How does a mortgage from Houski compare with a mortgage from a bank?

In this article we'll examine what the difference is between getting a mortgage from a bank, a mortgage broker, and Houski.

The easiest way to understand is to first compare the mortgage offerings between mortgage brokers and banks.

The difference between a mortgage from a broker vs a bank

The most significant differences between mortgage offerings between mortgage brokers and banks break down into two categories:

  • The mortgage's interest rate
  • The mortgage's features

You can imagine any "mortgage product" (which is what we often call them in mortgage industry jargon) is just like a car. When you're buying a car, you have your choice of features.

Here are some examples of common mortgage product features:

  • Ability to pay off additional principle outside of your regular mortgage payments
  • Ability to double up your mortgage payment amount going forward
  • Ability to transfer the mortgage to a different property with the same interest rate and terms

To continue with our car analogy, the addition or removal of specific features raises and lowers the purchase price of the car. Mortgage products are very similar in that regard, except for a mortgage product, the "price" is raised and lowered by adjusting its interest rate. The higher the interest rate, the more you're "paying" the lender, and vice versa.

One difference that mortgage products have that cars do not is "penalties". Not only do you lose features with lower rate mortgage products, you often gain harsher penalties. Penalties are incurred if you ever need to "break" your mortgage commitment. For Canadians, this happens on average every 3.5 years - so statistically if you take a low rate product with a bad penalty, you're very likely to lose money in the long run. Life happens, you get a promotion and you need to move, you have a baby and need a bigger place, etc. Think about it this way - lenders would not offer these extremely low rate products unless they were making money on them. No free lunch.

Can Houski get you the lowest available rate? Generally, yes. Would it be ethical for us to get you the lowest rate product without advising you of it's specific features (or lack of)? Absolutely not.

So those are some general rules about the main differences between all mortgage products. Now we can drill down into the details of what the differences tend to be between bank and broker mortgages products.

Bank mortgage products

  • Tend to have higher interest rates (generally true but historically not always)
  • Tend to have more restrictive features
  • Tend to have worse breakage penalties
  • Often add a "collateral charge" to your mortgage, which is generally dumb and terrible.

Broker mortgage products

  • Tend to have lower interest rates
  • Tend to have better features
  • Tend to have less severe breakage penalties

So from that comparison, you're probably thinking "it seems obvious that getting a mortgage from a broker is the better deal", and you would be correct. The final nail in the coffin for choosing a broker over a bank is simply because brokers have access to bank mortgage products, and can often get you a lower rate than you would get by going directly to the bank anyway. Why? Because brokers have a lot more negotiating leverage than a person walking into a bank. We can send the deal somewhere else if they don't match our other lenders.

So that's a quick summary of the differences between a bank and a broker. So now let's compare the difference between the typical broker, and Houski.

The first thing to note is that Houski is a mortgage broker, but it does not operate like a typical mortgage brokerage. Houski uses technology to create the best mortgage application experience available in Canada. We do things you won't find anywhere else, like collect the documents that are required to get your mortgage for you, all online. We then send your deal to a trusted broker partner, who will assist you in completing your deal and getting your new house! We also donate part of the proceeds to animal charities, so when you get a new home, an abandoned or abused animal gets a new home too.

There are many reasons we do this, most of them increase the quality of service offered to yourself, the customer.

  • It lets us get you the best available mortgage product in the area in which you are buying. No brokerage has access to all the best mortgage products all the time, so we solve this problem by connecting you to the broker that has the best mortgage product for your needs. This is how we can get any Canadian homebuyer the best mortgage products in Canada, at any time.
  • We want you to use a broker in the province in which you are buying. They are familiar with local and provincial laws and regulations, so your pre-qualifications will be calculated accurately and correctly and you won't end up losing a house you love due to some sort of error.
  • It allows us to focus on improving the experience of using Houski and our technology, because we are not internally operating a massive mortgage underwriting centre (a room full of people combing over deals, submitting them for approval, etc).

Should you use a bank or a broker?

  • You should use a mortgage broker.
  • Brokers have access to bank products, and can often place your mortgage at your bank (often at a significantly lower rate than you would get by going to your bank).
  • You will almost certainly get a lower rate.
  • You will almost certainly get a mortgage product with better features.
  • Brokers tend to be more flexibile on qualifying criteria than banks.
  • Brokers tend to advise more than banks (banks don't typically have much variation in their offering, but brokers have many options from various lenders).
  • Bank mortgage employees are typically sales people who are representing the bank's interests exclusively.
  • Brokers typically represent both your interests and mortgage lender's interests with the goal of reaching a fair deal for everyone.

Should you use a broker or Houski?

  • Houski will prequalify you accurately without damaging your credit.
  • Houski will gather your mortgage documents automatically.
  • Houski will connect you to the broker with the best available mortgage product (as well as the lowest interest rate, but remember to make sure it suits your needs and your penalties are not too severe).
  • Houski will also expedite the process greatly by connecting you with trusted, experienced real estate agents in the areas you need them, if you need them.

Other stuff to think about

  • Banks often refer to their mortgage professionals as "advisors", because the term "advisers" means they legally must represent your interests. See Wealth Professional for more information on this misleading practice.
  • Banks calculate your mortgage breakage penalties based on your "posted rate", not your actual rate (which they call "discounted"). This can cost you thousands of additional dollars if you ever need to break your mortgage - which the average Canadian does every three and a half years. You're welcome. 😉

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Alex Wilkinson the CEO of Houski