Because we buy consumer products everyday and are constantly being targeted by big organizations in mass market advertising campaigns, we tend to carry some of that brand-conscious mentality into the world of mortgages and the lending industry in general.
Most people who are old enough to make an independent decision to buy a house should already know that all lenders basically sell the same product… which is money.
A dollar from a big lender is not valued more than a dollar from an unknown lender.
Despite that, many borrowers still have the odd mindset that going for bigger and larger lenders are “safer”.
This “safety” partly comes from the fear that lesser known lender don’t have a big reputation to protect and are therefore more likely to be predators.
To a certain degree, there is also the fear that smaller lenders might go belly up some time in future, sending the borrowers’ home loans into chaos.
If only lesser informed home buyers realize that no matter who they borrower from, their mortgages are probably going to be sold in the secondary market anyway. And servicing will be operated by third parties that have no relation to the original lenders.
You see where I’m going with this? Are you starting to see the matrix?
In fact, I’d go as far as to say that it is more likely to end up paying above the market when you go to a big bank as opposed to going to a small mortgage broker.
This is because large lenders have high overheads and have the added value of goodwill added to their pricing.
Do you see Samsung or Apple selling their flagship smart phones cheaper than their competitors even when competitors have phones with better technical specifications?
Well-known lenders with high exposure can actually justify charging borrowers a premium rate because they make it so convenient for borrower to locate them.
They could be found on the busiest streets where you can step into right after work, or have a mobile workforce who can physically visit you with the application documents.
And this is a major reason why so many consumers continue to borrower from them even though there are cheaper and better home loans around.
Becoming a customer of a smaller broker or lender can sometimes be challenging because they are not found at the corner of each street like the big players!
Yet when you put it altogether, there is no real extra benefit for going with a big bank compared to a small lender, other than the illusion of branding.
And a major bank would undoubtedly only be selling their own mortgages.
Compare that with a mortgage broker who is one of the best referral sources that has a whole basket of attractive home loans from different lenders for a borrower to choose from.
The odds are much higher for a borrower to find a suitable loan catered specially for his profile.
Borrowers should really weigh up the pros and cons to determine whether any inconvenience of dealing with a small player is worth the potential savings they might make.
For me, the little guy will always be worth a look at all day long.
Even if you end up signing up with a big lender, at least you can have the peace of mind that you have thoroughly researched the market before making that decision.
Taking up a housing loan only to find out later that you could have saved thousands of dollars by going with another lender can be a deflating feeling.
I’m not saying that you should go all out and take on the hassle of dealing with a small lender even though they are situated all the way across the county.
What I’m saying is that if it is no inconvenience, a borrower should definitely walk in and give them a chance.
Maybe you happen to pass by the vicinity of a correspondent lender while running some errands, maybe you have a second degree friend on Facebook who is willing to come to you, maybe you have the whole day free with nothing on the schedule.
Maybe you did a search online and found a loan package too tempting to ignore.
If it’s not too much of an inconvenience to deal with a small lender or mortgage broker, do find out what they have to offer.
What they have in the bag can often shock you when you compare them with the quotes from big lenders.