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June 27, 2021

What Banks Won’t Tell You About Mortgage Financing

What Banks Won’t Tell You About Mortgage Financing

If you’re looking to buy a property or have a mortgage up for renewal, and you’re thinking about connecting with your bank directly, save yourself a lot of money and regret by listening to this episode first.


If you’re looking to buy a property or have a mortgage up for renewal, and you’re thinking about connecting with your bank directly, save yourself a lot of money and regret by listening to this episode first. 

Transcript

In today's episode of the I love Winnipeg Real Estate podcast, I want to speak with you about what banks don't tell you about mortgage financing. If you're looking to buy a property or have a mortgage up for renewal and you're thinking about connecting with your bank directly, you can save yourself a lot of money and regret by listening to this episode first. Now, here are four things that your bank won't tell you accompanied by four reasons that explain why working with an independent mortgage professional is in your best interest. Now, banks have limited access to mortgage products. Well, this may seem pretty straight forward. If you're dealing with a single institution, they can only offer mortgages from their product catalog. This means that you'll be restricted to their qualifications, which are usually narrow. Working with a single institution significantly limits your options, especially if your financial situation isn't straightforward. In contrast, dealing with an independent mortgage professional you'll have access to products from over 200 lenders including banks, mono-line lenders, credit unions, finance companies, alternative lenders, institutional B lenders, mortgage investment corporations, and even private funds.

Working with an independent mortgage professional will give you considerably more options to secure a better mortgage. Now, banks employ salespeople, not mortgage experts. Banks don't employ mortgage experts, they employ sales people. Banks pay and incentivize salespeople to sell their products. There's a fundamental misalignment of values here. If the bank incentivizes a banker to make a profit for the bank, how can they at the same time advocate for you and your best interest? They can't. Banks don't have your best interest in mind. In fact, the more money they make off you the better it is for their bottom line. However, when you work with an independent mortgage professional, you get the experience of someone who understands the intricacies of mortgage financing and will advocate on your behalf to get you the best mortgage. It's actually in our best interest to assist you in finding the mortgage with the best terms for you.

Once your mortgage completes, we get paid a standardized finder's fee by the lender for arranging the financing. So although we get paid by the lender, that lender has to compete with other lenders to earn your business. When you work with an independent market professional, everyone wins. You get the best mortgage available, we get paid standardized finder's fee, and the lender gets a new borrower. Now, banks rarely offer you their best terms upfront. Banks are in the business of making money and they're usually pretty good at it. As such banks will rarely offer you their best terms at the outset of your negotiation. This is especially true if you're looking to refinance your existing mortgage. With over half of Canadians simply accepting the renewal offer they get sent in the mail without question, banks don't have to put their best rate forward. Instead they rely on you to be ignorant of the process and will take advantage of your trust in them.

When you work with an independent mortgage professional, we don't play games with rates and terms. Our goal is always to seek out the lender who has the best mortgage for you from the start of the process. And if there are any negotiations to be had, we handle them for you. There's no reason for us to do it otherwise. In fact, the better we do our job the more likely it is that you'll be happy with our services and refer your friends and family. Now, banks promote restrictive mortgage products. As if it's not bad enough that banks don't offer their best terms up front, they actually promote mortgage products that are restrictive in nature. The fine print in your mortgage contract matters. Understanding it is challenging. Banks do what they can to make it hard for you to leave. Now, if you've ever heard stories of outrageous penalties being charged, this is what's called an interest rate differential penalty, IRD.

Each lender has its own way of calculating the IRD. Chartered banks are known for their restrictive mortgages and high IRD penalties. When you work with an independent mortgage professional, we take the time to listen to your goals and assess your mortgage needs based on your life circumstances. The best mortgage is the one that lowers your overall cost of borrowing. So not only will we walk through the cost of the mortgage financing, but we'll also clearly outline the costs incurred should you need to break your mortgage before the end of the term. This might be the deciding factor in choosing the right lender and mortgage for you. Working with an independent mortgage professional is in your best interest. Banks have limitations to the mortgage products they offer. Working with an independent mortgage professional gives you mortgage options.

Bankers work for the bank. They are incentivized to make money for the bank. An independent mortgage professional advocates on your behalf to get you the best mortgage possible. Banks rarely offer their best terms upfront. They leave negotiations up to you. An independent mortgage professional outlines the best terms from multiple lenders at the start of the process. Banks promote restrictive mortgage products that make it difficult to leave them. An independent mortgage broker will outline all the costs associated with the different mortgage products and recommend the mortgage best suited for your needs. So if you'd like to talk about the best mortgage product for you, you've come to the right place. Please contact me via my bio at ilovewinnipegrealestate.ca. It would be a pleasure to work with and for you. Thank you.