The top 10 secrets that banks don’t want you to know

1.  It’s not all about the interest rate.  Most individuals go into the process looking for a good rate and they get tunnel vision as a result.  The banks prey on this and they set people up with restrictive mortgages as a result.  Those who work with a mortgage broker understand that having options is more important than the interest rate you receive.  Rate is important, but sometimes it is better to take a slightly higher rate if it means getting a better mortgage.

2.  New customers have it made with banks.  With the way the system works, they know that it becomes a huge hassle to leave one bank for another.  They know that once they have you hooked, you are likely to stay with them out of convenience (although many people threaten to leave, it really doesn’t mean much because they know most people won’t leave).  For this reason, banks are fond of offering great incentives to new buyers, while neglecting their old, trusty customers.

3.  Though banks don’t necessarily want you to know this, when you work with a mortgage broker in Canada, you’ll be instructed not to sign the renewal form that’s sent out by the banks.  Since most people just blindly sign this, the bank does not offer its best available rate through that form.  Instead, a better option is to contact a broker and let them re-negotiate for you upon renewal.  Quite ofter, switching banks on renewal will result in a better rate and better product.

4.  Though banks speak a lot of loyalty, they are not nearly as kind to their customers as a mortgage broker is.  They will speak a good game, but the moment you cease the be profitable, the banker will drop you like a hot potatoe.

5.  Since banks are money making machines, they are naturally very greedy.  They have no emotional attachment to the customer, this means that they expect you to be good customers and loyal to them, but they have no desire to show that same loyalty back to you.

6.  Just because you have a large mortgage and a couple of chequing accounts with a bank doesn’t mean they will show you any extra loyalty.  While many people think that getting a $300,000 mortgage through a bank will earn some loyalty from that bank, they quickly come to realize that it is just a transaction.  Mortgage brokers in Canada in particular, are very appreciative, they treat every client with the same respect because they are all important to them.

7.  The bank and banker that you use is not your friend.  They have a job that is different from that of a mortgage broker.  They are in business to make the BANK money, so you will play by the same rules as the average Joe, no matter how long you’ve been with a bank.  Mortgage brokers on the other hand are in business for themselves and are looking to establish long-term relationships with you to help build a solid clientele that will provide them with many referrals.

8.  Variable rates make money for the bank — there is just no other way to put it.  People naturally get scared when they hear that rates are going up and pull the trigger  to “lock in” the current rate before they do.  If you were working with a mortgage broker, you’d get the advice you need before going into that variable rate mortgage.  Your broker should be able to help you figure out whether you are right for a variable rate at all.  Nobody can tell you (bank or broker) whether interest rates are going up or not, so it’s not smart to lock in the already high rates right now because you think they are going to go up.

9.  Though banks and loans might look the same on the surface, they aren’t.  While the process is pretty much the same with all banks, trust companies and lenders.  You apply, they give the money to your lawyer on closing.  The issue is that some banks offer better rates upfront and then slip clauses into their loan contracts that are not favourable to the client in the long term.  This is why it’s important to consider all factors, in addition to price.

10.  Don’t be fooled into thinking that a bank’s mobile rep is a mortgage broker.  Though he might seem like a broker, he is still just working for one single bank.  This means that you won’t get the choices that you’d get from a broker that represents many banks.

A mortgage brokerage in Canada is different from that in the U.S. or anywhere else in the world.  Our products are unique, and there are hundreds of products available in the market.  Therefore, it is always best to work with an independant mortgage broker or agent that will provide you with the necessary advice you need to get the best overall deal out there.

About the Author Jim Thornton