Relax gents, it’s not that kind of shopping! We’re talking about shopping around for a mortgage. Do you realize how many choices you have?
When we chat with financial partners, one of the most common questions we get is about mortgages: “should I use a broker, or just go to my bank?” Some of you seasoned investors already have a strong opinion, but let’s break it down for our newer real estate investor friends. We’ll use the analogy of purchasing a new vehicle.
Many parents can manage the car seats and the kids in a sedan—until they reach kid number 3. Then it’s time to find the infamous mini-van. Would you just walk onto the first lot you passed, and buy the first minivan you looked at? Probably not. Even if you LOVE your Toyota Corolla (or whatever)!
You would probably search online, go to a few lots, test drive at least a couple from the main dealerships: Honda, Toyota, Kia, Dodge, …. You would narrow it down, and then start comparing features: safety records, upgrade packages, etc…. Maybe you would even look at second-hand vehicles, or auction vans? You would take your time to find just the right van for the next 5-10 years of your life, for your specific needs.
Choosing a mortgage product is very similar to choosing a vehicle—especially for investors. However, the beauty of shopping for a mortgage, is that you don’t need to do ALL of that legwork yourself.
Your mortgage broker will:
- Provide an unbiased assessment of your needs, assets and goals.
- Check your credit once (instead of going to multiple banks and having each one pull your credit file).
- Search for the best combination of features in a mortgage product—for your specific situation (rate, prepayment privileges, and penalties).
- Provide expert credit and mortgage advice
- Get paid when your mortgage gets financed
In contrast, a mortgage advisor at a bank has some limitations to the services they can and will provide. A bank employee is paid by the bank, to offer that bank’s programs and services—period. AND, they are often required to cross-sell other bank services or credit products. One of the stranger differences between banks and mortgage brokers is that a mortgage advisor at a bank is in no way regulated by the provinces. In contrast, mortgage brokers are provincially licensed and have a code of ethics, and consequences if there is a professional complaint.
As real estate investors, finding the right mortgage product is an important key to our success. And like the mini-van analogy, you can manage those first property-babies just fine, regardless of your banking choices. Clearly, we prefer to work with mortgage brokers who are familiar and experienced with real estate investors; we prefer a standard above “just fine.” There are a lot of financing options out there. The right professional advice is a game-changer.
