A Mortgage Brokers fiduciary duty is to the client and Bank Mortgage Representative’s duty is to their employer, the bank. There is nothing more to say here, understanding that line alone is very powerful not only when considering bank vs broker…but everything in life.
FIDUCIARY DUTY: A fiduciary duty is the highest standard of care. The person who has a fiduciary duty is called the fiduciary, and the person to whom he owes the duty, is typically referred to as the principal or the beneficiary. If an individual breaches the fiduciary duties, he or she would need to account for the ill-gotten profit.
When shopping for a mortgage, sometimes consumer strictly think of rates…did I win…is it 0.01% lower than what Johnny in accounting got. Obviously this is important but there is more to it.
- What term suits you the most?
- What are your 2, 3, 5, 10 year plans?
- Will you be moving, renovating?
- Do you plan on buying investment property?
- Will you be making extra payments, how much?
- Do you have a budget in place?
- Can you handle fluctuating payments?
- What happens if you something goes wrong in your home, plumbing or mechanical?
- Etc, etc. etc…
Rates are not all created equally…an apple may be cheaper than an orange, but when you are baking apple pie, an orange just won’t cut it! It is the same with mortgages. You require a conversation and a meeting with the professional about the options, needs and what suits them most. A mortgage broker has access to 50 different lender and needs to narrow down the search and zero in on what suits you most, offers a low rate and saves you money in the long run.
For example, understand the penalty structure of your lender…you may have a great deal on the 5 year fixed but 70% of consumers break their mortgage early. Do you want the $2000 penalty or the $8000 penalty? The extra $5/month may be worth it, as insurance, in case you need to break your mortgage.
A banker only has access to their institutions product so they are limited, they also only understand the benefits of their product because that is what they have been trained on…or because they are unaware of what else is out there and the pitfalls to their own product.
I will be the first to admit…Broker’s are not all created equally either. As in any industry, business, profession; there are always the bad apples giving their industry/profession a bad name. That is why it is important to work off a referral or do the proper due diligence on the mortgage broker you are selecting.
READ THE REVIEWS, IF THERE ARE NO REVIEWS…RUN!
Search the Broker or Bank Representative on google or facebook…read their reviews and get ‘social proof’. I myself will read facebook AND google reviews on any service provider, store or restaurant I plan on visiting. These are reviews from real people, cannot be faked and shows that they trust their service enough to allow others to review them. If they do not have a google place page or a facebook page for reviews, that tells me they are worried about what kind of review they will get.
YOU ARE IN CONTROL…INTERVIEW THEM!
Then I suggest calling the Broker or Bank representative to conduct a short interview as you would when hiring an employee…ask for references, work history, motivation, how they are paid, why they suggest one product vs another. You are in control here…you are the client…you are gracing the professional with your business and trust…make sure you HIRE the right professional to join your team.
IT’S ABOUT A RELATIONSHIPS, NOT JUST A ‘ONE NIGHT STAND’!
Lastly, create a relationship with your new mortgage professional and develop trust so that going forward you can approach them with comfort and ease. Ensure that they will look out for you and your mortgage in the future, will they look out for you at renewal, reach out to you during the term and make sure everything is ok. You will be paying this mortgage for 15 – 35 years…will they be there for you or will they fall off the face of the earth if you have a question after your mortgage funds?
So, when considering Bank vs Broker make sure that the professional’s fiduciary duty is in your favor…always!