When shopping for a mortgage in Canada, one of the first decisions you will face is who to work with: a mortgage broker or directly with a bank. Both can get you a mortgage, but they work very differently — and the right choice depends on your situation.
Mortgage broker vs bank: quick comparison
| Factor | Mortgage Broker | Bank (Direct) |
|---|---|---|
| Number of lenders | 30–50+ lenders | 1 (their own products) |
| Rate access | Wholesale/broker-channel rates | Posted and negotiated rates |
| Cost to borrower | Usually free (lender pays) | Free |
| Best rates? | Often lower | Sometimes competitive |
| Product variety | High (fixed, variable, HELOC, private) | Limited to bank’s lineup |
| Approval flexibility | High (alternative + private lenders) | Lower (strict internal criteria) |
| Self-employed friendly | Yes (many lender options) | Varies by bank |
| Bad credit options | Yes (B lenders, private lenders) | Very limited |
| Speed | Can be faster (pre-approved with multiple lenders) | Standard processing |
| Convenience | Remote/online focused | Branch + online |
| Ongoing relationship | Mortgage-focused only | Full banking relationship |
How mortgage brokers work
A mortgage broker is an independent, licensed professional who acts as a middleman between you and mortgage lenders. Here is how the process works:
- You apply once — The broker collects your financial information (income, debts, credit, down payment)
- They shop your application — The broker submits to multiple lenders to find the best rate and terms for your profile
- You receive options — The broker presents you with offers from different lenders, explaining the pros and cons of each
- You choose — You select the lender and product that fits your needs
- The lender pays the broker — Once your mortgage funds, the lender pays the broker a commission
Broker compensation
| Compensation Type | Amount | Who Pays |
|---|---|---|
| Standard commission | 0.50%–1.20% of mortgage | Lender |
| Volume bonus | Additional incentive for high-producing brokers | Lender |
| Borrower fee (uncommon) | 1%–2% of mortgage | Borrower |
| Trailer fee | Small ongoing fee for the life of the mortgage | Lender |
Example: On a $500,000 mortgage at 1% commission, the lender pays the broker $5,000. You pay nothing.
Borrower-paid fees are uncommon and are typically only charged in difficult-to-place situations — for example, if your credit score is below 600, your income documentation is limited, or you need a private mortgage. Any fees must be disclosed upfront before you agree.
How banks work
When you go directly to a bank, you work with a mortgage specialist (sometimes called a mortgage advisor) — an employee of that bank. They can only offer you that bank’s own mortgage products.
Banks’ rate structure
| Rate Type | Definition |
|---|---|
| Posted rate | The publicly advertised rate (highest — avoid this) |
| Discretionary rate | A lower rate the specialist can offer based on internal guidelines |
| Special/promotional rate | Time-limited offers (often competitive with broker rates) |
| Relationship rate | Discount for existing customers with multiple products |
The key disadvantage of going directly to a bank is that you are negotiating with a single entity. The specialist’s goal is to close a deal at a rate that works for the bank. They may offer discounts, but they cannot show you a competitor’s better offer.
When to use a mortgage broker
A mortgage broker is typically the better choice in these scenarios:
First-time home buyers
You benefit from having someone explain the process, compare options across lenders, and help you navigate programs like the Home Buyers’ Plan, FHSA, and first-time buyer incentives.
Self-employed borrowers
Self-employed income is harder to verify, and many banks have strict documentation requirements. Brokers know which lenders are more flexible with stated-income or alternative documentation programs.
Less-than-perfect credit
If your credit score is below 680, some A-lenders (major banks) may decline you or offer unfavorable terms. Brokers can access B-lenders, credit unions, and private lenders that specialize in bruised-credit mortgages.
Rate shopping with leverage
A broker’s ability to generate competing offers creates natural leverage. Lenders know they are competing for your business and often offer their most aggressive rates through the broker channel.
Renewals
At renewal time, your current lender may send a standard offer at their posted rate. A broker can present competing offers to negotiate a better deal — or switch you to a new lender. You don’t need to re-qualify under the stress test if you stay with your current lender, but switching through a broker can still be worth it if the savings outweigh the costs.
When to go directly to a bank
A bank may be the better choice in these scenarios:
You want a single financial relationship
Some people prefer having their mortgage, chequing account, savings, and investments all at one institution. Banks often reward this with fee waivers, rate discounts, or bundled packages.
Your bank offers a competitive rate
If your bank is already offering a rate that matches or beats what a broker can find, there is little reason to switch. Some banks — particularly credit unions — have very competitive rates and may not be available through the broker channel.
You have a complex banking setup
If you have a HELOC collateral mortgage, multiple lending products, or other complex arrangements with your bank, switching can be more complicated. The bank may offer you special terms to keep the full relationship.
