benefit about going to the bank is familiarity.
“You have the ability walk into the branch and build a face-to-face relationship,” says D'Arcy Henneberry, president of MortgagePal and a former banker. “You’re able to have multiple products with the same institution like savings account, chequing accounts, investments and your mortgage.”
But Henneberry notes that convenience can come at a cost.
“If you have all your banking products provided by one institution and you’re not going out there and shopping and comparing the difference mortgage options, you could very well be leaving money on the table,” he says.
Henneberry recalls his time a decade ago working as a banker. He noted that after he became a mortgage broker, he learned that there were many other options that existed in the market outside of the bank’s products.
A good way to think about a mortgage broker is as a one-stop shop.
“Brokers compare and quote multiple lenders,” says Robert McLister, founder of RateSpy.com. “That often results in lower rates and better terms than if you called a bunch of lenders yourself.”
If you’re someone with varying needs, a mortgage broker can help you there, too, McLister says.
“Brokers have the most non-prime lending options, bar none,” he says. “That’s key for borrowers who can’t prove income in the traditional manner, such those who are self-employed, and folks with limited or bad credit.”
Mortgage brokers also have exclusive access to a category of lenders known as monoline lenders, which are lender names you might not recognize, but tend to have better mortgage rates, lower penalties and better prepayments.
While mortgage brokers have access to plethora of mortgage lending solutions, McLister notes that they cannot access all lenders. That’s when a mortgage rate comparison website can come in handy.
Mortgage rate comparison websites
Going on a mortgage rate comparison website is a good first step when shopping for a mortgage.
“By going onto a mortgage rate comparison website, you’re starting the due diligence process yourself,” says Henneberry. “You’re getting a sense of what’s out there in the market.”
However, mortgage rates comparison websites aren’t without their shortcomings. You need to make sure you look into the details of those products being offered.
“When you look on mortgage rate comparison websites you’re often going to see the lowest rate, but mortgages aren’t all made equal,” Henneberry says.
Some mortgage products charge a much higher penalty than others, notes Henneberry.
“Just because you find a low mortgage rate, it doesn’t mean you have the lowest cost of borrowing when you take into consideration the time that you’re in the mortgage and what the penalty costs are going to be.”