It’s something we see all the time. Big box-store names squeezing the little guy out. Or huge brand names like Heinz and Kraft taking over at the grocery store, and always priced just a little more than the no-name brands right beside it. But does brand recognition come into play when we get our mortgages? Would we really rather go with a big name that we know and trust, rather than save thousands of dollars a year on our mortgage? Yes, we would.
Looking at the chart you can see just how big of a factor a big name is when we’re getting a mortgage. But why?
The simple fact is, just like when we choose brand name milk at the grocery store over no-name, big names are trusted more. And while trust is important for the food you eat, it’s even more so when we’re getting our mortgages – a loan that we’ll have for much of our adult lives. Trust is key; and mostly, we want to be able to trust that our mortgage lender is going to be around for a little while.
In fact, lenders closing their doors or selling to another company happens quite often. Abode Mortgage, Citizens Bank, Dundee Bank, Maple Turst, ResMore Trust and more recently, FirstLine, are all mortgage companies that were around in Canada and then were eventually bought out or had to close their doors. Of course, this is deeply concerning if you hold your mortgage with that lender. Will you be forced to repay – tomorrow? What’s going to happen to your mortgage? What will happen to your home?
All some of the biggest questions that cross homeowners’ minds should something happen to their mortgage lender. And each question is legitimate. But in most cases, borrowers don’t have anything to worry about.
Typically, when one lender closes their doors on your mortgage, another will open theirs. When you’re with a prime lender (big or small,) typically not too much will happen should they close down shop. In fact, in most cases the mortgage will simply be sold to another company and your loan will continue on as it always did. You’ll just make payments and deal with a different lender. However, if there is no new purchaser of the mortgage and they’re still closing their doors, the onus will be on you to find a new lender. But doing so, if you’re a qualified borrower, shouldn’t be difficult. You’ll just have to do some digging before you choose who you’ll use.
This is because the renewal packages that you’ll be offered by the new lender could be drastically different than the renewal terms you had been looking at with your old lender. And if you’re not careful and don’t choose a lender that will give you desirable terms, you could still end up paying thousands more for your mortgage than needed.
But regardless of whether you need to find a new lender because you’re old one closed its doors, or just because you’re shopping around for your first mortgage, all lenders should be considered – big and small.
“I always find it fascinating that people are concerned about smaller lenders,” says Boris Bozic, president and CEO of Merix Financial. “We’re not deposit takers. We’re giving money, not taking money. The risk is all ours.”
