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Securing a Mortgage

Your guide to securing a mortgage in Canada.

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Securing a mortgage in Canada

There are ways in which homebuyers can obtain a mortgage. They include using mortgage brokers, direct from lenders (often through their in-house mortgage specialists) as well as credit unions and private lenders. It is important to know about the advantages and disadvantages of each to ensure that you’re getting the best mortgage product for your needs.

Mortgage brokers

Mortgage brokers are licenced professionals who work either for large brokerages or on their own to sell mortgage products. Brokers work with a variety of lenders and therefore can do the shopping around on behalf of the customer. Brokers provide their service free of charge to the customer and are compensated by the lender whose product they end up selling.

Advantages:

  • Have access to a variety of lenders and their products
  • Must pass a licensing course in order to sell mortgages
  • Top brokers get volume discounts from the lenders they work with

Disadvantage:

  • Don’t have access to all lenders, such as those that don't participate in the broker channel

Direct from lenders

Some lenders cut out the middleman (mortgage brokers) and sell their mortgages directly to consumers (usually through branches or mobile mortgage specialists). Certain lenders also make their mortgages available through other channels (i.e. brokers). The Big Six banks are generally the most popular direct lenders. Credit unions and trust companies can also be lenders. Example of Canadian mortgage lenders include:

Canadian mortgage lenders

  • RBC
  • Scotiabank
  • TD Bank
  • CIBC
  • Desjardins
  • BMO
  • First National
  • National Bank
  • HSBC
  • Home Trust

Advantages

Here are the advantages of getting a mortgage directly from lenders:

  • Have flexibility over rates
  • Often have a range of other financial products to offer their customers
  • Deep client relationship

Disadvantages

Getting a mortgage directly from lenders can have its disadvantages too.

  • Can only sell their own products
  • Focus on many types of financial products, not solely on mortgages

Mobile mortgage specialists

Mobile mortgage specialists, an increasingly growing channel, accounts for 25% market share. Mobile Mortgage Specialists sell the products of the bank they work for but unlike bank sales staff, they focus entirely on mortgages. They are also fully commissioned employees and also may operate their own businesses. A mobile Mortgage Specialist is essentially a hybrid of a broker and a branch salesperson working for a direct lender.

Advantages:

  • Flexibility (i.e. can accommodate customers schedule, are not defined by 9-5 working hours, etc.)
  • Focus solely on mortgages
  • Great for customers that want personalized service but value the relationship with their existing bank

Disadvantages:

  • Can only sell their own products
  • Generally a less familiar channel, but this is also starting to change

Credit Unions and Private lenders

Credit unions, known as caisses populaires in Quebec, are another common way to obtain a mortgage. There are more than 700 throughout Canada and they typically provide a more community-focused approach to banking. Credit unions are regulated provincially, and as such are not necessarily subject to federal mortgage rules, such as the mortgage stress test. This can make credit unions a popular option for those unable to qualify at federally regulated financial institutions.

The largest credit unions in Canada include:

  • Vancity.
  • Coast Capital Savings Credit Union.
  • Meridian Credit Union.
  • Servus Credit Union.

Private lenders tend to focus on niche markets (i.e. bad credit customers) and make up a very small percentage of the overall market. A private lender can be an individual, a group of individuals or a business. Private lenders are often a lender of last resort for those who cannot obtain a mortgage through one of the other channels. Private lenders normally charge much higher rates to compensate for the higher risk of the individuals they lend to. For this reason, private lenders are typically used as a short-term funding solution, until such time that the borrower can rebuild their credit and secure a more competitive mortgage through traditional channels.

Advantages

  • Can sometimes offer market-leading rates (credit unions)
  • Can be used as a lender of last resort
  • Not bound by the qualification requirements of direct lenders

Disadvantages

  • High interest rates

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