Within Canada, home buyers have a wide range of lending institutions to consider when it comes to financing their mortgages. Knowing what each banking provider offers allows you to make a wallet-friendly and consumer-conscious choice.
What makes a mortgage lender
Simply speaking, a mortgage lender loans money to borrowers to buy or refinance a home. Both private and public financial groups exist in Canada to help both homeowners and homebuyers finance their mortgages.
The top three ways most Canadians choose to get a mortgage are through a commercial bank, a credit union or a trust company.
Types of mortgage lenders
The most traditional and sought-after place where people seek a home loan is from a commercial bank. Commercial banks directly lend you a mortgage without the need of a broker or middleman to assist with transactions. Their services, however, come with a catch: qualifying for a direct bank loan is usually the most costly, limited and expensive option. This is because banks don’t offer large financing packages and may charge you more than their competitors’ rates.
While not new to Canada, mortgages from credit unions such as Meridian are growing in popularity. Credit unions are non-for-profit institutions that cater only to their members and vary in size. If you are an account holder, you along with hundreds of other members, are owners of the union, its upkeep, and financial status. Most of them offer comparable products and lower interest rates than a traditional bank would.
Trust companies function similarly to a bank, but unlike a bank, they mostly focus on managing and administering trust funds. This includes financial estate management and making bill payments on the behalf of trust accounts. Trust companies provide mortgages to those who usually don’t qualify for commercial banking loans, such as self-employed people. People who don’t like the thought of using a credit union also seek out trust companies.
There are untraditional ways you can access a mortgage loan. For those who have poor credit scores or unstable employment, seeking out a private lender is a risky last resort.
Unlike banks, credit unions and trust companies, private lenders can be a wealthy individual, group of investors or a mortgage investment corporation. Using a private lender comes with paying interest rates that are double or triple what a bank or credit union charges (10-20%+ vs. 2.37-2.50%).
The best way to avoid running into this financing option is to reach out to a mortgage broker. Mortgage brokers won’t lend you a mortgage, but they can negotiate with lenders to allow you financing, even if it’s at a non-standard rate(4-6%).
No matter where you’re getting your mortgage, consulting a brokerage about your options is a surefire way to get value for your money.
With Loanerr, borrowers can shop many loan options and apply for a
mortgage fast – anytime, anywhere, from any device.