Do First-Time Home Buyers Work with a Bank or a Mortgage Broker?

A dilemma first-time home buyers when trying to secure a mortgage is whether to work with a bank or a mortgage broker.

Today, the issue is compounded by overheated housing markets with skyrocketing prices and government rule changes designed to dampen the housing market.

In the fall of 2016, the government pass new laws requiring home buyers to show they can afford to make payments if interest payments rise.  The mortgage stress test uses the Bank of Canada’s mortgage rate as a barometer. Some home buyers that would qualify for a particular mortgage before the stringent stress test now have to settle for a lower mortgage.

Other rules changes in previous years have tightened lending and made qualifying for a mortgage more difficult. First-time home buyers face significant challenges with down payment amounts, income requirements and affordability.

Who’s better suited to help the first-time home buyer in today’s market?

First-time home buyers may initially feel more comfortable going to a bank.  Banks are where people go to get loans after all.  Canada’s big banks push hard to win over new mortgage customers.  However, this year the big banks have come under heavy scrutiny for the way they sell new customers.

In March of 2017, the CBC News program Go Public published a story about employees from all five big banks in Canada saying they feel pressured to meet unrealistic sales targets. To meet sales targets, many employees use sales pressure, tricks and even lies to close new deals.  Go Public said it has received nearly 1,000 emails from employees from RBC, BMO, CIBC, TD, and Scotiabank locations across Canada describing high pressure sales tactics used on customers.

Go Public also sited a report by the Small Investor Protection Association that 96% of the 121,000 people registered as financial professionals in Canada are registered as dealing representatives.  Dealing representatives are sales people licensed to sell financial investments. They don’t have a legal obligation to act in a client’s best interest.  They are paid to sell.

Banks sell lots of different products in addition to mortgages.  They don’t specialize in mortgages. High sales quotas require bankers to sell lots of products.

A mortgage broker, like Vertuity Mortgage, specializes in mortgages.  It’s all mortgage brokers do.  The first-time home buyer is better served by a specialist in mortgages.  The specialist can take the time to really understand the housing market.

The government rule changes require a significant investment of time and effort to understand and put into affect.  Even more taxing is understanding the effect the government rules have on buyers. The mortgage broker learns the rules inside and out and understand how it affects the home buyer.  The mortgage broker can shift and adjust mortgage strategies to not only secure a mortgage for the client but make it the right mortgage at the best rate.

Contact Vertuity Mortgage to talk to a mortgage specialist about your home purchase.