Many home buyers might believe they don't have a choice when it comes to the lender with whom they obtain a mortgage. But whether you're in a great financial position or a not-so-great one, you still have a choice.
Making the smartest decision for your own unique situation means considering all options, even if they may seem out of reach.
1. Brand Loyalty
If you already have a mortgage on your current home, it may seem perfectly reasonable to stick with that lender when renewing and renegoiating, or to apply for a mortgage with that same lender on a new property. You may assume because you have other products with that lender such as bank accounts, savings, RRSPs, or investments, that your lender will offer you the best interest rate and terms or that it's simpler to keep all of your financial products in one place. It may surprise you to know it may not necessarily be the best choice for your investment.
The best thing you can do for yourself is shop around. Shop your existing lender against a wide variety of others. Don't just contact the ones you see on television or social media, look into others as well. Get referrals from friends and family and ask plenty of questions about how they perceive their lenders' customer service. Decide what is important to you: Do they treat their customers well? Do they offer the best rates? Do they offer incentives? Do their terms lock you in or can you negotiate?
2. Mortgage Terms
Before you start shopping for a lender, determine your plan of action for the next five years. Do you see yourself purchasing a home and remaining there for the long term, or do you plan to buy a property in the interest of gaining equity in order to purchase a larger house in 2-3 years? If your plan is the latter, you'll want to find the most flexible lender in length of contract, comparable rates, and potentially their portable products.
How accessible do you prefer your lender to be? You'll also want to look into how easy they are to work with in terms of how you prefer to contact them. Banks have brick and mortar storefronts you can visit yourself—if this is how you prefer to deal with your lender, a major bank will be ideal.
If you are fine conducting your mortgage business over the phone, you may consider other types of lenders—typically monoline lenders that only work with mortgage products and nothing else. These lenders may be able to offer competitive rates and terms based on the fact they don't spend millions of dollars on advertising so their overhead is lower.
3. Compare Experiences
If you're a buyer who cares about how your lender treats you, both in terms of dealing with problems and with negotiating rates and incentives, by all means, ask your contending lenders these questions. Some lenders advertise unique products and services that are experience focused; if this is important to you, it may be worth paying a bit higher interest rate to get that premium experience. These are the kinds of decisions you'll want to make in the process of selecting your lender.
Don't be afraid to "interview" lenders. You don't need to fill out an application at every institution; you can contact them to ask questions first. Ask them about the things that matter most to you. If your situation is such that you plan to sell and buy another property in a few years, ask questions about your best options for today and for the future. If you plan to pay off your mortgage faster, ask about
penalties and options for accelerated mortgage payments. You may be surprised to learn not all lenders permit early payoff without major penalties.
You'll find in your conversations with these lenders that one or two will stand out to you based on what it is you're looking for. If you're applying for a mortgage as a couple [ link to AFHYYC - Nov 8 - A Couple's Guide to Getting a Mortgage ], be sure to inquire about the ways in which each lender will evaluate your joint financial status.
4. Ask About Incentives
You might find in your process that multiple lenders offer the same interest rates and terms, especially among the big banks. This may make the choice a bit more difficult for you. Go back to these lenders and negotiate additional incentives, such as debt consolidation, better terms, investment products, and other extra items that may sweeten the deal. Lenders are accustomed to making these offers to earn your business, so feel free to discuss how working with them will be the best choice.
Buying a home is the biggest investment in your lifetime, and the mortgage you obtain is the largest contributor to your financial future. Educating yourself on all of your options will ensure you make the best decision for yourself today and tomorrow.
