One of the first questions a home buyer should ask themselves is "Should I use a Mortgage Broker or my bank for my mortgage?". Before making this decision, it is important to know the difference between using a mortgage broker - an independent worker not affiliated with any financial institution, or your local bank's mortgage expert. There are benefits and challenges to both, and so knowing which is the best choice for you could save you thousands in interest!
Why is it so important to make the right choice? Let's do the math:
If you need a $400000 mortgage and can get a 1% lower mortgage rate, your monthly payment will be $215 less and by the end of your 5 year term you will have saved $12900 on payment interest and will have $6400 less on the principal amount. That's a savings of almost $20000! There is also making sure that there is the right product that addresses early payment, late payments, and buying out the mortgage should you sell the home before the mortgage term ends.
Using Your Local Bank
Many people have a loyalty to their banking institution, built up over year, decades, or generations of good service and products. Your local bank or credit union that you use for your day to day banking also may have a better idea as to your spending, borrowing, and saving habits due to their experience with you. This knowledge may also be able to offer you a product or combination product of services that may be beneficial.
Using a Mortgage Broker
A mortgage broker is an independent agent that is not necessarily affiliated with any of the banks that provide the products. What the mortgage broker does for home buyers is basically act as a personal shopper, collecting the home buyers financial data and shopping different banks and credit unions across the country to find a rate and product that will work best for the home buyer. The advantages to this is that you have so many more banks competing for your mortgage business so the result is often a much more competitive rate.
A Word of Warning
The one thing that I would certainly not recommend is going to both the your bank and a mortgage broker and asking for a preapproval from both. The reason why is because each party will be pulling your credit rating, and one of the factors of a your credit rating is how frequently it is being pulled by financial institutions so that you can . It is frowned upon to be considered a 'credit seeker' and multiple credit checks within a short period of time may negatively affect the goal of getting the best mortgage product for your specific situation.
I would suggest that you talk to someone at your local bank as well as a local mortgage expert that you feel comfortable with before making any concrete decisions. In the long run, it is ultimately your decision as to where you choose to go to get a mortgage preapproval. Answering the question " Should I use a mortgage broker or my bank for my mortgage?" is ultimately up to you!