When choosing a mortgage provider, otherwise known as a “lender”, you have a few main options to choose from, these include banks, private lenders, Trust Companies or Credit Unions.
All regulated lenders in the Canada are approved by the Canada Mortgage and Housing Company (CMHC).
Big banks have mortgage specialists who sell their own mortgages. Some people tend to choose banks as their provider since banks are a well known financial institution. However, banks are only going to present you with their products and rates which might be as competitive.
Mortgage brokers are independent mortgage specialists who have access to many lenders. As such, mortgage brokers, in most cases, can get you lower rates than banks, which is why some people tend to work with mortgage brokers instead of banks.
Types of mortgage lenders
Mortgage brokers work with a number of different lenders when helping you finance your mortgage:
- Big Banks: Large financial institutions are the first stop for first-time homebuyers because of a pre-existing bond through other financial products and many big banks work with independent brokers. Examples of the big banks that provide mortgages are TD and Scotiabank.
- Small Banks: More people are moving to smaller banks to receive better banking options. They can also offer competitive mortgage rates. Examples are National Bank of Canada, HSBC, Laurentian Bank, and ATB Financial.
- Credit unions: Predominantly regional, credit unions are provincially regulated and are owned by their members. Examples include Vancity and Meridian Credit Union.
- Trust Companies: Unlike credit unions and banks, trust companies have no deposits, meaning none of their own money to lend as mortgages. They arrange a mortgage agreement with you, then sell your mortgage to another institution.
“A” lenders versus “B” lenders
As discussed in the Mortgage Pre-Approval article, the type of mortgage and rate you’ll get is largely based on your credit score. In Canada, your credit score can range from 300–900. Depending on your credit score, you will either work with a level “A” lender or a level “B” lender.
We recommend that you shop around when it comes to comparing different mortgage products and lenders. Start off with the financial institution that you bank with and then compare them to products presented to you by different mortgage brokers.