Many people know the difference between Ottawa mortgage brokers and bankers; one works for the borrower and suggests many different products from many different lenders, while one works for a bank and sells only their product. But what’s the difference between a mortgage broker and a wholesale mortgage lender? In fact, there are many.
Wholesale mortgage lenders are lenders just like banks are. Ottawa mortgage brokers on the other hand, are the link between borrowers and lenders; they don’t actually provide any mortgages or second mortgages themselves. The difference between banks and wholesale lenders is that banks may or may not go through the broker channel to offer new loans while wholesale lenders mainly use brokers to obtain new business. Once the broker has found the wholesale lender to provide the loan, the lender will need to approve and underwrite it – just like they do at the banks. However, the interest rate that may be applied to the mortgage will probably be less than what’s charged at the bank.
This is because wholesale mortgage lenders aren’t bound by the same kinds of policies that banks are, and they can move their rate more easily. Wholesale lenders like to use this tactic of moving and lowering their rate in order to attract business, and attract customers to them instead of going elsewhere for their borrowing needs.
Wholesale lenders are usually in the mortgage business as an investment opportunity – just like banks are. Banks will often sell portfolios of their mortgages to the government and investors in order to get them off their books and be able to lend to even more borrowers. Wholesale mortgage lenders do this as well, but the difference is that wholesale lenders invest in mortgages specifically for this purpose; so they’re more likely to sell mortgages than banks are. Typically with a wholesale lender, this will happen after only one or two months of the borrower obtaining their mortgage.
Because wholesale lenders work much like banks but often have more lenient lending practices and lower interest rates, they are often attractive to all kinds of borrowers, especially those that would have trouble obtaining a mortgage from a major lender. But there is one more difference when it comes to banks and wholesale lenders. While borrowers could walk into just about any bank branch and ask to apply for a mortgage, those who want to use a wholesale mortgage lender will most likely have to go through a mortgage broker to do it.
