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Buying Mortgages

Your guide to buying a mortgage in Canada.

Buying a mortgage in Canada

There are several channels for buying a mortgage including mortgage brokers, direct lenders, mobile mortgage specialists and even private lenders. It is important to know about the function of the channels as well as the advantages and disadvantages of each to ensure that you’re getting the best mortgage product for your needs. While in the past, buying mortgages would typically be acquired through a direct lender, today the other channels play an increasingly important role.

Mortgage brokers

Mortgage brokers are independent licenced professionals who sell mortgage products on behalf of lenders. 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 lenders whose products they sell. Brokers have a 30% share of the market.

Advantages:

  • Have access to a variety of lenders’ products
  • Must pass licencing courses in order to sell mortgages
  • Top brokers get volume discounts from the lenders they work with

Disadvantages:

  • Don’t have access to lenders rates that don’t sell their products through brokers
  • Generally, a less familiar channel but this is starting to change

Direct lenders

Direct lenders are companies that sell their mortgages directly to consumers (usually through branches). Certain lenders also make their mortgages available through other channels (i.e. brokers). Direct lending represents the largest channel with a 45%1 market share. The big banks are the most popular direct lenders. Credit unions and trust companies can also be lenders. The top 10 lenders are listed below:

Lender + Mortgage Book (billions)

  • RBC, $198.2
  • Scotiabank, $187.4
  • TD Bank, $175.9
  • CIBC, $146.6
  • Desjardins, $86.6
  • BMO, $82.6
  • First National, $50.6
  • National Bank, $34.7
  • HSBC, $18.5
  • Home Trust, $15.9

As you can see banks dominate this category and represent 8 out of the top 10 lenders.

Advantages:

  • Have flexibility over rates
  • Consolidation of products
  • Deep relationship

Disadvantages:

  • Can only sell their own products
  • Focus on many 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
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Private lenders

Private individual lenders 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. Someone would normally use a private lender when they cannot obtain a mortgage with one of the other channels. Private lenders normally charge much higher rates to compensate for the higher risk of the individuals they lend to and because they don’t have the advantage of large diversified portfolios, like direct lenders do.

Advantages:

  • Can be used as a lender of last resort
  • Not bound by the qualification requirements of direct lenders

Disadvantages:

  • High interest rate
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