Mortgage Broker or Direct Lender: Compare the Service
Ask how many lenders will actually be consulted and how the broker is paid before handing over your file.
In this article
Mortgage broker or direct lender: this debate is hard to settle in the abstract, and easy with the right questions put to both. Ask the broker how many lenders will actually be consulted for your profile. The honest answer is a few concrete quotes, not an advertising number. Also ask how they are paid (a commission from the chosen lender, varying by institution) and who follows the file through to disbursement. Ask the institution what negotiating room exists for an established client. It is often real when you have a documented competing offer on the table. A third actor is indispensable: you. Your own comparison, on the same assumptions (rates, privileges, penalties, fees), is done by neither the broker nor the bank, since each sees only its own catalogue. This article gives the questions to ask each party, the standard comparison table and the sequence that gets the most out of each.
Ask how many lenders will actually be consulted
A mortgage broker sells access to a market. To measure that access, ask directly: how many lenders will actually be approached for a profile like mine? An honest answer separates agreements from real work: about twenty partners in the catalogue, but three or four concrete quotes depending on the file, since lenders specialize by type of borrower. A broker who promises the whole market with no nuance is describing a sales pitch, not a practice. Another question is worth just as much: which lenders will be set aside from the start, and why? The answers show the real value of the service for your situation. For a standard file, offers differ little. For an atypical file, the intermediary is fully justified.
Understand how the broker is paid
A mortgage broker is generally paid by the chosen lender, through a commission, and the rate of that commission varies by institution. That variation creates an interest worth knowing about, without invalidating the service. Ask the question plainly: most brokers answer frankly. Add a second one: does the broker receive volume bonuses tied to certain lenders? These answers disqualify no one, they inform. If two recommendations differ by a few hundredths of a point in rate, that deserves one more question. A good broker finds these questions normal. If they dodge them, that is already an answer, and you choose an intermediary partly for transparency. Ask the question directly.
Settle who follows the file to the end
Between approval and disbursement there is a zone where files get lost: extra documents to provide, an appraisal to coordinate, conditions to waive, a notary to brief. Before handing over your file, ask who handles this follow-up, the person you met or a processing team, and how available they are at critical steps. A commitment obtained in writing beats a verbal assurance. The comparison with a direct lender plays out on this ground as much as on rate. An institution where you have been a client for fifteen years already knows your file, which genuinely smooths things. The deadlines of a conditional purchase promise do not forgive files left without an owner.
Do your own comparison, whatever happens
Neither the broker nor the bank will do the comparison that matters for you, since each sees only its own catalogue. Build your table with the same assumptions for every offer: the rate, the prepayment privileges, the type of charge registered on title, the penalty formula, the fees absorbed or not. These columns often show that a slightly higher rate comes with distinctly better conditions, a trade-off invisible when you only talk about rate. The best sequence gets the most out of each party: the broker to show what the market offers, the bank to match that information and your table to decide. The service that gave you the information deserves consideration, even if you decide to go elsewhere.
Quebec scenario
First purchase, first dilemma for an occupational therapist in Sainte-Foy: hand her file to a mortgage broker or negotiate directly with her institution. Rather than decide on reputation, she asks both the same questions. To the broker: how many lenders do you actually consult for a profile like mine? Honest answer: about twenty agreements, but three or four concrete quotes depending on the file. How are you paid? By a commission from the chosen lender, varying by institution, which is worth knowing. Who follows the file through to disbursement? He does, and he commits to it in writing. To her bank: which products can you offer me? Only its own, but with real negotiating room for a fifteen-year client whose file is already known. She then does what neither will do for her: her own comparison. The broker's best offer beats the bank's first offer by 0.25 points. Once informed, the bank matches to within 0.05 points and improves the prepayment privileges. She chooses the bank, knowing exactly what the market offered. The broker gave her that information, which she would not have had alone. Both were useful, but neither replaced her own arithmetic.
Checklist
- Ask the broker how many lenders are actually consulted
- Ask how the broker is paid
- Confirm who follows the file to disbursement
- Ask your bank for its negotiating room
- Present the documented competing offer
- Build your own table on identical assumptions
- Compare rates, privileges, penalties and fees
- Use each actor at their best
- Decide on the table, not the relationship
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