You prefer in-person service
While many brokers work remotely, banks have physical branches across the country. If you prefer face-to-face meetings and a walk-in office, a bank may be more convenient.
Lender types available through brokers
One of the biggest advantages of working with a broker is access to a wider range of lenders:
| Lender Type | Rate Range | Best For |
|---|---|---|
| A-lenders (big banks) | Lowest | Strong credit (680+), stable income, standard documentation |
| Monoline lenders | Very competitive | Rate-focused borrowers; no branch services needed |
| Credit unions | Competitive | Members; sometimes more flexible on qualifications |
| B-lenders (alternative) | Higher (1–3% above A-lender) | Self-employed, bruised credit (550–680), non-standard income |
| Private lenders | Highest (7–15%) | Very poor credit, urgent timelines, unique properties |
Monoline lenders (like MCAP, First National, CMLS) are a key advantage of the broker channel. They do not have branches or offer banking services — they focus exclusively on mortgages and often have the lowest rates in the market because they have lower overhead costs. These lenders are generally not available if you walk into a bank.
Rate comparison: broker vs bank
To illustrate the potential savings, here is a comparison of typical rates in each channel:
| Mortgage Product | Broker Channel Rate | Bank Posted Rate | Bank Negotiated Rate |
|---|---|---|---|
| 5-year fixed | 3.89% | 6.49% | 4.29% |
| 3-year fixed | 4.19% | 6.30% | 4.49% |
| 5-year variable | Prime − 0.90% | Prime + 0.00% | Prime − 0.40% |
Rates shown are illustrative and will vary based on current market conditions and your profile.
What a 0.40% rate difference means
| Mortgage Amount | Lower Rate (Broker) | Higher Rate (Bank) | Monthly Savings | 5-Year Savings |
|---|---|---|---|---|
| $300,000 | 3.89% | 4.29% | $65 | $3,900 |
| $500,000 | 3.89% | 4.29% | $109 | $6,540 |
| $700,000 | 3.89% | 4.29% | $152 | $9,120 |
Even a small rate difference adds up significantly over a 5-year term.
Questions to ask a mortgage broker
Before choosing a broker, ask these questions:
- How many lenders do you work with? — Look for 20+ lenders for adequate selection
- What is your commission structure? — Ensure transparency about how they are paid
- Will I pay any fees? — Confirm no borrower fees for standard A-lender mortgages
- What rate can you get me? — Ask for a rate quote with specifics (product, term, rate hold)
- Do you have access to monoline lenders? — These often have the best rates
- How do you handle renewals? — A good broker will proactively reach out before your term expires
Questions to ask your bank
If going directly to a bank, ask these:
- Is this your best rate? — Never accept the first offer
- What is your discretionary rate? — Push for below the posted rate
- Can you match this rate? — Present a competing broker quote
- What prepayment privileges do you offer? — Compare lump-sum and payment increase options
- Is the mortgage portable? — Important if you might move during the term
- What are the penalties for breaking the mortgage? — Calculate potential penalties upfront
Provincial mortgage broker regulators
Mortgage brokers in Canada are regulated at the provincial level:
| Province | Regulator |
|---|---|
| Ontario | Financial Services Regulatory Authority (FSRA) |
| British Columbia | BC Financial Services Authority (BCFSA) |
| Alberta | Real Estate Council of Alberta (RECA) |
| Quebec | Autorité des marchés financiers (AMF) |
| Manitoba | Manitoba Securities Commission |
| Saskatchewan | Financial and Consumer Affairs Authority (FCAA) |
| Nova Scotia | Service Nova Scotia |
| New Brunswick | Financial and Consumer Services Commission (FCNB) |
| PEI | Consumer, Corporate and Insurance Division |
| Newfoundland & Labrador | Financial Services Regulation Division |
You can verify that a broker is licensed by checking with the appropriate provincial regulator.
The bottom line
For most Canadians — especially first-time buyers, self-employed borrowers, or anyone looking for the best possible rate — a mortgage broker is the better starting point. You get access to dozens of lenders, competitive rates, and expert guidance at no cost.
If your bank is already offering a rate that matches the broker channel, or you value having all your finances under one roof, going direct can also work well. The key is to never accept the first offer — whether from a broker or a bank — without comparing alternatives.
Related guides and tools
- Mortgage Pre-Approval — How to get pre-approved from either a broker or bank
- Mortgage Rates — Compare current Canadian mortgage rates
- Mortgage Calculator — Calculate your expected payments
- Mortgage Affordability Calculator — How much home can you afford
- Mortgage Stress Test Calculator — Qualify at the stress test rate
- First-Time Home Buyer Guide — All programs and incentives for new buyers
- Home Buyers’ Plan — Using your RRSP for a down payment