It all depends on your goals and current situation.
If you are looking to renew your current mortgage, but there have been recent changes to your income, such as a new job, a new lender will want to verify that you are off probation before funding your mortgage. Your current lender will likely ask you to sign for the new term since they have already approved your first mortgage. In this case, it’s just easier for you to stay with your current lender.
However, whether you are purchasing or refinancing, it’s prudent to shop around. Find a broker who can get you the best lender for your needs.
The difference between using a mortgage broker or the bank
Bank or Credit Union
A direct mortgage lender is a company that is actually funding the loan. When you work with a loan officer that is an employee of the Bank, they only have access to the home loan programs that the bank offers. In other words, they have the best interests of the bank in mind.
Mortgage Broker
A mortgage broker is a professional who must be licensed and operates independently. Since they don’t work for any specific financial institution, this means they represent you and your goals. With access to dozens of lenders, they can compare rates and terms getting you the mortgage that fits your goals best.
How mortgage brokers get paid
This depends on the type of mortgage you’re looking for, and what your income, credit and debt situation is.
If you are in business for yourself and don’t have 2 years of income history (which is required by an ‘A’ lender), but you found a property that you’re ready to buy. The broker would find you a suitable ‘B’ or private lender. These lenders charge a small fee for their service, generally between 1% and 2%. This amount can be paid upfront or sometimes added to the loan, depending on the lender. In this case, the broker must disclose this fee upfront.
On the other hand, if you’re a self-employed person, but have 2 years of income history, your broker will find a suitable ‘A’ lender and it won’t cost you a thing. In this situation, the lender pays your broker a commission for your business. The broker will disclose what the lender will pay once your approval comes in.
Unless you paid upfront costs, mortgage brokers generally do not receive payment unless the deal is closed.
In summary…
The choice is yours! However, mortgage brokers have access to more lenders and they’re better able to find one with a mortgage tailored to your specific needs. Although the mortgage broker represents both you and the lender, they are there working for you, putting you first. The loan officer at the bank or credit union is working for the financial institution, having no choice but to put the needs of the bank first.