In the mortgage loan market, the big Canadian banks, which are well established, are in competition with so-called “virtual” lenders.
Some of these virtual lenders specialize in mortgages and offer the same services as the bank on the corner of the street, with one difference: there is no branch, since everything is done over the phone and over the internet.
In Canada, for example, there are First National Financial, MCAP, Paradigm Quest and MERIX Financial, to name a few.
Would you be afraid to borrow money from these financial institutions? In fact, there is no real reason to be afraid, since virtual lenders are governed by the Bank Act, the same that governs major Canadian banks. Plus, the process is the same as applying for a loan from the bank on your corner, except that everything is done virtually and through a mortgage broker.
In deciding whether or not to opt for a virtual mortgage lender, you have to consider the pros and cons.
Benefits
Lower costs: Virtual lenders have lower fixed costs and can lower their fees as a result. Sometimes the rates are better. But beware, this is not always the case.
Less solicitation for other products: Lenders who specialize in mortgages and have nothing else to sell will not push you to sell you other products, such as a savings account, a margin. credit or credit card.
The disadvantages
The product mix is limited: You may not have access to a home equity line of credit.
Can’t pay in cash: Do you often handle banknotes? If you are considering doing business with a virtual lender, be aware that it will not be possible to stop by the counter to make an advance payment in cash.
More difficult to centralize your finances: Some people prefer to centralize their mortgage, investments and bank accounts in the same institution. But is it really a good idea to centralize everything?
By decentralizing, you could fetch better deals left and right.
In short, deciding whether or not to opt for a virtual mortgage lender, you should not stop at the interest rate. You have to consider the other loan conditions. It’s a bit like buying your home; you won’t buy the cheapest just because it’s the cheapest, since you might end up with a few little surprises …
Advice
No matter who you are dealing with for your mortgage, take the time to read the fine print on your contract.
To find a virtual mortgage lender, you can use an online rate comparator or you can call on a certified mortgage broker directly. You can validate their right to practice by checking the website of the Autorité des marchés financiers (AMF).
Everything is negotiated, even the terms of your mortgage. No matter which lender you do business with, don’t hesitate to negotiate, both with the virtual bank and with the more established bank.
information of this article Ghislain Larochelle is a professional registered with the Order of Engineers of Quebec as well as the OACIQ.
